Episode 154 - $8 Billion in Funding for Clean Vehicle Innovation

Big ideas need proper funding. The U.S. Department of Energy’s Loan Programs Office (LPO) is helping companies with clean energy innovations get to the next stage of commercialization.

By providing access to debt capital and custom financing, the LPO finances first-of-a-kind projects and other high-impact energy-related ventures. Since 2009, the LPO has issued more than $35 billion of loans and loan guarantees for more 30 energy infrastructure projects in the United States.

Under the Advanced Technology Vehicles Manufacturing Loan Program (ATVM), the LPO provides loans to support the manufacture of eligible vehicles and qualifying components. To date, the program has loaned $8 billion for projects that have supported the production of more than 4 million advanced technology vehicles. Participants include Tesla, Ford, and Nissan, among others. The LPO is also helping onshore and reshore EV supply chains and manufacturing, as well as supporting energy storage.

To learn more about this program, we sat down with Jigar Shah, Director, Loan Programs Office, U.S. Department of Energy, to discuss how the LPO is transforming existing energy infrastructure, reviving nuclear construction, accelerating growth of utility-scale solar and wind, and of course, expanding domestic adoption of EVs.

Meet Our Guest

JIGAR SHAH
Director, Loan Programs Office, U.S. Department of Energy

Jigar Shah was most recently co-founder and President at Generate Capital, where he focused on helping entrepreneurs accelerate decarbonization solutions through the use of low-cost infrastructure-as-a service financing. Prior to Generate Capital, Shah founded SunEdison, a company that pioneered “pay as you save” solar financing. After SunEdison, Shah served as the founding CEO of the Carbon War Room, a global non-profit founded by Sir Richard Branson and Virgin Unite to help entrepreneurs address climate change. Originally from Illinois, Shah holds a B.S. from the University of Illinois-UC and an MBA from the University of Maryland College Park.

Transcript: 

Grayson Brulte:

Hello, I'm your host, Grayson Brulte. Welcome to another episode of SAE Tomorrow Today, a show about emerging technology and trends and mobility with leaders and innovators who make it all happen. On today's episode, we're absolutely honored to have Jigar Shah, Director of the DOE's Loan Programs Office. On today's episode, he'll discuss how the LPO provides loans to support EV manufacturing under the Advanced Technology Vehicles Manufacturing Loan Program.

We hope you enjoy this episode. Jigar, welcome to the podcast.

Jigar Shah:

Thanks for having me.

Grayson Brulte:

I'm excited to have you here because you're doing very important work. Your department is helping to decarbonize the economy with a big focus on mobility. Before we dive into this conversation for our listeners who are wondering what is the Department of Energy's Loan Programs Office?

Jigar Shah:

I ask myself that every day. We were invented in the 2005 Energy Policy Act and the whole purpose of the Loan Programs Office was to help really commercialize technologies and accelerate their going from innovation to use within the general public. I would say we really started in the nuclear space and then fossil space, and then we added the Advanced Technology Vehicle Manufacturing Program, which really helped us with figuring out how to help vehicles that reduced fuel consumption.

So some of our biggest loans were Ford Motor Company and then Nissan, and then Tesla. And more recently we've added loan programs in the Tribal Energy Loan Guarantee Program, as well as the Energy Infrastructure Reinvestment Act. So very busy. We're up at 200 employees or so, but the goal is really to help these companies who've made really fantastic innovations, get to that next stage of commercialization. 

Grayson Brulte:

For tribal is that putting solar or wind on tribal land? Is that what you're trying to look for in that regard? 

Jigar Shah:

Yeah, we support any of their energy ambitions. I would say that solar and wind is where we're getting the most interest, but certainly it can be used for, folks who wanna do carbon orchestration and storage, or folks who wanted to produce clean hydrogen or other types of energy projects as well.

Grayson Brulte:

You mentioned Tesla and it's becoming an American success story. It went through the loan program. Did that accelerate the awareness of the loan program? Hey, Tesla went through this and look what they. 

Jigar Shah: 

Certainly Tesla has been very high profile, so you can imagine the loan program and Tesla has been, synonymous with the kind of acceleration that we can participate in.

