Energy Secretary Chris Wright and the White House appear to be headed for a clash on major DOE spending programs, including the agency’s Loan Programs Office and the main research arm, ARPA-E (Advanced Research Projects Agency-Energy).
On Monday (Mar. 17), DOE sent another $57.8 million in federal money to the Palisades nuclear plant resurrection in Michigan, part of a $1.52 DOE billion loan to Holtec International for the project.
Since DEO’s Loan Programs Office approved the deal last September, the agency has doled out almost $96 million for the restart of the 805-MW reactor that shut down in 2022, starting with $38 million in January.
The Biden administration and two Democratic Michigan governors, Gretchen Whitmer and her predecessor, Jennifer Granholm, who was also Biden’s energy secretary, were important parts of the impetus behind the Palisades subsidy.
Nevertheless, Wright said of the release of the funds, “Today’s action is yet another step toward advancing President Trump’s commitment to increase domestic energy production, bolster our security and lower costs for the American people.”
Also on Monday, keynoting ARPA-E’s annual “summit” meeting at a Maryland resort, Wright touted ARPA-E, modeled on the DOD’s Defense Advanced Research Projects Agency. Wright billed ARPA-E as essential in the AI race, which he said is crucial for national defense and medical science.
Bloomberg quoted Wright as saying, “The only way we can get there is if we grow our energy system faster and faster, and that’s why you are all here. There is a huge, life-changing opportunity for innovation there.” Since it’s 2009 formation in the Obama administration, ARPA-E has awarded about $4.2 billion to some 1,700 energy projects.
On January 28, the White House’s Office of Management and budget produced a 52-page spreadsheet – which Bloomberg obtained – listing targets for a spending axe or Elon Musk’s chain saw. Among the myriad targets: DOE’s Loan Program Office and ARPA-E. The next day, a federal judge issued a temporary hold on those program cuts, which expired in February. No cuts have been made to date.
The DOE press release on the Palisades funds characterized the financing as a “loan guarantee,” a term the federal government and Congress stole in 2005 to imply that Uncle Sam was simply backstopping private sector money. The aim was to free up money for the construction of new nuclear plants after the first generation had fizzled out. But the solons didn’t want it to look like they were risking taxpayer dollars, which they were.
That didn’t work – as the outrageously expensive new Vogtle units in Georgia and the failed V.C. Summer project in South Carolina demonstrated.
A conventional loan guarantee, as defined by Investopedia, is “a type of loan in which a third party agrees to pay if the borrower should default.” DOE’s “loan guarantees” are loans, much like car loans. The borrower provides a down payment of 20% and DOE picks up the rest. The loans are approved by the Treasury Department and disbursed by Treasury’s Federal Financing Bank, which also collects loan payments.
According to the Code of Federal Regulations, “The full faith and credit of the United States is pledged to the payment of principal and interest.” If a borrower defaults on principal or interest payments, and “such default has not been cured within the applicable grace period, the (Treasury) Secretary shall notify the Attorney General.”
The DOE loan authorities have come under fire since the 2011 collapse of the advanced solar photovoltaic firm Solyndra, leaving the Obama administration holding a bag containing a $527 million default.
A 2012 monograph from the Nonproliferation Policy Education Center – Pure Risk: Federal Clean Energy Loan Guarantees – offered a series of critiques of the loan guarantees, especially for nuclear plants. NPEC Executive Director Henry Sokolski wrote in a foreword, “This volume spotlights the costs and risks associated with federal clean energy loan guarantees….They point to the half billion dollars Solyndra has already cost U.S. taxpayers.”
In 2017, Rep. Randy Weber (R-Texas) and four other hard-right House conservatives – Mark Meadows of North Carolina, Pete Sessions of Texas, Gary Palmer of Alabama, and Jim Jordan of Ohio – introduced legislation to “amend the Energy Policy Act of 2005 to repeal certain loan guarantee programs of the Department of Energy, and for other purposes.” It went nowhere.
The Heritage Foundation’s 2023 book Mandate for Leadership Project 2025 – which Trump distained during the campaign and has frequently attempted to implement once in office – says the “DOE Loan Program should be eliminated or reformed,” along with a list of other DOE subsidy programs including the “DOE Office of Clean Energy Demonstrations (OCED); Office of State and Community Energy Programs; ARPA-E; Office of Grid Deployment (OGD).”
Euthanizing of those DOE programs would require congressional action, which is unlikely.
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