Amplifying Industry Investments in Clean Transportation, Charging Infrastructure, and Energy Projects with the U.S. Department of Energy’s Loan Programs Office (Text Version)
This is a text version of the video for Amplifying Industry Investments in Clean Transportation, Charging Infrastructure, and Energy Projects with the U.S. Department of Energy’s Loan Programs Office presented on March 13, 2024.
AISHWARYA KRISHNAMOORTHY: This website in the next seven business days, and may also be used internally. If you speak during the call or use video, you are presumed to consent to recording and use of your voice or image. And we're going to press record now. And today we are going to start with a quick poll, to learn more about the kinds of organizations you all are joining us from.
Sandra, if you could hit that, thank you. Please take a second to make a selection on the poll, that should have popped up on your screen. Well, and Sandra if you wouldn't mind sharing the results with everyone, if that's possible. Cool, it's for a host to take a look, see. All right, thank you all for participating.
Now, I'm going to pass things over to Margaret Smith. Margaret is a Technology Manager in the US Department of Energy or DPR, Vehicle Technologies Office or VTO. As the Clean Cities and Communities lead for the GOE headquarters team, she provides strategic direction for the federal partnership with a team of leaders across DOE and its national laboratories, Margaret.
MARGARET SMITH: Thank you so much. We can jump ahead to the first slide. The Department of Energy's Vehicle Technologies Office is happy to collaborate with our loan program office on today's webinar. This webinar is organized and promoted through our Clean Cities and Communities partnership, recently rebranded from Clean Cities.
And together DOE and Clean Cities and Communities coalitions are implementing solutions to some of our nation's biggest problems. We are building an equitable clean energy future, decreasing transportation emissions, improving transportation affordability, promoting American made energy solutions, and creating jobs and economic growth.
Working with the loan program office on transportation decarbonization projects is very much in line with these solutions. Next slide, our office also provides online technical assistance. The alternative fuel data center website and fueleconomy.gov, offer a large collection of tools and resources.
These calculators interactive with maps and databases, assist transportation decision makers in their efforts to deploy electric vehicles and electric vehicle charging infrastructure, as well as other fuels and technologies in our portfolio.
We also offer a technical response service, staffed with seasoned experts who will help you find answers to technical questions about alternative fuels, fuel economy improvements, idle reduction measures, advanced vehicles and other clean transportation related resources.
Next slide, Clean Cities and Communities is a US Department of Energy partnership, to advance clean transportation nationwide. More than 75 DOE designated coalitions work locally in urban, suburban, and rural communities, to strengthen the nation's environment, energy security, and economic prosperity.
And Clean Cities and Communities has been transforming transportation for over 30 years. Through collaboration with nearly 20,000 public and private stakeholders, we have put 1.6 million alternative fuel vehicles on the road, and reduced 72 million tons of greenhouse gas emissions.
So if you're not already working with the coalition, we encourage you to find your local contact at cleancities.energy.gov. I greatly appreciate my loan program office colleagues, taking the time to present information to Clean Cities and Communities stakeholders, on opportunities for financing charging deployment, as well as decarbonization efforts for fleets, ports, and more.
We need to utilize many different strategies and federal incentives, to move towards a decarbonized transportation future. In just a moment, I will hand things over to Tom Hucker, from the Loan Program Office.
First I do want to say that Tom and I both attended an in-person Greater Washington Region Clean Cities Coalition annual meeting last fall, where he presented about the loan program office financing mechanisms. And it was very well received by the coalition stakeholders.
And since then, we have had numerous conversations about how we can collaborate to get the word out to all of our coalitions, and their stakeholders about these opportunities. So a big thank you to Antoine Thompson, the Greater Washington Region Clean Cities Coalition Director, for getting the ball rolling on ensuring our coalitions are well informed about DOE loan offerings.
I'm grateful for the enthusiastic and collaborative energy that the loan program office brings to DOE, and I do encourage you to follow up with them after the webinar if you have any ideas you want to explore. So now over to you, Tom.
TOM HUCKER: Thanks, Margaret. And yes, thanks so much to Antoine Thompson for his great leadership at the Greater Washington region Clean Cities Coalition for many years, and for setting this all up. My name is Tom Hucker. I'm a Senior Consultant with the US DOE Loan Programs Office.
I work on the state and local outreach team, in the outreach and business development division. I'm a former– where I met Antoine, was I'm a former state legislator in Maryland and county council member in Maryland, and that's where we met.
And I spend most of my time now working with state and local leaders across the country, to help them access our loan programs. Let me turn it over to my colleague Wayne Killen, who will introduce himself and then lead you through the first slides, Wayne.
WAYNE KILLEN: Thank you, Tom. Hopefully I'm on here. So good afternoon and good morning, everybody. It's nice to be with you today, and thanks to Margaret and team for giving us this opportunity. Tom and I are going to take you through a little background, who we are, what we're here to do, what we've accomplished thus far.