But we certainly, funded the first 500 megawatt solar farms, the first large wind farms, transmission line, geothermal projects. We obviously have the Vogtle nuclear plant that's under construction and hoping to turn on unit three this year. So I would say that we have a tremendous number of success stories, even if Tesla got a lot of publicity.

Grayson Brulte:

When you're funding the clean energy infrastructure, if you talked to a lot of individuals today, there's the cost of getting the line there. Do you fund that? The whole services that have to go. The larger project or is it just the equipment that goes into the project? 

Jigar Shah: 

Yeah, so we have what you call an eligible cost definition. And so a lot of costs are included in the eligible costs, but corporate overhead is not included. And so that's the part that's most prominently excluded from the cost of eligible costs for our loan. And the eligible cost number is generally around this calculation of our maximum, which is 80% of the eligible.

Grayson Brulte:

What does a loan repayment look like when the company, they're, they take the loan they build out the infrastructure. What does the payback period start with and when do the taxpayers eventually get paid back? 

Jigar Shah:

We're able to go up to 30 years. We rarely do, I'd say for most manufacturing type loans we're in that tenure.

Timeframe for some of the project finance deals, we can be closer to 30 years, and we issue bonds basically out of the federal financing bank for people who take loans directly from us. And so when they decide to repay, if they repay early, then we look at where the interest rates are. And so if they borrowed at 4% and then interest rates went.

Then there is a may call that they have to pay. Because we have to pay off the bonds early. But in general, I'd say that's 10 to 30 years or so. 

Grayson Brulte:

Okay. So that's not a very long payback period for the taxpayer there. And we're seeing a big shift across America and President Biden has spoken very openly about this, the shift to electrification the shift to electric vehicles.

How is the advanced technology vehicles manufacturing loan program being used to accelerate the adoption of electric vehicles in the United States? 

Jigar Shah:

Yeah, so our loan program can be used for all sorts of things, right? So in the passenger vehicle space, we certainly funded EV manufacturing, right in the Tesla loan.

We can also do manufacturing of batteries, so that you saw that with the LTM announcement with General Motors, we can also do critical minerals. And so you saw that with the Rhyolite Ridge announcement with ioneer as well as the Redwood Materials announcement that we made recently and the Syrah resources announcement for graphite in Vidalia, Louisiana. So we can do a lot of things there. And then in the bipartisan infrastructure law married with the Inflation Reduction Act, our authority was expanded to include. Aircraft, locomotive, marine, heavy trucks, medium duty trucks. And so we're starting to get more applications in for, let's say, clean school buses or construction equipment or, some of these other categories.

Grayson Brulte:

Decarbonizing maritime, to me, is something that's very important. I don't think it gets enough attention from a new standpoint. Are you seeing the maritime, since the Bipartisan Act allows you to fund that where these new start saying, okay, we can decarbonize cargo shipping or passenger transportation.

Jigar Shah:

Yeah, so it depends on the pathway that you're taking, right? So if you're doing a drop-in fuel, let's call it e-methanol or some of those things, that would be in the Title 17 part of our authority and sustainable aviation fuels, maritime fuels, is really going into Title 17, I'd say where the maritime activities fall into the Advanced Technology Vehicle Manufacturing Program is if you're building a new ship that can use these advanced fuels.

Or you're using a ship that does electrification or some of those kind of things. And so on the manufacturing side, you'd be in the advanced technology vehicle manufacturing program. Whereas if you're just making the fuels, you'd be in the Title 17 side of things. 

Grayson Brulte:

And then as part of the Inflation Reduction Act, there was an additional $250 billion loan guarantees to retool projects. Where does that fit in your environment?

Jigar Shah:

Yeah, so that's the Energy Infrastructure Reinvestment Program. And that just to, one clarification, it's not $250 billion, it's $5 billion of credit subsidy. So basically we're forced to pay the points on the loan for you so that everyone gets us treasuries plus three ads.

So if we did all risky projects, that $5 billion would stretch to, let's say $50 billion. And if we did all very low risk projects, then it could get to $250, where capped at $250 billion. So just to be clear, if we may or may not get to the $250 billion mark in terms of the use of the proceeds, we have a tremendous number of existing energy infrastructure locations, right?

