He is the decision maker for $400 billion in climate finance, and time is short
The hotel ballroom was packed for breakfast when Jigar Shah took the stage at the annual conference of the oil and gas industry in Houston this spring. The host joked that he was sure a huge crowd would come for Mr. Shah even at 7:30 am
It’s rare for a mid-level federal official to attract so much attention. But the small, obscure office overseen by Mr. Shah, that of the Department of Energy Loan Program Office, has become a driver of the Biden administration’s efforts to aggressively promote clean energy. And Mr. Shah is no ordinary bureaucrat.
As part of last year’s Inflation Reduction Act, Congress replaced the office’s authority to take out loans to companies seeking to bring emerging energy technologies to market increased tenfold from $40 billion to more than $400 billion. That makes it potentially one of the largest economic development loan programs in United States history.
Mr Shah, 48, is the gatekeeper for that taxpayer. And the clock is ticking; he has about a year and a half to get the money out the door before the 2024 election could mean changes in the White House that would curtail the program.
He brings with him an entrepreneurial swagger and tolerance for risk. Before entering government in 2021, Mr. Shah something of a celebrity in energy circles. A pioneer in the solar energy industry who made millions, he co-hosted a popular energy podcast for nearly a decade in which he bluntly ranted about everything from self-driving cars to Canadian energy policy. (“Countries should not have stupid policies,” he told listeners in 2017, calling it “the Jigar Shah rule.”) will amount the “greatest opportunity to create wealth of our lives.” He is a regular presence on social media where he banters with the public.
The business acumen of Mr. Shah weighs heavily with energy companies. “Jigar brings credibility to the street,” said Atul Arya, chief energy strategist at S&P Global, a research firm.
The job comes with huge expectations — and the stakes are high. Founded in 2005 to help fund clean energy projects that commercial banks found too baffling, the loan program funded some of the country’s first major wind and solar farms and launched electric vehicle maker Tesla. But it also lent $535 million in 2009 to Solyndra, a solar company that went bankrupt two years later, leaving taxpayers to bear the loss. In Republican circles, Solyndra became short for government message and the Trump administration essentially froze the loan program.
Mr. Shah has focused on avoiding another Solyndra as he revitalized the office, hired staff and convinced energy companies that the federal government is ready to borrow money again.
He is always aware that Republicans are about to seize taxpayer-backed loans that are going bad. The Energy Department Inspector General warned her office doesn’t have enough resources to properly monitor the newly created agency, which is a concern for some in Congress.
“Americans deserve to know that this money is being spent responsibly,” said Washington Republican Representative Cathy McMorris Rodgers, who chairs the House energy committee and calls the increased funding for the loan bureau “Solyndra on steroids.” She said she would hold the energy department “responsible for every penny spent.”
Mr Shah says the role of the loan program is not to take a leap of faith in high-potential projects, but to support promising clean energy deals that cannot get conventional financing because commercial lenders are unable to research – scientific expertise available at the department of energy.
In a recent interview, Mr. Shah said that today’s office bears little resemblance to the office that made a poor bet on Solyndra ten years ago. The workforce has grown from 12 to 250 and has safeguards to eliminate risky projects. Last month, the office reported that its total loan portfolio has turned a profit while incurring losses equivalent to just 3 percent of its loans – a performance in line with commercial banks.
“The failed projects of the past were clearly not going to make it through the office this time,” said Mr. Shah. “Now we can look at our $38 billion portfolio of loans and say that we’ve actually been pretty good stewards of capital and we’re actually making money for the federal government.”
Sitting in his office in the energy department in front of a map covered in color-coded decals representing projects across the country, Mr. Shah expresses relaxed confidence. Dressed casually in a fleece vest more befitting a tech executive than a federal employee, Mr. Shah spoke in full paragraphs, transitioning seamlessly from Wall Street’s lending practices to the challenges of geothermal energy.
He estimated that cutting America’s global warming emissions by roughly half this decade, as President Biden has pledged, will require about $10 trillion in investment. The Inflation Reduction Act could bring in $1 trillionbut the rest must come from the private sector.
“We’re not the smartest people in the room,” he explained at a recent podcast event in Napa, California. “The people who are the smartest people are the American innovators and entrepreneurs who put their sweat and tears behind something and come to us to get that last bit of help they need to get to the finish line.”