Maybe first a little more on our actual roles, a big part of this new office that was established by Jigar Shah back in 2021, was the establishment of an outreach and business development team, of which Tom and I are part of that. And it was really a recognition of a couple of things. One, to really promote the program a lot more.
There still wasn't enough awareness that we exist, and how we can support cleaner technology projects. The other half was actually decoupling the business development function from the LPO as a bank, leaving the origination and technical teams to do what they do best.
To put new folks on the front line, to meet with potential applicants to help them shape their projects and meet the requirements in the office. And similar to a bank relationship manager, really hold their hand all the way through. So that's what we're going to give you a briefing on today.
My particular sector expertise is transportation. So that's aircraft marine, on road, off road, it's component supply chain, including, batteries and refueling infrastructure. My background, I have about 30 years in the private sector portion of things, 10 years at Mercedes-Benz, 10 years at Volkswagen Group, where I also learned a few things about DC fast charging at Electrify America.
And that will be a lot of the focus today, but you're going to see we have a much broader mandate at the office right now, on projects that we're funding. OK, next slide. So first, we're going to take a step back. And there's a lot on this chart, but really I want to show you the DOE writ large.
And some of you may know this already, really exist to help companies from the various earliest stages of development of a concept, through market deployment, which we're going to talk a lot about today. And then frankly, it's the whole cradle to grave.
And grave could be defined as recycling projects for batteries for example. But if you see at the top, the development continuum and the phases that a typical company or project might go through, from research, development, demonstration and deployment, the underlying technology as at various stages of maturity.
And we use the NASA acronym, TRL Technical Readiness Level. The lower the number, the more infant it is in its maturity. And of course, as you get close to 10, that's commercially ready. And you can see here in general, the Department of Energy has offices that are designed to support all of these phases, which each of them are difficult of course.
And it doesn't get easier as you go to the right, but you can see an interesting exception, the Office of Technology Transitions, OTT, starts from TRL 1 and goes all the way through TRL 9. They're kind of unique in that regard. You see the Office of Science, there's a small business innovation research and small business technology transfer.
They take place in TRL 1 through 5. Then you've got RPE. And then you've got the applied offices, which really helped take that product, if you will and get it to market. And of course, the applied offices would include EERE and Margaret's Department, VTO.
And then you see underneath there, the new departments from OCED to MESC, to our department. And I should phrase, obviously the Loan Programs Office has been around more than a decade, but we really got a new enhancement with Inflation Reduction Act, with bipartisan infrastructure legislation, in terms of expanded loan authority and frankly, new categories that we're going to talk about today.
Again, technical risk on the left, going to market risk on the right. And each of the Department of Energy offices is really set up nicely, to take companies through that progression and make them successful. So we're going to talk next about what we do, and providing that bridge to bankability. Next slide, so the bridge to bankability is really that last phase when you're ready to deploy.
So the product is developed, it's been piloted, tested. It's been demonstrated, if you will. But now, so you're at the left side of that bridge, getting to the right is equally challenging. There's taking that applied engineering into a project. There's construction risk. There's market risk. There's a lot of things going across that bridge, that the LPO is designed to really support companies through.
And the end goal of course, is get to full market acceptance on the right. That really means that the Department of Energy and our 17 national labs, and 20,000 engineers have helped validate and verify a new technology. Such that the traditional banking sector that we all know, that might be risk averse before this stage is now ready to endorse that technology.
And the best example of this is probably the solar, wind sort of coming to market over 10 years ago, early stage Department of Energy, we put billions of dollars into those sectors. And now of course, it's much more typical to see those companies getting supported by traditional banks.
And then the quote from Jigar Shaw I think says it all here, "There are many areas that are mature from a technology standpoint, but not mature from an access to capital standpoint." And that's really that bridge that we played with solar and wind back then, and today with a lot of other sectors that we'll talk about shortly.
Next slide, OK. We are a policy-driven bank. That is our mission, our branding. And we're unique within the Department of Energy, in being the office that provides low cost loans, whereas other offices will provide grants and technical assistance.
And how we're differentiated from traditional banks, first of all, is access to low cost capital. It's really penned around the underlying treasury rates, which are coming down thankfully a little bit. And it's typically about half the cost of traditional credit by traditional bank. Flexible financing means there's no one size-fits-all.
The deals are really structured around the company's technology, their ability to generate cash flow. So we can do different kinds of amortization, interest only loans, really to make that company successful. And then finally, the committed DOE partnership simply means, once the loan is closed, we're still there with the project through the tenure of the loan, to make sure everything is as successful as it can be.
Next slide, OK. So a couple of years ago when Jigar started in the spring of 21, we had I think two dozen applications at that time. And we had one conditional commitment letter that year, late in '21. We now have 203 active applications. And if they were all to close– which they probably won't, that's an implied loan value of $262 billion, which is quite remarkable.