Whether it's coal plants and natural gas plants, whether it's old coal mines. Whether it's old pipelines, we've built a lot of pipelines in this country and some of the old pipelines are no longer used. And so we've had some folks come to us and say, Hey, we wanna use these old pipelines and we're gonna recoat them.

So that they can hold hydrogen or ammonia or carbon dioxide, right? And so those are eligible, but also we have old tank farms, old refineries, and so there's a lot of that. There's also upgrading of existing facilities, so you're seeing a lot of nuclear plants operate. So they're bringing in next generation equipment.
So for the same exact footprint, they can generate another 150 megawatts worth of power. So that would qualify. And then there's also a lot of plants where they're adding battery storage or adding other features. And that would also qualify. So we're excited. We're excited to see all the different use cases.

One other use case we're seeing is reconductoring, right? So stringing new conductors on existing transmission lines and two Xing or three Xing, the capacity of that transmission line in the process. 

Grayson Brulte:

Is increasing the capacity a focus of yours, as, let's just say, a million Americans, 2 million Americans, eventually 10 million Americans are bringing electric vehicles online to ensure that there's enough capacity there when they either go to public charging and they charging at their reside.

Jigar Shah:

Yeah, there again, there's a lot of ways of looking at this question. The first way to look at this question is the grid is a. The National Academy of Science has named it the single largest marvel of the 20th century, right?

And so the grid is a machine. Most machines are operated to get the most capacity utilization out of the machine, right? If you build a steel plant, you want running as much as possible. The grid is the only machine that we have that is, is not running efficiently, so the grid only runs about 40% of the other, 60% of the capacity is underutilized. So one of the things that we can do is to use virtual power plants to up the use of the existing grid. And so what that means is a lot of electric vehicles plug in for the evening, right? Someone comes home from picking up their kid from school, they plug it in and they don't unplug it for 11 hours even though it only takes an hour and a half to recharge the car. And so for a lot of people, whether it recharges immediately when they plug in or it recharges at midnight, they don't really care, right? So every automaker is now allowing you to control when your car charges through an app on your phone.

And so there are many companies who have said, Hey, if you let us control that app for you, then we'll cut the price that you would charge your car at by half. So the electric utility is saying we'll give you an incentive to use the grid more efficiently because then we don't have to upgrade the grid for everyone on the street to, switch to electric vehicles.

So there's some of those programs going separately. We are gonna still need more new infrastructure as well. And so the 1706 Program, this energy infrastructure reinvestment program can be used to install better generation, s o cleaner generation on the grid, replacing old coal plants that have already been designated to retire, and then upgrade those transmission lines with reconductoring so that more power can get to your neighborhood, as well as like putting in battery storage strategically at the distribution substation so that you can handle peaks more efficiently without having to upgrade the lines.

And so you're seeing a tremendous refocusing now as we are adding all these additional loads onto the grid around how we use the existing infrastructure more efficiently and thereby reduce electricity rates for everybody. 

Grayson Brulte:

When we look at large scale infrastructure, a sporting stadium or a concert venue, or for perhaps a large office building, does it come to a point in the future where battery storage is mandated as part of your building permit just to ensure that there's plenty of energy to go around?

Jigar Shah:

So I would say that it's less about mandating that there's, energy to go around and more about recognizing that the electric utility grid is the largest commodity supply chain in the world that doesn't feature storage, right?

So if you look at like food production, we have grain elevators, right? If you look at gasoline and diesel, you have tank farms, right? So in every large commodity footprint, whether it's mining or fuels or food, you feature storage. And it turns out when you feature storage, it is way easier to run the commodity supply chain.

But electricity was the only thing where we're saying, let's make this as hard on ourselves as possible, and let's make electricity generation and usage equal each other every microsecond of the day, right? And so now people have recognized, let's make things easier on ourself. Let's figure out how to do this.

Now, there's a couple ways of making it easier on yourself. One is behind the meter battery storage, like you're describing at stadiums or commercial facilities. What you find is that battery. is most efficient when it's only a short duration. Let's call it an hour, because then you can protect yourself from power, quality issues.

