Senate proposal for clean energy bank needs significant improvements to protect taxpayers

The proposed Clean Energy Deployment Administration (CEDA) included in the American Clean Energy Leadership Act (S. 1462) passed last year by the Senate Energy and Natural Resources Committee would offer a range of financing options. They include direct loans, letters of credit, loan guarantees and insurance for a broad range of technologies that are intended to reduce both global warming emissions and energy consumption.

Renewable energy, advanced nuclear, and coal carbon capture and storage projects are among the technologies that would qualify for assistance, although it is debatable that all of the eligible technologies are really innovative. For example, the new reactors the nuclear industry is planning to build are based on designs that are largely unchanged from those in already in commercial operation.

Those plants are already on the short list for $18.5 billions in loan guarantees under the existing Department of Energy (DOE) Title XVII program, and the Obama administration wants to provide an additional $36 billion in loan guarantees to fund more reactors.

The Senate CEDA proposal would put taxpayers at even greater risk than the current DOE program by promoting large-scale investment in technologies that have inherently higher financial risks and costs than many other low-carbon options while lacking any clearly defined limits on how many loan guarantees could be issued. For example, the Congressional Budget Office estimated CEDA would provide $130 billion in loan guarantees to nuclear and fossil fuel energy projects based on current applications. That would allow high-cost, high-risk and environmentally destructive technologies to monopolize the fund and crowd out investment in truly innovative, clean energy technologies.

To avoid these problems, the Senate should modify the CEDA proposal to protect taxpayers and ensure that funding targets innovative clean energy technologies that have the potential to reduce the most global warming emissions at the lowest possible cost. (For more information, see the Union of Concerned Scientists’ fact sheet, “The Senate Must Fix the Clean Energy Deployment Administration.”)

Specifically, Senate should:

— Limit the overall size of the fund as well as the amount of credit support that can go to any one technology;

— Subject CEDA to the Federal Credit Reform Act to ensure ongoing congressional oversight and budget authority;

— Prioritize financial support for technologies that will reduce the most greenhouse gas emissions per dollar invested; and

— Limit loan guarantees to help the private sector deploy emerging clean energy technologies on a large scale and enable those technologies to become commercially viable.

These common-sense modifications would reduce the overall risk of default to taxpayers and promote more cost-effective, environmentally acceptable alternatives. Without these protections, the potential financial risk to taxpayers could be astronomical.