On average, that's about just under two loans per week, which is lining up well because our goal is to actually close three loans a month starting later this year. So we need to fill the upper funnel. You can see on the right side, the size of the color bar defines the volume of business we're seeing.
And so there's a really good smattering of everything from virtual power plants, down to advanced nuclear in the lower right. And then on the right side of the slide, you'll see the remaining loan authority, which is quite generous, $72 billion alone in Title 17.
So we can support a lot more projects. Title 17, energy, infrastructure, reinvestment, which Tom will talk a little more about later, $60 billion there. And in ATVM loan, our famous automotive loan that now does a lot of other things. There's $50 billion of remaining authority, so we have a lot of work to do.
And some of these loans by the way, the loan values, we want to get that spent before the end of '26, that is according to our statute. OK, next slide. So the other thing I think that's relevant for today's conversation, given that so many of you were spread across the country, is we really are focused on the United States in general here.
You can see there's really no particular region that stands out in the number of applications right now, except for maybe the Pacific Northwest. But everywhere else has their fair share of applications right now. And you'll notice that there's 203 active applications, but 249 proposed project locations.
So obviously the simple math is, there are quite a few projects that are having more than one location for either a manufacturing project or deploying new technology. OK, next slide. OK, now we're trying to get a little more specific to the actual loans that we have. A couple of ones that we've had around for a while, and a couple of new ones that came about by Inflation Reduction Act.
The first one where I spent a lot of my time in terms of zero emission fleet vehicles and charging infrastructure is Title 17. And it's essentially called innovative energy, and that loan is designed to either deploy technology and market or to manufacture it in the first place. And I even have some applicants that are doing both with the same loan.
It's a very open-ended loan in terms of not really having anything it shuns. It welcomes any new technology that is better than business as usual, and it's coupled with a substantial greenhouse gas reduction, that's really key. There is a SEFI version, State Energy Finance Institution version of this that Tom will talk about, that is exempt from an innovation criteria.
The innovation criteria for Title 17, simply means you need to bring a better mousetrap to market, that potentially avoids or sequesters or reduces greenhouse gas more so than usual. The other defining characteristic frankly of all of our loans, is commercial readiness.
So that TRL 8 that we saw referenced earlier, that really means the product is beyond the proving stage. It's ready to go commercial scale, and sell in volumes or be deployed. Now, the loan itself will cover a variety of things. You can purchase land, you can buy vehicles, charging equipment, construction, engineering costs.
It could even be a utility interconnect. Other setup and commissioning expenses that are really defined by the applicant, that are "fair and reasonable" to set up essentially a service for success. The big new sort of trend we're seeing with Title 17 loans, is as a service.
So quite a few charging companies now that are coming to us, where they will procure the charging equipment, they'll provide the construction services to put it in a site host property. And then the site host can pay a monthly bill, instead of writing a big check upfront. That seems to be very popular right now.
On the ATVM side, that has expanded authority. It used to cover light duty cars through trucks. It now covers medium to heavy duty truck on road. It covers marine, rail, and aircraft. We're getting specific authority on that this year.
So literally, any manufacturing project that produces those kinds of vehicles that achieves a fuel economy improvement or greenhouse gas reduction, could be possibly eligible on that loan as well. It'll cover a lot of the same things that Title 17, does especially the startup and commissioning expenses.
The only thing it won't do, is help you deploy a technology. So you can produce the chargers in ATVM, but you could deploy them in Title 17. Next slide, and then my last slide here before I hand it over to Tom, I want to give you some deployment examples, given we have 203 right now.
And these are ones that I've cherry picked from my portfolio, but variety of charging projects from level 2 in the metro areas through DC fast charging on the highway, the projects are asking for the equipment, construction installation costs, even interconnects.
I'm seeing a trend towards medium and heavy duty truck charging projects right now, where the truck itself, the EV truck will be bundled with a DC fast charging hub. And now the service can be provided to a truck fleet or an operator, who can't afford a new electric truck or frankly, worry about charging infrastructure.
So that would be an, as a service model and I'm seeing two applicants with that focus. A lot of trend towards micro grids and virtual power plants, most of those with charging infrastructure. Whether it's L2 or DC fast, a lot of city fleets are coming to us.
And this private sector is really stepping in and bundling the zero emission truck itself, along with charging infrastructure for city fleets, utilities, school districts and transit agencies. And other examples, I have quite a few aircraft applicants now that are not only going to manufacture and deploy these zero emission aircraft, but it's going to have refueling infrastructure.
And I've got one applicant that literally wants to replace all diesel gensets that are used on construction venues, and Hollywood film production and events, with a clean mobile battery solution that will have software and tell essentially the site when it needs to be refueled.
Very low cost and of course, no noise. And then finally, I have one aircraft applicant that literally is going to have 100% SAF compatible jet in the next five years. So a broad smattering of different examples here. Now, I'm going to hand over to Tom.