You can protect yourself from demand charges peaking, right? So if you have a hot day, you can make sure your air conditioning doesn't peak and cause you higher demand charges. So an hour or two hours is really cost effective for you. What you end up finding though, is. , take all those use cases.

We're thinking about a hundred gigawatt hours of battery storage by the end of the decade. Right now, compare this to vehicles. We will ship a hundred gigawatt hours of vehicle batteries next year, in one year, and in 2030, we expect that to be 800 gigawatt hours that will ship in one. Compare that to the cumulative amount of batteries that we're gonna put into people's garages.

Places like stadiums and grocery stores will be a hundred gigawatt hours by 2030, and that's why this whole integrating electric vehicle batteries into the grid. Is such a top priority and you're seeing it right in the 2022 Super Bowl Ford featured the fact that you could run your entire house off your F-150 Lightning for multiple days as part of the reason why you would buy the truck, right?

So this is not something that the government is opposing on the system as much as this is something that consumers want this feature. For, the protection of their family and to be able to use their vehicle for multiple purposes. 

Grayson Brulte:

It goes back to a common thread we've discussed in this podcast. Convenience. It's a convenience. You buy the electric vehicle, if you're in a storm or an area where you have an outage, for example, it's a convenience. You can re, you can operate your dishwasher. You can operate your stove if you. If you have the ability to plug in the vehicle, the term virtual power plant, I like, and when I have an electric vehicle and I talk to other individuals that own electric vehicles, nobody talks about powering their car.

I live in Florida and we get storms, which are well known, and thank you for the government and helping us, bailing us out during those issues. But nobody ever talks about, oh, hey, you can make coffee today with your vehicle. How do we move the public perception around EVs are cool. They're good for the environment to, oh, by the way, they're gonna be convenient if you're in a situation where you lose.

Jigar Shah:

Yeah. I think it's a really good question and it's one where we have to work together, right? So we are working with the electric utility, for instance, in Florida. They have an extraordinary new program where they are saying, we will pay for the charger, the level two charger in your garage, and you pay us $35 a month or so.

You can use unlimited amounts of electricity through that charger as long as you're only charging the 21 hours a day where we have excess capacity on the grid, and those three hours a day where we have strained capacity, you can still charge, but you gotta push a little button and that'll be 35 cents a kilowatt.

Right, and people are saying, oh, that's not really inconvenient, because, I just plug my car in when I get into the garage and it doesn't matter to me when it charges, as long as it's full, when I'm ready to drive out again. And if I really desperately need it to charge at that moment, I can push this button, right?

Which is pretty infrequent. And so you're starting to see a level of coordination between the utility and the homeowner who want to put in these electric vehicles where they're saying, look, you can do whatever you want. If you wanna charge whenever you want, you can. And it's just a little more costly to you.

And if you want to be more flexible, we'll give you a discount. And I think you're seeing that happening across the country as utilities start to navigate all of these consumer preferences, right? They want this, even if it's not for both cars. There's a lot of people who have more than one car and they're saying, you know what, I'm gonna convert one car to electric; the other car, maybe I'll make it a plug-in hybrid vehicle or I'll make it, gasoline powered vehicle. And you know what you find naturally is people know that it's way cheaper to operate the electric vehicle than the gasoline powered vehicle. So once they get one of their vehicles is electric, you find that they transition many of their miles.

To the electric car. And so that is the partnership that we're in where the Department of Energy has done years and years of research to allow for that software, that hardware, everything to work seamlessly. And the utilities are now implementing it at scale. 

Grayson Brulte:

From going from a gas car to an electric car the first time, you don't have to pay for an oil change bill. You're like, okay, this is really great. It's just those little moments there. You mentioned the utility. It's Florida power and light and what they did really well, they don't charge you an installation fee. You don't have to go trying to find an installer.

It's all included. You're getting a certified technician and so that's getting rid of the friction. If they're doing electricity in your house, you know it's gonna be done safe because after all they are your utility. Getting back to your office, currently you have 125 applications seeking $119 billion in loans. As you and the team go through those loans, how do you determine who is eligible and who's not eligible for the potential loans? 

