WHY THE TITLE 17 PROGRAM IS IMPORTANT
The Innovative Technologies Loan Guarantee Program was established during the Bush Administration through Title 17 of the Energy Policy Act of 2005. A one-time appropriation of $40 billion established its revolving loan fund. This appropriation is known as “no-year” money, since it requires no further action by Congress to renew the Title 17 loan authority. Only the program’s administrative costs are subject to annual appropriations.
The U.S. government has many programs, available through multiple agencies, to promote the research and development (R&D) of innovative, disruptive technologies. But there is a yawning gap between the development of a promising new technology and the financing needed to bring it into commercial operation. This gap is known as “the valley of death.” That’s because private sector lenders are averse to financing projects that have a high risk of failure due to the use of something that is brand new, unproven, and never done before at commercial scale.
That’s why the Title 17 loan guarantee program – and its sister, the Advanced Technology Vehicle Manufacture (ATVM) direct loan program – were created. Without a path to commercialization, no innovation advanced through R&D can become a reality.
BENEFITS OF THE TITLE 17 AND ATVM PROGRAMS
The Title 17 and ATVM programs are responsible for providing the funding that allowed Tesla to build the Tesla S, brought the Nissan Leaf into commercial production, and allowed Ford to develop its line of Eco-Boost engines. Title 17 loan guarantees funded other groundbreaking innovations, including the first utility-scale solar projects in the U.S., which stimulated private sector financing for another 43 utility-scale solar projects and led to a 70% drop in the price of solar.
There also was one spectacular failure: the Solyndra solar project, something opponents of the program – including Office of Management and Budget (OMB) Director Mitch Mulvaney – have used relentlessly to berate the program.
The programs’ losses, however, represent only 3.1% of its portfolio, a loss rate any commercial bank would happily claim.
That’s not all:
The Title 17 program has shown through the projects it has supported that each federal dollar invested in a loan guarantee stimulates more than $10 in private capital investment and leads to scores of additional follow-on projects supported entirely by private sector financing.
Every project in the Title 17 pipeline that is built generates tax revenues for local communities, states and the federal government, as well as state and federal income taxes from the salaries paid to workers.
Moreover, the Title 17 and ATVM programs have produced an average of $250 million per year in interest payments, returning almost $2 billion in collections to the U.S. Treasury since their first loan closing in 2009.
The bulk of the administrative costs necessary to operate the Title 17 program – up to $37 million per year – are paid by the companies that submit applications. Only $17 million per year has been allocated from the general fund for the two fiscal years preceding 2018 for the Title 17 program in the DOE budget. Another $5 million per year was allocated in FY2016 and FY2017 to operate the ATVM program.
While actual and projected revenues have no impact or relevance in the U.S. Congress when it comes to scoring spending bills (i.e., matching up budget allocations with expenditures), the revenues generated by the Title 17 and ATV programs occur nevertheless.
In fact, interest payments to the U.S. Treasury from Title 17 and ATVM loan obligations generate six times more in revenue than the total annual administrative costs required to operate the programs, and 11 times more in revenue when the fees paid by companies that submit applications are taken into account ($250M/$22M = 11.4).
WHY ITS DEATH SENTENCE CAME ABOUT
Unfortunately, criticisms about the Title 17 program abound. It’s benefits – and the critical need it fills – are not well known or understood.
Case in point: We had assumed during the spring of 2017 that other people were taking action to save the Title 17 program. According to the Loan Program Office (LPO) website, more than 70 projects that represent over $50 billion in total capital costs and would create 75,000 jobs were in the pipeline.
Certainly the companies that were in the process of pursuing loan obligations, and the communities that would benefit from economic development and job creation as a result of these projects, were making their support for the Title 17 program known. Right?
There had been a clear warning that the Title 17 program was in jeopardy. President Trump had issued a “skinny budget” – an outline of his funding (and de-funding) priorities – in March 2017. The skinny budget called for a federal-government-wide curtailment – and elimination – of programs that support renewable energy. The 2018 budget that the President delivered to Congress in May 2017 laid out the Administration’s priorities. OMB Director Mulvaney had gone out of his way to vilify the Title 17 program, cherry-picking facts that supported his view and ignoring the program’s benefits.
Certainly someone was taking action to reach out to members of Congress to speak up on behalf of the program. Right?
In fact, no.
Professional staff of the Energy and Water Appropriations Subcommittees had polled House and Senate members to identify the 2018 funding priorities for each office. Not a single office had mentioned the Title 17 program. That’s because hardly anyone had called or visited these offices to speak out on behalf of the program and ensure that it was a funding priority.
When we met with the majority clerks of the House and Senate Appropriations subcommittees last August we found that, in one case, we were only the second group in over a year to meet with the clerk to discuss the Title 17 program.
This is why lobbying – and reaching out to your members of Congress – is important. Your opinion counts. If members of Congress do not hear from you, they don’t count your opinion.
We lobbied as hard as we could this time, making regular visits to Capitol Hill, coupled with one-page handouts and short follow up emails, always pointing out and stressing one or more of the benefits of the Title 17 program.
EUREKA! WE DID IT!
When the language for the 2,232-page 2018 Omnibus Spending Bill was released on March 21, the Title 17 program was funded in full, with $33 million for administrative costs, no rescission of loan authority funds, leaving the full $40 billion of revolving loan funds intact, along with the addition of language mandating that none of the loan guarantee funds could be subordinated to other financing or debt obligations.
Considering the odds against saving the program just a few months before, it was a big win.
NEXT UP: FY2019 APPROPRIATIONS FOR TITLE 17
Now work begins on ensuring the appropriations bills for fiscal year 2019 (FY2019) continue to fund the Title 17 and ATVM programs.
Work also will start on making improvements to the Title 17 loan guarantee program. There are things that can be done to make the program more efficient, effective and responsive and to address the criticisms that several members of Congress have leveled against the program.
We hope you will join us in these efforts.
THE VALLEY OF DEATH