TOM HUCKER: Thanks, Wayne. This is really helpful. You might be at this point, wondering how to access our financing. And the program that Congress created– that most of you will likely qualify for, is called– I hate to use the acronym, but SEFIs. And Congress loves acronyms, it's hard to get any major legislation passed without creating a new one.
The challenge they were trying to address, was they wanted to help states and territories finance their clean energy transitions. In many states, it's called a climate plan, and other states it's called a clean energy transition or a clean air plan. But whatever your state calls it, Congress wanted to help finance all those projects and they created this program to do just that.
The challenge they were trying to meet was, there are thousands of potential projects. And how will they decide which projects should be eligible for a taxpayer subsidized low interest loan, and which one shouldn't? And the test they set up is, does the state government have some skin in the game?
So if there's an eligible state agency that provides a loan or a grant, or even just a loan loss reserve to that project, the project should qualify– that should unlock that financing from the state, that endorsement from the state, should unlock our financing under this program. And so you're probably asking, what is a qualifying state energy financing institution?
There are lots of examples, you can see on the slide. They include your state energy offices, like the Pennsylvania Energy Development Authority, PEDA. And I'm shepherding one of their projects right now. Green bank, such as the Connecticut Green Bank.
And there are green banks in at least a dozen other states. Energy funds like the clean energy center in Maryland, which recently was determined to be a SEFI. Finance agencies, like the Finance Commission in Washington State, which are financing using many programs to finance conversions of clean energy and energy efficiency conversions of multifamily housing.
And economic development authorities, which often are working with departments of commerce to capture new businesses or help incumbent businesses expand. And other state agencies as well, including water authorities and many other quasi-independent authorities in your state. So you don't have to figure out which of your state agencies qualify for this program and which don't.
I would just encourage you to reach out to me or Wayne, and we can help you determine which agencies in your state qualify. And if your project receives some support, whether it's a grant or a loan, or even a loan loss reserve from that agency, that will unlock our financing.
And the good news is while many of you have heard about federal financing opportunities, where there's a one to one match– the state puts in $1 million, you get $1 million from the feds, this is quite different. The state contribution can be as low as in the single digits, and we're allowed by statute to finance up to 80% of a project cost.
So as long as the state is putting in a little bit of money, which is defined in law as a meaningful contribution, but is currently being interpreted as single digits, we can work with the state agencies and the private sector to finance the majority of the project costs.
So you should really get back to us with individual use cases, and we can help you along the path to financing your projects. Next slide, so what should you do at this point? If you're a representative of a company or a project developer, in the poll showed, probably at least half of you are with a private company.
Please reach out to your state agencies, to ask if they're in touch with the loan program office. And also, feel free to reach out to us as well. I'm the lead for a dozen or so states. We have a small team that are doing outreach every day to state and local governments.
We can direct you, and tell you which state agencies we're in touch with and the status of those relationships. And we would love introductions to state agencies that you have relationships with, but we can help you access the state support to unlock our financing.
And for representatives that are here of state and local governments, who are interested in leveraging our financing, please reach out as well. There are many opportunities. We're happy to just jump on the phone.
We can go through slides like this in 20 minutes, and help you see which of the financing programs you already have. Which of the projects that are already in your capital budgets should qualify for financing from the Loan Program Office?
And there are a lot of examples right here, that many of which Wayne just ran through. But they include, multifamily housing, including low and moderate income housing, fleet electrification, industrial decarbonization, including cement plants and many other high industrial plants that have a huge carbon footprint, commercial buildings.
There's at least a dozen states in the country, that have a building energy performance standard requirement, and have a statutory requirement to decarbonize those buildings. We can help you finance that transition as well.
And finally, government buildings, not just airports and ports, but municipal buildings, town halls, fire stations, schools, all should qualify for decarbonization under this program, as long as they have some support from an eligible state agency.
Next slide, the SEFI program is the program that most of you will qualify for, for most of your projects, but we did want to make sure you know about our other programs as well. The first one on the slide here, our energy, infrastructure reinvestment program, is our largest program. Congress put $250 billion in loan authority into it, and this is aimed at helping existing energy facilities in the United States transition to a cleaner energy future.
The classic example are fossil fuel plants that are decommissioning, and they want a transition to use the interconnect that they already have with the grid, to become a clean energy hub. Whether they're installing solar, battery storage and other renewable energy, generation sources.
Another application that's very common, is many municipalities many universities around the country have a district energy system that is powered by either diesel or natural gas boilers that need to decarbonize. Transitioning those to electric boilers also qualifies for this program as well, because they're an energy generator.
And there are many other applications as well. So you can talk to us about your individual use cases for that program. There are also programs for tribal energy. If you are aware of any programs on tribal land in the United States– and also transportation infrastructure there's a dedicated program for large capacity common carrier CO2 transportation projects.