Jigar Shah:

Yeah, look, I think that the statute's very clear about who's eligible and who's not eligible, right? So we have multiple statutes, to be clear. So the two traditional pro projects programs that we have are the 1703 Innovative Clean Energy Program and the ATVM, the Advanced Technology Vehicle Manufacturing Program.

In the 1703 program, there has to be some sort of innovation, right? It doesn't have to be groundbreaking fusion level innovation, but it does need to be innovation where we're deploying it for the first time or the sixth time we can do up to the first six deployments on the ATVM program. There is no innovation requirement.

That program is really around onshoring and reshoring this manufacturing capacity here in this country, right? And so that's the goal of that. Now you've got the 1706 program we talked about, which is that Energy Infrastructure Reinvestment Program. That program also does not have an innovation requirement.

That requirement is really to reduce greenhouse gas emissions and repurposing these traditional energy sites where you already have union workforce that's trained. You already have a interconnection to the grid that's already being used, et cetera. How do you use that more productively? Then we have the tribal energy loan program. Which also doesn't have an innovation requirement, but it has a requirement that the tribe is actually applying for the loan. And lastly, we have this CO2 pipeline program, the CFIA program where we're building CO2 trunk lines across the country so we can sequester carbon from industrial facilities around the country.

And so each program has a very clear set of rules. We ask people to, to participate in pretty extensive pre-consultation. That way we don't have to waste their time, right? So we can say, look, you're likely to qualify for this program, so you should make the effort to put in an application, or you're unlikely to qualify.

If you wanna apply, feel free, and we'll still evaluate you under the criteria. , but from the first reading, we don't think you're gonna qualify. And so we do that service for people and we have 30 people in our outreach and business development team that do nothing but talk to hundreds of entrepreneurs every month to try to help them to, whether this is a good investment of time for them.

Grayson Brulte:

You're making convenient and you're being honest. You're not wasting their time. 

Jigar Shah:

Look, they're America's best and brightest, right? And so they are the ones taking the risk to, to really innovate in this country and to bring manufacturing capacity back to this country. And so the least we can do is to treat them with respect and honesty.

Grayson Brulte:

When you look at manufacturing capacity, I'm assuming that the 1703 was an example of over the Redwood Materials loan went. How important is it for a circular economy so we can recycle the batteries and reuse them as more and more electric vehicles come online in the United States? 

Jigar Shah:

Yeah, it's critical. And Redwood was in the advanced technology vehicle manufacturing program because it's a critical mineral that's returning minerals. Back to the automotive supply chain, right? Copper foil and cathode animal materials. so they did qualify under at vm. Something that would qualify in the critical mineral space or circular economy space in the 1703 program would be detached from the automotive supply chain right?

So if they were doing some sort of rare earth for wind production or solar production, that would be in the 1703 program. But the circular economy in general, I would say is more difficult for us to underwrite because oftentimes circular economy projects have a lot of. Beneficial qualities, but they often don't reduce greenhouse gas emissions.

For instance, recycling plastic isn't actually a big reduction in greenhouse gas emissions versus virgin plastic. It diverts a lot of plastic from landfills or the oceans, which is really good for the planet and for our country. But doesn't necessarily reduce greenhouse gas emissions. So we work hard with the applicants to see whether we can get to 10% greenhouse gas emission savings, which is where the threshold is for us to, believe that they've really honored the spirit of that requirement.

Grayson Brulte:

Your office has made several conditional loan commitments for raw materials that go into batteries. Is that still a priority of your office to, we can shore up the supply chain for raw materials in the United States. And on the backside of that, have you made any loans around refining capacity? 

Jigar Shah:

Sure. Critical Minerals is clearly a focus of the administration and certainly a focus of our office.

And that with the IRA resources project in Vidalia, Louisiana, where we're taking graphite from one of the product most productive minds in the world in Mozambique and processing it here in the United States. Similar similarly, the Rhyolite Ridge ioneer Lithium Project that we announced in Nevada.

It's some of the most productive clay in the world that has a very high lithium contact, and then they're using DLE to separate the lithium out of the clay, which is a really advanced processing technique which is great. And so that continues to be a focus of the office. But I think it's important for us to remember what a focus of the office means.

