US Department of Energy steps in when ‘commercial banks are too timid’ – Jigar Shah

➤ The U.S. Department of Energy’s Office of Lending Programs wants to advance President Joe Biden’s decarbonization goals by supporting critical mineral technologies.

➤ The DOE has expanded its criteria under the program to support critical mineral processing projects in an effort to increase the national supply of battery materials.

The loan office received more applications than at any time in the past 10 years and is processing 77 applications totaling $75.9 billion in funding requests.

Jigar Shah, director of the Office of Lending Programs at the U.S. Department of Energy
Source: US Department of Energy

The U.S. Department of Energy’s Office of Loan Programs on April 18 extended a conditional commitment to lend up to $107 million to graphite company Syrah Technologies LLC, a subsidiary of Australia-based mining company Syrah Resources. ltd. The loan would support an expansion of the company’s Vidalia graphite plant in Louisiana, which is expected to supply enough anode material to make batteries for up to 2.5 million electric vehicles by 2040. If finalized, it would be the first loan issued by the DOE’s Office of Lending Programs under its advanced technology vehicle manufacturing program in more than a decade.

S&P Global Commodity Insights sat down with Jigar Shah, director of the DOE’s Office of Lending Programs, to discuss the role the federal government should play in the country’s transition to a low-carbon energy economy, and why more loans have not been granted in the last decade. . The following conversation has been lightly edited for clarity and space.

S&P Global Commodities Outlook: What do you see as the appropriate role for the federal government in helping the country transition to a low-carbon energy economy?

Jigar Shah: The Office of Lending Programs has several key roles to play. One is to assume perceived technological risks. It intervenes when commercial banks are too timid to do so. Second, when you have such large deployment volumes – like you see with electric vehicles or solar panels – you start to have critical minerals and supply chain constraints because the volumes are so large. So I think it’s the responsibility of the Office of Lending Programs to see if we can help get things done faster and meet the president’s goals of decarbonizing the electric grid by 2035 and decarbonizing the entire economy by 2050.

We are truly open for business and open to all technologies that reduce carbon emissions and help us on the path to decarbonization.

If completed, the $107 million loan to Syrah Technologies would be the Office of Lending Programs’ first loan under its advanced technology vehicle manufacturing program in about a decade. Why has it been so long since a loan was finalized under this program?

In general, I would say there are two elements to this. One is to get applicants to believe that the effort they put into applying for a loan is worth it. Each submission requires a lot of time from the applicant. In the past, there was a feeling that projects took too long to process or that people made decisions in a highly political way. Ultimately, what we’re trying to accomplish is to make sure people believe they’re getting a fair and efficient experience from the Lending Programs Office.

How long does it take to process a loan application?

In terms of how efficiently we can process an application, we’ve basically set a benchmark of six to eight months for the office, which is very similar to commercial banks, frankly, for these very large and complicated loans. Once an application is submitted, we must do all our due diligence on a loan. We have to read all the hundreds of documents that are submitted. We engage consultants to help us determine whether the market has been fairly represented by the claimant. This process usually takes six to eight months if the applicant is fully prepared. It’s possible to go fast, but it requires candidates to have all the answers we need at their fingertips.

We’ve had many more loan applications submitted under the Biden administration than we’ve had in the past 10 years. We have 77 active applications.

Why is a graphite plant under the DOE’s Advanced Technology Vehicle Manufacturing Program?

The Advanced Technology Vehicle Manufacturing Program has funded Ford Motor Co., Tesla Inc., Nissan North America Inc. and others in the past. The heart of the program is to save fuel by using alternative fuel vehicles, including electric vehicles. This mandate has expanded to include supply chains, which has been interpreted as [include] battery manufacturing.

Only in recent years has the designation been expanded to include critical minerals. This program really has not been advertised to support critical mineral applications in the past. And critical mineral applications require a lot of work – from obtaining permits and going through the [National Environmental Policy Act] process. For many applicants, they may have been considering this program for some time, but did not have all the documents in place to qualify for the program until recently. By Critical Minerals, we really focus on processing, not mining. We do not finance the clearing of the earth. We finance the refining of ore into finished materials.

US President Joe Biden and Energy Secretary Jennifer Granholm have made clear their commitment to strengthening critical mineral supply chains in the United States. What progress has been made towards this goal, and what plans do you have to accelerate it?

We have made significant announcements to build significant amounts of battery capacity here in the United States. The Loan Programs Office has multi-billion dollar projects who applied for loans in the battery manufacturing space and space of critical minerals. Now they have to finalize their designs and permits, and then they’ll have to start construction. But I think the intention to outsource supply chains is having tangible results.

Extracting and processing critical minerals carries environmental risks. How do you ensure that DOE-funded projects take the necessary steps to mitigate the climate impacts of critical mineral production?

We certainly ask mines to follow best practices and look for [environmental, social and governance] certificates. But I think suggesting that mining will be risk-free or hassle-free is probably too high a standard. But we want them to intend to adhere to best practices.

Are you worried that the United States will not be able to compete or catch up with China in the production of batteries and electric vehicles?

I would say the industry is still young. We have over a billion cars in the world and we have less than 10 million electric vehicles in the world. When you think about where we need to go, we probably need to grow the total battery supply chain almost 20 times to be able to meet the needs of 2030 and 2035.

While China has traditionally dominated some of these supply chains, it won’t necessarily dominate supply chains in the 2030s. And most battery technology was invented here in the United States. Then they were allowed by China to scale up manufacturing. I think the next generation of battery technology is also here in the United States. This time our intention is to expand the manufacturing of these other technologies here and that’s it.

S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.

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