Each of these programs has a dedicated team of experts at the loan program office, so we're happy to– you don't have to know very much about your potential project, just reach out to me or Wayne and we can connect you to our colleagues, and potentially put you in line for financing from one of those programs. Back to Wayne, next slide.
WAYNE KILLEN: Thanks, Tom. And just a note on the tribal loans, the project doesn't have to take place on tribal land. As long as the tribe is contributing 51% or more equity to the project, that could potentially be a fit.
So just a small note there. So we talked a lot about how the loans work, what they cover, requirements. Maybe to get in a little more what the application process is like. On the left side, these are the key six phases we go through.
And I can tell you that probably number one is the most important, so that's the role that Tom and I and others play at the office in terms of, it could be a few weeks to a few years of literally meeting and talking with the applicant, to help understand their project, to shape the requirements and to make sure everything is compatible with the loan, and the requirements are met before the application is actually drawn up. That's stage two.
There's a lot of back and forth, and reviews and fine tuning of the application and draft form. Once that's done, essentially our business development team pitches it within the office. So origination technical, and our legal teams will be invited in. They'll get an overview of the merits of the project, and why we should cover it.
From that point generally, the application is accepted in. And we get into an intake process review, where we make sure we don't have any major questions. . We understand the underpinnings and scope of the project. And at that point, we basically want to invite the applicant to due diligence.
And that's where we see a finish line in sight, and that's basically where we'll hire third party advisors to help us to go through, to make sure everything from offtake to production, to deployment to equity is in good shape.
And then we essentially will issue a conditional commitment letter, and that's what you've been seeing, about two or three of those a month now actually coming from our office for various projects. After which, we reach financial close.
If there are any conditions precedent at the conditional commitment letter and those are satisfied, we can do a close. And as I mentioned before, the close can feature one payment or multiple payments that really align with the needs– I should say the invoices that the project is going to generate.
And then finally, monitoring. That just means our PMD team is on there, having quarterly or monthly meetings with the applicant to make sure things are proceeding successfully through deployment or the manufacturing phase.
So on the right, that's really how it breaks down in terms of timing and borrowing KPIs. ATVM, I can tell you, we quote 12 or more months now from start to finish. We can certainly move faster than that.
The same with Title 17, we find that the applicants normally who haven't done this before or have to clarify certain things, it can add to the timing. But 12 or more months for ATVM. About 18 months for Title 17, that is a two part loan by the way. The first part validates the technical innovation and greenhouse gas reduction.
And if that's satisfied, we move to part two. And in between the two parts of course, the applicant has to prepare new materials, that's why it's a little longer. Suggested borrowing amounts, we like to suggest $100 million or more being asked from LPL. For a simple reason that you think about the time invested, the closing costs that could be $3 to $5 million or more.
It basically amortizes much better at that level or above. Now, that said, it's not a hard floor. I have two applicants that are asking– one is asking for $75, another one for $80 million, that's fine. The typical debt to equity ratio is 50 to 70%.
We can go as high as 80% by statute, but we really try to stay within this boundary because the typical startup that is not generating cash flow positivity yet, this is a better ratio to be in. And a typical loan tenor, 5 to 10 years. It could be longer than that. It's really based on the useful life of the asset in question being financed, that ultimately addresses that.
Now, there are no application fees with either of our loans, which is nice. Flexible amortization schedules, I mentioned earlier, ATVM is based on the prevailing treasury rate that most closely matches the tenure of the loan, plus 10 basis points closing costs, that's it. Title 17 is a little higher than that.
It starts at 37.5 basis points, it goes to 200 basis points as a markup on the underlying Treasury. And that's because of course, that loan is meant to lean into more innovative technologies. And then I did mention the third-party advisor costs that are $3 to $5 million, but those costs can be actually eligible costs to amortizing the loan itself.
So just a little more about the loan logistics. Next slide, OK. You might be wondering, who applies to our office? Well, by and large, I would say most companies are single entities. It's either a small startup or it's an established joint venture company.
And speaking of joint ventures, that is a very common approach with a larger scale battery projects that you've seen from our office multiple companies coming together in a joint venture, special purpose entity. We have also government, with private entities as the supplier of record. We have multiple states or cities that come to us with or without a private entity.
And finally of course, there's other entities like school districts and ports, that we're talking to now. That want to think about taking advantage of our low cost loans. But it's very flexible structure in terms of overall deal structure, and the applicant composition.
Next slide, so probably the most important takeaway today is this slide, a lot of our applicants think they can come to our office. They've got a great idea, they've got some offtake committed, well, it's much more than that. And like a traditional bank, we're going to want to make sure that the prospect of repayment is fairly substantial.
And these are the things that we provide our applicants early on in the checklist. So for a Title 17 is– I use an example here, ATVM is very similar, is there a clear technical innovation with a greenhouse gas improvement? And a lot of times those projects can't get past that stage.