We're a commercial bank, right? So our focus is really around, , proactively reaching out to people to say, Hey, you qualify for the loan programs office. But ultimately, we process every loan that comes into our office as they are fully prepared with a full data room. They've met all of our requirements, whether it's, nuclear or critical minerals or solar or wind or transmission or geothermal or hydrogen or carbon sequestration. We really play everything straight and process them as they're prepared to be processed. 

Grayson Brulte:

You mentioned hydrogen earlier. We're three years in the pipelines. Are you seeing a lot of demand for hydrogen? Because for a while hydrogen was bubbling up. Bubbling up and then it just seems electrification, it's overtaking it. But then if you look at class eights, hydrogen technology, there seems to be bubbling up again. 

Jigar Shah:

Yeah, so there's a couple of angles to hydrogen. One is that, the IRA has this $3 per kilogram for clean hydrogen. And so the final rules are still being worked out by Treasury there, but we are seeing an extraordinary amount of commercial interest in hydrogen, not only through our office where we've done two hydrogen deals, right?

The monolith materials deal in Hallam, Nebraska, as well as the Delta ACES project in Delta, Utah. And so we have many more hydrogen projects in the Loans Programs Office, and mostly that's on the production side of hydrogen, and so I believe pretty strongly that we'll hit the full 10 million tons of clean hydrogen by 2030 that we need to offset the 10 million tons of gray hydrogen that we currently produce in this country.

And so I think we're on track to doing that on the production side. Now on the use case side there's a couple of things that we need to do in answer to your question on Class 8 vehicles. One is we need to produce hydrogen Class 8 vehicles in this country, and right now we don't produce them at scale.

And so as a result, the cost of Class 8. Hydrogen powered vehicles are much higher than one would want because they're one-off custom made products. Second is that you have a lot of hydrogen refueling infrastructure that has to be built, and so you see some of that in California and then there's others that are being produced with in conjunction with some of these hydrogen hubs that we're supporting here in the United States.

But I'd say that in general, where you see the most interest in hydrogen for motive applications is really in forklifts, right? So that's plug power. There are tens of thousands of them being deployed. Today. You see a lot of interest in mining equipment, in construction equipment. I'd say. I think that on the road equipment side of things. We're seeing a lot more interest there in Europe. And then I think if we get to scale there, my sense is a lot of those producers will come from Europe to the United States. But we're not frankly seeing a lot of that in our office today. The other place we're seeing a ton of interest in hydrogen is in particularly for short haul flights, right?

The 300 mile flights, as well as helicopters, as well as, some of these like transit buses and some of these other areas. And so we're excited about the hydrogen use case for vehicles, but I think we have to be cautious about the loan program's office. We're the last step of the process, so we're not on the r and d side where we have a ton of work going on there. We're really on the, somebody's scaling up a commercial facility to ship thousands of units. 

Grayson Brulte:

Aviation's a very good point. We saw the press release from United Airlines where they're working together with a consortium to decarbonize the sky that's becoming for the United States carriers to, to decarbonize there.

You mentioned earlier when electricity was built, no storage. Are we gonna have that same problem with green hydrogen or as an entrepreneur saying, wait a second, we've learned this lesson. We're gonna build storage at the same? 

Jigar Shah:

I think, again, this depends on what the use case is. So for the Delta ACES project, the main feature of that project was storage, right?

We've got one of the best salt caverns in the entire west, and we're gonna be storing so much hydrogen there that it'll actually be more than all the stationary battery storage that we expect by 2030 in one cavern. And they're building two caverns worth of storage there, right? So one cavern will be storing more hydrogen.

All of the stationary battery storage we expect by 2030 on the grid. And there's about 15 additional caverns that have been scoped out where people want to use them for hydrogen storage. And so I think from that perspective, hydrogen storage I think will be a big thing and it will happen. Now the question is if you want storage in one specific spot that's pretty expensive today, right?

So if you have reinforced carbon fiber storage or other types of gaseous hydrogen storage, it's pretty expensive. But we have a ton of in r and d occurring there now that's reducing the cost of that today. And so you've got a couple of approaches to on-demand hydrogen production that folks are looking at for aviation.

