Inflation Reduction Act of 2022 (IRA): Department of Energy Loan Guarantee Programs

Inflation Reduction Act of 2022 (IRA): Department of Energy Loan Guarantee Programs

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INSIGHTi

Inflation Reduction Act of 2022 (IRA):
Department of Energy Loan Guarantee
Programs
August 5, 2022
As posted by the Senate Majority leader on July 27, 2022, the Inflation Reduction Act of 2022 (IRA)
would amend, expand, and appropriate money for two loan guarantee programs administered by the
Department of Energy’s (DOE’s) Loan Programs Office (LPO): (1) the Title XVII Innovative Technology
Loan Guarantee Program (Title XVII) and (2) the Tribal Energy Loan Guarantee Program (TELGP).
Table 1 provides a high-level comparison of these programs under current law. LPO also manages the
Advanced Technology Vehicles Manufacturing direct loan program, which the IRA would also amend but
is not discussed in this Insight.
Background
Established by the Energy Policy Act of 2005 (EPACT05 Title XVII, P.L. 109-58, as amended at 42 USC
§§16511 et seq.), the Title XVII program has supported projects under two separate loan guarantee
authorities with different characteristics (see Table 1).
1. Section 1703 authority is currently active and to date has committed funds to 2 projects,
and
2. Section 1705 authority expired in September 2011 and committed funds to 28 projects.
The TELGP was also established in 2005 (P.L. 109-58, at 25 USC §3502(c)). To date, no projects have
received funding commitments under TELGP authority.
Generally, federal credit programs such as Title XVII and TELGP require that a subsidy cost be paid—
through appropriations and/or payment by the borrower—prior to finalizing a loan guarantee agreement.
The Federal Credit Reform Act of 1990 (FCRA; Section 13201 of P.L. 101-508) requires that estimated
lifetime net costs, which consider default risk and other factors, of new loans and loan guarantees be
recorded in the budget year in which the loans are disbursed (2 U.S.C §661c). The costs of these credit
programs, referred to as subsidy costs, are measured on a net present value (NPV) basis—which is the
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combined value of expected future cash receipts, less expenditures adjusted or discounted, calculated
using an interest rate based on Treasury securities.
Table 1. Existing Department of Energy Loan Guarantee Programs
Innovative Technology Loan Guarantee Program
Tribal Energy Program

(Title XVII)
(Title XXVI)

Section 1703
Section 1705
Section 503a
Establishment Year
2005
2009
2005
Program Authority
Ongoing
Expired September 30, 2011
Ongoing
Available Loan
$21.9 billion
N/A
$2 billion
Guarantee Authority
Eligibility Criteria
Projects must (1) avoid, reduce,
Projects were limited to (1)
Projects must be for energy
or sequester air pollutants or
renewable energy systems;
development by a federally
anthropogenic greenhouse gas
(2) electricity transmission;
recognized Indian tribe or
emissions; and (2) employ new
and (3) leading edge biofuel
Alaska Native Corporation
or significantly improved
projects, but could employ
technologies, including projects
commercial technology
that employ elements of
commercial technologies in
combination with new or
significantly improved
technologies
Appropriations for
$161 million, available until
$2.5 billion (no longer
$8.5 million available until
Subsidy Costs
expended, for a portion of
available)
expended
subsidy costs for Renewable
Energy and Efficient Energy
projects
Loan Guarantee
2 project commitments
28 project commitments
None
Commitments
Source: Congressional Research Service.
Notes: Section 1703 also includes eligible project categories (42 USC §16513). Generally, the borrower pays §1703
subsidy costs. Under §1705, appropriations covered these costs. The Tribal Energy Program is currently authorized, until
September 30, 2022, to provide direct loans to qualifying projects.
a. P.L. 102-486, Title XXVI, §2602, as amended by P.L. 109-58, Title V, § 503(a); 25 U.S.C. §3501 et seq.
IRA Proposed Amendments to DOE Loan Guarantee
Programs
Sections 50141, 50144, and 50145 of the IRA would amend Title XVII and TELGP programs. Loan
guarantee commitment authority would increase for both programs, including $250 billion for a
temporary Section 1706 loan guarantee authority that could finance energy infrastructure (see Figure 1).
Additionally, the bill would appropriate nearly $9 billion that could be used to pay for subsidy costs.
These amendments—including time-limited availability of appropriations and most commitment
authority—could facilitate lending activity for two existing authorities (Section 1703 and TELGP), and
for a new authority (Section 1706).

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Figure 1. Current and Proposed Lending Authority and Appropriations for DOE Loan
Guarantee Programs

Source: Congressional Research Service.
Notes: Numbers may not sum due to rounding. TELGP = Tribal Energy Loan Guarantee Program. Title XVII lending
authority and appropriation increases would be available through fiscal year (FY) 2026. TELGP lending authority increase
would be permanent. TELGP appropriation increase would be available through FY2028.
Title XVII
Proposed Title XVII amendments in the IRA would increase Section 1703 lending authority and
appropriation levels, and would establish a temporary loan guarantee program that could support
investment in energy infrastructure. Section 1703 amendments would build upon recently enacted
legislation to address two related program challenges: (1) innovative technology requirements, and (2)
limited credit subsidy appropriations. For example, the Energy Act of 2020 (P.L. 116-260, Division Z)
relaxed innovative technology criteria, and the Infrastructure Investment and Jobs Act (P.L. 117-58,
Section 40401) eliminated the requirement for projects supported by a State Energy Financing Institution.
IRA provisions would increase Section 1703 lending authority by $40 billion and would also appropriate
$3.6 billion to pay for program costs, including subsidy costs. Lending authority and appropriations
would be available through the end of FY2026.
The IRA would also establish a time-limited (available through FY2026), $250 billion Title XVII loan
guarantee commitment authority—Section 1706—for “Energy Infrastructure Reinvestment Financing.”
As defined in the bill, energy infrastructure would include (1) electricity generation and transmission, or
(2) production, processing, and delivery of fossil fuels, petroleum-derived fuels, or petrochemical
feedstocks. Additionally, $5 billion would be appropriated to carry out the program. To qualify for a 1706
loan guarantee, projects would need to
(1) retool, repower, repurpose, or replace energy infrastructure that has ceased operations—subject to
a requirement that fossil fuel electricity generation projects must avoid, reduce, utilize, or
sequester air pollutants and anthropogenic greenhouse gas emissions, or
(2) enable operating energy infrastructure to avoid, reduce, utilize, or sequester air pollutants or
anthropogenic emissions of greenhouse gases.
TELGP
The IRA would permanently increase TELGP loan guarantee commitment authority to $20 billion.
Additionally, $75 million would be available through FY2028 to pay for TELGP program activities.

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Author Information

Phillip Brown

Specialist in Energy Policy

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