And is the component itself or the software at that TRL 8 level of readiness? Which means anything less than that might need some more time. Now, that means the applicant could potentially start the application with us. And by the time we get to part two, it will be at a TRL8. But that's just one example of how you can be a little flexible.
Then the rest of it is for part two. It really dives into the facility or the deployment strategy, the status, suppliers, are they secure? If you build it, will they come? A lot of applicants really have great aspirations. They define an addressable market, but there's not even MOUs or LOIs to find it.
And we don't need 10 years of purchase orders necessarily, but we want something that indicates that the product or service will sell. The equity is important too, to have some or all of it at closing. A financial plan that does show how the costs, and sources, and uses will be essentially levied. And the prospects for a cash flow positivity, and when the loan can be repaid.
And then finally, has the company got experienced personnel? Are they staffing up to do the manufacturing or the deployment project? These might seem like basic questions, but a lot of times, these companies are very excited about their technology and their approach, and not enough attention is paid to these factors. Which really ultimately are gating items in our program and getting you through to the end.
OK, next slide. So next generation of LPO financing. We talked a lot about different project examples today, here's a smattering of the rest of them. And I talked about ATVM, but you can see there's biofuels on this slide, there's hydrogen in all manifestations, lots of different renewable energy projects.
Transmission, we have now a team of four people that are handling projects to do with generation, transmission and distribution. We've advanced fossil, and we've had carbon capture and of course advanced nuclear. So really all of the parameters that I think define clean tech investment are relayed here, and this is not exclusive or there are other ideas too that might come to the table.
Next slide, and I think this is our last one, it is. I want to stress that today was really the start of a conversation. And I think where folks like Tom and myself come in most helpful, are meeting one on ones with applicants or groups of applicants that want to talk about a specific project. So you may not have that idea today.
We're certainly going to be open to questions now, but we would very much urge you to reach out to us and set up a follow up conversation. Roll up the shirt sleeves, and we can talk about what you want to do and potentially how we can be a support. So I think at that stage, I'm going to turn over for Q&A. And I think, tom, do you see some questions in the chat there?
TOM HUCKER: I do see the questions. I was just waiting– anyway, if you see me. OK, at the top, Jim asks, what's the minimum loan considered? Do you want to handle that, Wayne?
WAYNE KILLEN: Yeah, like I said, there's really no floor. I would say practically, anything less than $50 million would not make sense as a loan ask, but that's where a lot of our applicants will get creative and why they might think of a project in one state, they add two or three states into it, and now you're starting to approach that higher threshold.
TOM HUCKER: Right, and multiple years as well, right?
WAYNE KILLEN: Yes.
TOM HUCKER: Christian asks, will the slides or recording be available after this meeting? And Aishwarya replied there in writing, that the slides are recording. Well be posted. on the Clean Cities and Communities website in the next seven business days. Mark asked, could state fleets also receive LPO deployment funding? And I replied, but Wayne, do you want to take a crack at that as well?
WAYNE KILLEN: Well, yeah, I think there's nothing stopping a state from receiving funding for the fleet of vehicles, if you will. And again, if it's a SEFI loan, it makes it very straightforward. If it's not a SEFI, then the technical innovation requirement has to be met.
TOM HUCKER: Right, Ryan asked, great insights and very helpful. A few questions, what does an application process typically look like? And I think there's a slide on that. And second, how long does it take the application through the deployment of capital to capital typically, and what are typical costs of capital?
WAYNE KILLEN: Yeah, so this question probably came up before I reviewed that, but I would say this, most applicants do write their applications in house. Expect they've got someone who's done grant writing before.
And I would say, a typical application is anywhere from 40 to 80 pages long, when you think about the narrative, charts, graphs, exhibits, diagrams, process flows and org charts. Some applicants do wish to hire a third party. There are firms out there that know our loans very well, and will write very nice applications and help guide the applicant through some of the tougher questions.
The typical cost of capital again, that's based on the underlying treasury rate. So with Title 17, there would be a 37 and a half basis points mark up up, to a maximum of 200. So let's say a 10 year treasury now is 5%.
Plus or minus, the most that you would pay is 7%, which I hear from most applicants is about half what the traditional banks would charge. And I think, Tom, there's a list on the– I'm not sure, do we have a list of qualifying SEFI institutes?
TOM HUCKER: Yeah, I replied to– Jonathan asks, is there a complete list of qualifying SEFI institutions? And I replied to Jonathan below, but for everybody's benefit, well, there are a lot of state agencies or authorities that have asked our legal team to look at their statute, and determine that they're a SEFI before they initiate this whole process.
A portion of them have also agreed to be listed on our website publicly. So I posted in the chat, a link to our SEFI toolkit, which has an illustrative but not comprehensive list of the SEFIs that have already been– the agencies that have already been determined to be a SEFI.