And then you have some where people are converting. Electricity or natural gas to hydrogen and then storing it on site. Because right now you really only need enough to refuel, let's say three or four flights a day. You're not looking for enough to refuel an entire airport. And I think we've got the technology today to do it, and then that technology is improving over.

Grayson Brulte:

In your previous career, in, in the prior sector, you were a clean tech executive. I'd love to know, in your opinion, what is the best way to usher in and strengthen a clean energy supply chain domestically here in the United States? 

Jigar Shah:

I think we start by suggesting that we have a lot of planning tools here in the United States so we can plan the supply chain plan hydrogen decarbonization, plan, industrial decarbonization, plan. the resurgence of nuclear power in this country. We can do all sorts of planning, right? But ultimately the United States is private sector led, government enabled, right? So all the plans in the world. only come to fruition when the private sector decides to put capital against those plans, and they pick companies for all sorts of reasons, right?

Sometimes they pick them because they believe that the technology is the best, but a lot of times they pick companies to back because they think that management team is superior to other management teams, even if the technology is only third. And so I think that it's important for everyone to recognize that we live and die by what the private sector decides to do.

They're the ones who pick the winners and losers. And then what the government does is say once you've been chosen by the private sector, we can provide you with low cost loans from loan programs office. We can provide you grants from the Office of Clean Energy Demonstration. Which has a matching component to it, which the private sector is providing, right?

We can provide tax credits from the Inflation Reduction Act, right? But ultimately all of those things are unlocked by private sector decision making, and so we are asking the private sector to be more aggressive in telling us. What they're choosing to do. And part of the way we facilitate that is we have these commercial liftoff documents that we're writing.

And so the first four that are coming out soon are in nuclear hydrogen are carbon management and long duration energy storage. And there we're saying to the private sector, tell us what you are allocating capital, right? We've done all this econometric sort of work saying these are the first four use cases that should go first.

But the private sector sometimes says, ah, we like this use case better, great. If you're putting $20 billion behind it, I wanna know about it. And then we'll reallocate the money at the Department of Energy. To make sure that your decisions are the most successful it can be within, the foundations of science, right? We don't want to be violating any laws of thermodynamics around here. 

Grayson Brulte:

How fast are you able to reallocate potential loan funds? Is it a long, complicated process, or can you move like the private sector and there's enough demand?

Jigar Shah:

So the loan funds are easy because we have very broad categories, and we're not allocating money to any specific sector.

We're allocating capital to any loan from any sector that meets our requirements, right? So whether it's like in the Title 17 program, the 1703 and the 1706, it that spans 15 different sectors, right? So we don't have to reallocate between the sectors, but I'd say that for a lot of our grant programs, we put together funding opportunity announcements, and then there's a scoring mechanism in those FOAs around, here's what we're solving for.

And so based on private sector feedback, we can change the way in which we. For who wins those grant program announcements based on what the private sector is telling us is needed to be demonstrated so that they can then put the next dollars into commercializing the technology. 

Grayson Brulte:

I like the fact that you used the term a commercial bank. I'll call you a clean energy commercial bank that's in touch with the private sector and you're matching and enabling stuff to scale. In your opinion, what is the future of the clean economy? You're sitting here in government, you're having, you came from private sector, you're having those relationships. You got a pretty good magic ball to where this is going. 

Jigar Shah:

Yeah. Look, I think that we have hundreds of companies that have received over $60 billion of venture capital in 2021 and again in 2022. And so there are probably thousands of companies in there, but I'm only tracking the ones that are later stage, right?

They've gotten C rounds and D rounds. They've demonstrated their technology and now they're ready for the loan programs office, right? Once that occurs, we're still 10 years away from, right? So when you look at all of the loans that we provided in the 2010, 2011 timeframe in the Loans Programs Office, right?

The first 500 megawatt solar farms, solar was still less than 2% of production on the grid until four years ago, right? And so when you think about we in, we provided those loans in 2010, they were not relevant to grid scale until 2020, and the same thing's true with Tesla. Like I, I think Tesla's extraordinary, but when you think about where they were in 2009 when we provided the loan, then they went public in, I think 2012 maybe, and then they were not profitable, I think maybe until 2018, 2019. They were not relevant in terms of total car sales until 10 years after we provided that loan. And so they were awesome. There were a lot of people who had Model Ss, right? But today the Model S is one of their, lower volume cars. It's really the Model 3, the Model Y, right?