Mr. Shah also emphasizes that clean energy can be twofold. His office is currently reviewing applications from 141 energy projects seeking $121 billion in loans — many in red states. Fossil fuel companies also invest in renewable energy.
“Everyone is participating in this action,” said Mr. Shah at the Napa event. “I understand that some of them were afraid that their country club membership would be canceled if they outwardly supported what we do. But more and more everyone in the country club is participating.”
One of the biggest obstacles clean energy companies face is crossing what is known as the “valley of death.” Investors could fund small demonstrations of new battery chemistry or geothermal drilling techniques. But funding a commercial-scale version is a challenge.
Take Monolith, a Nebraska-based chemical company. Monolith has been refining “methane pyrolysis” for years, which extracts natural gas, heats it to high temperatures and produces two valuable products: ammonia, used in fertilizers, and carbon black, used in tires. Both products are usually made using highly polluting methods, but Monolith thinks it can be done without heating the planet.
Monolith had already built a small production facility and was ready to expand significantly. That’s where the lending agency came into play. Using the network of scientists and experts within the Department of Energy, the agency evaluated Monolith’s proposal and has since conditionally approved a $1.04 billion loan.
“The scrutiny you go through can be quite intense – it takes years, they bring teams together to go through every little detail of our technology and our business plans,” said Rob Hanson, CEO of Monolith. “But at the end of the day, you don’t just get a loan, you get validation from one of the most advanced engineering organizations in the world, which is incredibly valuable.”
Other projects currently supported by the loan bureau include a new plant in Rochester, NY, which harvests lithium from old electric vehicle batteries and a giant salt cave in Utah that will be converted into a hydrogen battery to back up wind and solar energy.
Even when government experts investigate a new technology, success is not guaranteed. Markets change, raw material prices fluctuate, foreign competitors can participate. Solyndra failed not because solar technology didn’t work, but because alternatives became cheaper as silicon prices plummeted.
For Mr. Shah, the office naturally fits. He is almost encyclopedic about both energy and finance.
“In some ways he knew more about methane pyrolysis than I did,” said Monolith’s Mr. Hanson. “He knew what Exxon and Chevron had done in this space in the 1970s, who had tried what. He immediately understood the importance of what we were trying to do.”
In 2003, Mr. Shah founded SunEdison, a solar energy company that pioneered a new way to pay for solar energy projects. SunEdison would bear the risk of financing and building solar panels, and the customer would agree to purchase electricity from those panels for a fixed price over an extended period of time. His first customer was a Whole Foods store in New Jersey. Today, many solar and wind projects are funded by similar agreements.
“There’s no better way to learn than the world of hard knocks,” says Claire Broido Johnson, his co-founder at SunEdison. “We had a lot of ups and downs in those early days trying to convince potential clients and investors that our idea wasn’t crazy.”
The loan bureau wants to make advanced technologies, such as clean hydrogen fuels, as commonplace and easy to finance as wind and solar have become.
And it’s trying to expand clean energy in a way that affects all Americans. Last month, the office said it would conditionally guarantee up to $3 billion to help Sunnova, a solar energy company, finance networks of rooftop solar panels and battery systems to help reduce energy costs in underprivileged communities.
As part of his new windfall, Mr. Shah $250 billion to rebuild old fossil fuel infrastructure – by far the largest pot of money. While the agency has yet to clarify how it intends to use this money, experts say it could help, for example fend off economic devastation in communities affected by coal plant closures.
One question is how quickly the loan office can get money out the door without making hasty decisions. Since Mr. Shah took office, the program has completed only a handful of loans.
“It’s incredibly challenging to get through the application process, especially with all the protections put in place after Solyndra,” said Taite McDonald, a partner at the law firm Holland & Knight, which represents dozens of loan agency applicants and winners. “The Jigar team has been working hard to get projects back on track, but it’s not easy.”
Mr. Shah is aware that he must act quickly. He pointed to the Monolith project as proof that the office is no longer crippled by past failures. “Everyone was like, ‘Wow, that’s a really risky project.’ And we’re like, ‘Well, we’re back.’”