And if you scroll down on that page, it has links to examples of how different states are using RFIs, request for information or other tools to recruit ideas from the private sector or from local governments, about how to use LPO financing.
So I would check out that link. It's in the chat. It has a list of many of those types of SEFIs, whether they're economic development, corporations, housing agencies, green banks or state agencies. And also, links to RFIs that they've published seeking ideas. So you don't have to even write your– or your state agency doesn't have to write your own RFI.
You can take one of the ones that we have posted on our web page, and swap out the name of that state for your state and swap out their priorities for your priorities, and post it as well and you're likely to get a lot of interest from local governments and from the private sector, about how to use our financing to decarbonize.
Next is, does the State Department of Transportation qualify? In every use case, we have to look at the individual state statute and their authority. And so we're happy to just look at those individually. Just reach out to me or to Wayne, our contact information as I think on the first slide and on the last slide.
And we're really the front door of the Department of Energy. You can reach out to us with not just questions like that, but crazy idea use cases that you're kicking around. You don't have to have all the answers all buttoned up, and we're happy to explore those with you.
Shan asks if public universities qualify. I posted something below on that, but the short answer is yes, they should as long as they get support from a qualifying state agency. And we're working with a number of public universities right now, who are interested in decarbonizing their district energy systems, as I mentioned. Or their dormitories, or their administration buildings, all their stadiums, all those types of projects should qualify for funding.
Most of them would be under the SEFI program, but the district energy systems will likely qualify under the energy infrastructure reinvestment program that I mentioned earlier, because they're energy generating systems.
Next is Matt asks whether the– he says, the FTA Low-No, this year is putting preference on proposals that are able to provide advance or progress payments to the vehicle manufacturers. Can alone be coupled with this type of grant to achieve this request, Wayne?
WAYNE KILLEN: I'm just looking for that question here. FTA Low, OK. So I would say this, typically, Title 17, you cannot co-mingle other federal, state or local loans, if you will with the product.
There are some exceptions to that, and we have to work out inter-creditor agreements. ATVM, it's much simpler. ATVM, can be combined with other grant and loan funding, as long as the applicant can prove that they're able to repay the loan without benefit of that other consideration.
TOM HUCKER: And that's great.
WAYNE KILLEN: So I'll just add one more thing on to that. One way my applicants can work around this is having that other funding pay for a piece of the project that we're not going to fund. So maybe it's taking care of the property expense, and the OPO loan will cover the building and the tools, design and equipment inside the building. That's one way to get around that.
TOM HUCKER: That's great. I always learn when Wayne is answering questions. All right, so Kabira asks, for your current applications from city fleets and HMT electric trucks, who is expected to take on the residual value risk?
WAYNE KILLEN: Well, residual would be I guess a leasing program. The companies that are doing this right now, frankly, the applicants are taking that risk. And it's less of a leasing program, and it's more of an as a service. It's more of something in between a purchase finance and a lease, but they are taking that risk and they've done the modeling that shows that over the long haul, this is a good investment.
TOM HUCKER: And the last question we have– and we have a little bit more time if anybody is sitting on one, but Caroline asks, what is the criteria for ownership of the applicant? Can foreign-owned us companies apply?
And the answer is yes, it doesn't really matter who applies, as long as the project is in the United States and produces a significant greenhouse gas benefit, and is eligible according to our other requirements. But both foreign investors and foreign citizens are eligible to be the applicant.
WAYNE KILLEN: Right that said, I would say, tongue in cheek, any entity from China or Russia would have additional scrutiny right now so–
TOM HUCKER: There we go, yes. And then Peter asks, do we need the aid of a grant writer to apply?
WAYNE KILLEN: Not at all. I would say like I said, most of my applicants will write the application– the questions, it's basically an open-book test. We ask you the question. We tell you what should be in an ideal answer, and folks in my group will basically read drafts of that application and refine it over time so–
TOM HUCKER: Yeah.
WAYNE KILLEN: It's a requirement. I would say all things being equal, it can potentially help you speed the process through because frankly, the narrative is much more on point sooner.
TOM HUCKER: Yeah, now, Peter, one thing we haven't covered is, our loan authority right now is scheduled to end in the fall of 2026. So we really want to get across the idea that this should be on your front burner. It can take six months to a year to go through our process, so we want to get you into the pipeline that Wayne described earlier, with over $200 billion in applications.
We want to get you into that pipeline, and two conditional commitment as quickly as possible, ideally by the end of the year. So that your loan is essentially locked in. And so that means really starting now. That said, a number of people have mentioned grants and this is different than a grant application.
In grants– and I've written a lot of those applications, and Wayne and I have reviewed a lot of those applications, it's competitive. It's a lot of work. You may or may not get it. And you have to put your best foot forward, make your best arguments.