Those are the ones that are really, taking off, right? And so when you think about relevance is in gigaton scale. relevance is not in market capitalization. So there's a lot of companies that are like, they're worth $50 billion on the stock market, great, but they're producing one battery a week.

That's not relevant, right? . And so I just wanna make sure people understand that we are tied to. Which is around carbon reduction and greenhouse gas emission reduction. And so those are all technologies that are five plus years old, right? So by definition, I am busy working on relevance, not on, first of a kind demonstrations, right?

And even the first of a kind deployments that we're funding, like monolith materials that we provide a conditional commitment to. I think that technology is, And they make carbon black, which even electric vehicles need tires and carbon. Black is in making tires, but they're not gonna be relevant until they produce 20 of those factories.

Right, and so I just think it's important for us to be careful about mixing and matching the hype cycle and the relevant cycle.

Grayson Brulte:

I like that you're finding stuff earlier that will have a positive impact on carbon emissions. And if you wanna use the private sector term you're a patient investor, you're finding a relevant sector that will meet your goals and you're waiting because we never know gonna happen with Tesla.

We all saw the reportings and the up and downs and it turned into a great American success story. We're having this conversation 10 years ago. We're having a, we're having a different conversation, but I like this, you're focused on the relevance. You're focused on lowering carbon, which is good for the environment and good for all citizens around the globe.
 

And Jigar, as we look to wrap up this insightful conversation, what would you like our listeners take away with them today? 

Jigar Shah:

Look I think it is very clear to me that America leads the world every 20 years in lots of different sort of phases, whether it's our manufacturing capacity after World War II, whether it was the information, computer revolution, then it was the internet revolution and social media.

Today I would posit to you that the most exciting way that we're leading the world today is in our innovation around climate technologies, right? We have the world's best nuclear technologies. The Canadians, the Ontario Power Group, decided to build a GE Hitachi design, Tennessee Valley Authority is doing the same.

We have the world's best electrolyzer technologies, right? And you're seeing people scaling up those technologies. We're exporting them to Europe and around the world. We have the nation's best carbon management technologies, whether it's direct air capture or traditional carbon management, where we're injecting carbon dioxide into classics wells, right?

Like we're doing a million tons a year right now in ad. Facilities from an ethanol facility into Illinois, right? We have the best technology in terms of advanced conductors for transmission lines, HVDC lines, right? We have the best technologies in the world around next generation battery technologies, right?

So when people talk about lithium phosphate, iron phosphate batteries, DOE technology invented at the UT-Austin, right, university and licensed to Chinese companies. And we now have the next five technologies ready to go that we're gonna be deploying here in this country, and we're not gonna license it to Chinese companies this time around, we're gonna manufacture them here in this country. So I wanna make sure people understand just how in the lead America is, We just didn't choose to manufacture them here in this country a decade ago. Today, we've pivoted. We want to manufacture all these technologies here, create great American jobs here, and then once we've made them here, we're gonna be exporting not only that product, but also our technologies around the world to help our allies decarbonize around the world.

Grayson Brulte:

It's gonna be, It's gonna be extraordinary and it's gonna be great for the US economy cuz America enables innovation. America is the home of the entrepreneur and America will lead on all forms of climate technology. Today is tomorrow. Tomorrow's today and the future is the clean economy. Jigar, thank you so much for coming on SAE Tomorrow Today.

Jigar Shah:

My pleasure. And thanks for your interest and thanks for all the time you guys are spending on this really important topic.

Grayson Brulte:

Thank you for listening to SAE Tomorrow Today. If you've enjoyed this episode and would like to hear more, please kindly rate review and let us know what topics you'd like for us to explore next.

Be sure to join us next week for another episode of SAE Tomorrow Today, where I'll share my candid insights on the future of mobility. 

SAE International makes no representations as to the accuracy of the information presented in this podcast. The information and opinions are for general information only. SAE International does not endorse, approve, recommend, or certify any information, product, process, service, or organization presented or mentioned in this podcast.

 

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