The Scoop
US President Donald Trump’s unpredictable approach to policymaking undermines his goal of energy “dominance,” the former senior official who managed Joe Biden’s biggest energy bank told Semafor.
Jigar Shah, a former solar executive who headed the Department of Energy’s Loan Programs Office, said he expects his successor under Trump, John Sneed, will veto many of the roughly 200 applications from companies still in line for a piece of the LPO’s $400 billion war chest, funding meant to support cutting-edge energy projects considered too risky by Wall Street. That’s no surprise and could happen in any new administration, Shah said. But Sneed has also threatened to claw back funds that were already approved under Biden. Shah thinks that effort won’t ultimately succeed — but that it could scare companies away from one of the country’s most important sources of capital for improving the reliability and affordability, not to mention sustainability, of the US energy system.
In this article:
Tim’s view
Climate tech needs to find a new way to grow without government support in general, and the LPO in particular. The office has been on a roller coaster for the last 15 years: It was effectively closed under former US President Barack Obama after the high-profile bankruptcy of Solyndra, and moribund under Trump. But it saw explosive growth during Biden’s term: Shah signed off on about $100 billion in finalized and conditional loans and guarantees for renewable energy, batteries, advanced nuclear, and other technologies. This money was largely aimed at helping companies cross the “valley of death” between the lab and full-scale commercialization. Under Trump, LPO is likely to narrow its focus to technologies that are more favored by Republicans, such as carbon capture and blue hydrogen. Everyone else needs to find a new path across the valley. In the meantime, Shah warned that Trump’s fixation on fossil fuels is likely to encounter some inconvenient obstacles from economics and physics. A DOE spokesperson didn’t respond to a request for comment.
Tony Moses, entrepreneur-in-residence at the climate tech investment firm At One Ventures, said that without LPO, climate tech companies need to tighten their belts and probably give up on trying to build their own full-scale factories. But they should still be able to reach profitability by cutting back their capital spending and focusing instead on leasing existing factory space, a strategy that worked well for alternative food manufacturers like Oatly that also struggled to access traditional project finance, Moses said.
The View From Jigar Shah
This conversation has been edited for length and clarity.
Tim McDonnell: What’s the thing from your four years in LPO that you’re most proud of?
Jigar Shah: When I entered the office, everyone said ‘Jigar, why are you joining the government? We never pay attention to the government. We would never partner with the government, and we’re not going to onshore stuff here.’ By the time I left, figuring out how to engage with DOE programs became the top priority for all of these [climate and energy] companies looking to commercialize here. Before looking at sites in Asia, they’re looking at sites in South Carolina and Tennessee. That was not pre-ordained. We got everyone to change their mind.
Do you see a risk that those changed minds could change back again now?
Yeah. It’s kind of shocking. When Trump ran for president in 2016 he was like, ‘We need to keep plants here, we need to onshore and reshore.’ This is the fundamental concept of the whole ‘America First’ effort, right? And if as a consequence of his second term, America loses its mojo and decides to ship all manufacturing to China, that would be not what I would have expected.
Should companies who got financing from your LPO be concerned that money will be clawed back now?
No. These are obligations of the US government. The things they are talking about doing now are patently illegal.
I think Chris Wright is a patriot and really an extraordinary pick, frankly, to be the head of the Department of Energy. But whether we are going to honor the full faith and credit of the United States is not up to him. That is what’s at stake. If people believe the US government doesn’t honor its commitments, what is [Wright] going to do? Someone who wants to build a new nuclear plant might look at DOE for a loan, but if they see that other technology deals are being mistreated, they’ll say you’re being arbitrary and capricious. I mean, the [due diligence] costs of getting a loan through our office were about $6 million. Who will want to pay that, and then just hope and pray that Wright is still the Secretary? They’re playing with not just fire, but like red hot magma, because I don’t see how anyone can make a 20- or 30-year investment in the energy sector without the rule of law.
So the problem I have is not with Wright or [Interior Secretary] Doug Burgum. It’s that other parts of the Trump administration enjoy being arbitrary and capricious. That does not lead to certainty on the part of the private sector.
So even if existing LPO loans do go out, it seems fair to assume the volume of incoming applicants may go down.
If companies feel like [LPO due diligence] isn’t a good use of money, they’ll stop the process. That might be a victory for some people [in the Trump administration] who say ‘Look, people are flying away from this now that we’ve imposed our controls and threw Jigar under the bus.’ But now who’s doing big things in this country? I don’t know. Exxon and Chevron just cut their budgets for the year. So I don’t know how you hit energy abundance and dominance with those characteristics.
And in the meantime the administration is raising new barriers to some alternative energy sources, like freezing leasing and permitting for new wind projects.
Physics really matters. All the culture war rhetoric in the world isn’t what causes the grid to stay stable. If demand is growing, supply has to grow. Who’s ready to deploy this week? Oh, it’s solar, wind, and battery storage? Well, crap, I guess we’re going to have to say yes to those projects, or we’re going to have a physics problem. I really don’t see any way around this. It has to be the projects that already have their interconnection agreements completed, who already have their land secured. All the other stuff the administration wants to build, maybe it can be done by 2034, and what are you going to do until then?
We haven’t built massive amounts of natural gas infrastructure in this country since 2005. Those supply chains are gone. No one knows how to even do it. Could we five-fold the amount of natural gas plants we’re installing in this country? No, we cannot. Even if you want to buy a new natural gas plant, they’re shipping for 2034 right now. You can build a nuclear plant faster.
Is there anything you wish you had done differently at LPO?
Not a single thing. To take an office that was shut down by the Obama administration after Solyndra and give it hope again, that just takes the amount of time that it takes. For example, when a company is applying for an LPO loan, that’s a trade secret. But we hosted the Deploy23 conference, and all these people were looking around, going, ‘Wait, you’re here, and you’re here.’ The only way I could get people to meet each other was by inviting them all to the same conference. And then they figured out that this is a far safer thing than they thought, like safety in numbers.
Any last words of encouragement for climate tech entrepreneurs?
You are now dominant energy. Refer to yourself that way. There has never been a better time for you to make money, to succeed, to solve problems. Once you realize you’re the dominant energy source, your swagger is different.
Notable
- Net zero policies have “achieved precious little” in reducing greenhouse gas emissions, Wright said after his confirmation; the DOE intends to focus on “affordable, reliable, and secure energy technologies,” he said.