And then it's an arms length relationship, you're just hoping that your argument and your project stacks up well against the competition. It's very different with us. It's not competitive, it's collaborative. And we work with our applicants at every step of the journey.
Before your application we have multiple confidential pre-application consultations, to hear about the project, to understand it better, to give you advice and then to walk you through our loan application process. And we usually go back and forth several times, before you're even invited to submit a formal part one application.
The formal part one application is very straightforward. It's like, who's on your team? What's their experience level? What's the project? How much are you equity are you bringing to the table? How much do you want to borrow from us? Over what period of time? And how will this all work? And the application looks at generally eligibility for the program.
So it really doesn't cost you anything to get to that stage, and to put in your part one application. It's very sort of– not informal, but straightforward and not very time consuming, might be 15 pages or so. It's the part two part of our application, where there's a little more professional support that comes in. We require a credit rating.
We require the use of a independent financial consultant and market analyst, and those things will add some origination costs. But just to get in the pipeline and have those individual consultations, and then make your part one application, that's all relatively low cost, very collaborative. And we'd encourage you just to get started because the sooner you start, the sooner you're at the end of the process.
PETER VANCEA: Thank you.
TOM HUCKER: And then Catherine asks, a large focus appears to be on investing in decarbonizing technologies that are created or made. Are there any examples of projects that have been considered or approved, that include reduced industrialization approaches, such as rain catchment, rewilding, increased urban greenery, et cetera, in regards to defining decarbonization, is it life cycle or just end implementation or use?
WAYNE KILLEN: I don't know how specific I could get there. I know we've handled a few waste to energy projects, if that's any consolation.
TOM HUCKER: Yeah, I think, Catherine we would have to see the individual use case, and understand more about it. And I think neither of us are in a position to give you like the legal guidance now, but I think the spirit of the law was that, it's really aimed at decarbonizing existing infrastructure.
And so if you're standing up anaerobic digestion, if you're remodeling existing housing or commercial buildings that use energy inefficiently and you're making them more efficient or less carbon intensive, those types of projects should qualify.
If you're converting a green field to rewilding or something, and there's no energy use and it's a brand new project, it may not qualify. But anyway, I don't want to scare you away in any way. I think the thing to do is to bring us the details, and we can have our colleagues look at it.
WAYNE KILLEN: Yeah and 9 out of 10 times, Tom, I would tell you, we in the front line know enough about the categories and competitive examples where we can provide some pretty good upfront counsel on that
TOM HUCKER: Right, , and, Margaret, it's up to, the Katherine, sorry it's up to the applicant to scope the project. So you can be creative about what you pull into the project and what you leave out of the project, in order to qualify for our financing. But anyway, we can continue that offline.
And then finally Kabira asks, regarding your answer to my question on residual, values what happens if the borrower or loan program applicant defaults on the loan? Does the LPO assume ownership of their electric trucks as collateral? Do you make assumptions for how much they're worth? Most commercial banks assume these trucks are worth very little, so it won't make loans to these companies because they can't cover collateral requirements.
WAYNE KILLEN: Yeah, that's a little more precise question. I would tell you, the short answer is that would probably be collateral for the loan. And obviously we hope that that doesn't happen, and that's why we put so much effort into due diligence. And making sure that the underpinnings of the project, the market are there and that this won't happen. But yeah, in the worst case, we are designed to take some risk and it's not that we have to bat 1,000, be successful. We'll just say that.
TOM HUCKER: Right, yeah. Congress set us up really, Kabira, to wear risk that the commercial banks won't wear. So we have a very low default rate, and more often than not, we're going to work with the applicant to restructure the loan. And look at all the processes and the costs, and the revenues and to keep the loan going, rather than to collect on the collateral.
So we're at 1:57. We have to make that question the very last, but we want to remind you that my contact info and Wayne's is in the slide deck and it's in the chat. So please reach out to us with individual questions, we're happy to kick around your individual use cases and any crazy idea you have. And let how to structure it, so you might be able to access our financing. Wayne and Margaret, final thoughts.
WAYNE KILLEN: Now, there's been a great opportunity. And I would just say, I can tell the crowd is just getting warmed up here. So I hope that some of you want to take advantage of a follow-up consultation.
TOM HUCKER: Margaret.
MARGARET SMITH: Yeah, I hope people do follow up directly with Tom and Wayne. And yes this presentation and the recording will be available on the cleancities.energy.gov. Website in the webinar section. So you'll be able to access all of this information. And I encourage people to take advantage of this opportunity.
AISHWARYA KRISHNAMOORTHY: Great, thank you all so much for attending. Like Margaret said, we'll have the slides and recording posted on the Clean Cities and Communities website in the coming days. Have a great rest of your day.
WAYNE KILLEN: Thanks.
TOM HUCKER: Thanks so much, everyone. Thanks to Clean Cities. Bye-bye.
WAYNE KILLEN: Bye-bye.