Meet Jigar Shah, who runs the DOE office that helped Tesla get its start

Picture this: You’ve just demonstrated that your brilliant clean tech project works, albeit on a very small scale, and that, if scaled up, it could help with the energy transition.

But now you need a lot more money to build it. You may have already raised funds from VCs, but not enough to finance an infrastructure-sized project. So you go to the banks…and every single one says, ‘Nope, too risky.’

Now what? Enter the Department of Energy’s Loan Programs Office, in charge of more than $40 billion in funds, equivalent to the total, record-setting VC investments in climate tech last year.

The LPO, which was created through the Energy Policy Act of 2005, works with entrepreneurs to take emerging energy tech from demonstration to deployment. Using the expertise across the DOE, the office assesses these energy projects—and once the LPO issues a loan, the banks are much more comfortable following suit.

• During Barack Obama’s presidency, in 2010, the LPO provided a $465 million loan to Tesla, which grew into one of the most valuable automakers in the world.
• But the year before, it loaned $535 million to solar company Solyndra, which went bankrupt shortly afterward, drawing criticism.

The office was mostly dormant under President Donald Trump, but in March 2021, the Biden administration appointed Jigar Shah, who co-founded renewable energy company SunEdison and clean-tech infrastructure investor Generate Capital, as executive director.

Now, Shah is looking to make up for lost time. In December, the office announced its first loan in years—more than $1 billion to finance the expansion of production facilities in Nebraska for clean-hydrogen company Monolith. Just last week, the office announced a $107 million loan for Tesla graphite supplier Syrah Technologies to increase its production of battery anode materials in Louisiana.

We sat down with Shah to discuss how the LPO evaluates projects, the challenges of infrastructure financing, and the climate tech he wants to see more of this year.

This conversation has been edited for length and clarity.

For our readers who might not be as familiar with what the LPO does, could you give a summary of the role it plays in supporting emerging technology?

The core of the idea of the Loan Programs Office is that there are lots of reasons that commercial banks decide not to do loans. One of them that everyone talks about is that they don’t want to take technology risks. That’s something we can handle really easily because we have 10,000 engineers, scientists, and experts on our platform [at the DOE] that can evaluate any technology risk.

So we also don’t take technology risks; We take perceived technology risks. There’s a lot of technologies that are scary to people, but they’re not scary to us. If we’re genuinely unsure as to whether a technology will work or not, that goes into the demonstration bucket at the Department of Energy and not the deployment bucket and the Loans Program Office.

The goal of the Loan Programs Office is really to be a source of competitively priced debt, to really move established and mature technologies to relevancy. There are lots of places where the Department of Energy supports entrepreneurs, but I think it’s important for them to feel like they have a one-stop shop that they can go to, and we’re happy to be that place for people to start their journey through the Department of Energy.

How does the LPO evaluate projects?

The way that debt works is that we’re capped on the upside. If everything goes beautifully, we make the same amount of money. But if everything goes badly, then we lose money. So from a risk-reward standpoint, we don’t get the upside, but we get all the downside.

So then the question becomes: Are there ways for us to narrow that range? Can we create reserve accounts? Can we not put our money in until after construction is completed? Because some of these companies have raised a billion dollars on Wall Street, so they can actually do the construction financing themselves. And then we can come in after the construction is completed and give them 10-year debt for the operation period. And so are there ways for us to reduce risk on our side, but give them something valuable on their side?

With these loans being so customized to each project, how are you measuring success? Is there a certain financial metric you’re tracking?

Dollars out the door. We have $40+ billion of authority that we got during the 2009-era stimulus. That money has been sitting around. We’ve got to put it out the door.

We only want to do quality loans and so we’re very cautious about how we put the money out the door. We’ve rushed to get people to apply to the program, and so that’s been great filling the funnel, but we’re not going to rush to put the money out the door.

How has the office grown or changed since you joined to move these companies through the application process more quickly?

It’s building trust. Because the people that are here, and were here already, are amazing at processing the loans. But the actual trust-building exercise with the entrepreneurs is a big deal. Part of the reason why the Loan Programs Office wasn’t active, before [US Energy Secretary Jennifer Granholm] came in, was that we didn’t have a lot of people applying for loans. I don’t think that the need is more today than it was five years ago, but the trust was lower. And so the question becomes: How do we gain the trust? You put the work in. You call people up and you explain to them what we do. And we really do reach out to people. And I think that has led us to roughly 77 active applications today, requesting roughly $70 billion worth of capital. [Editor’s note: Last week, Shah tweeted that the program’s active applicants were requesting $75.9 billion in capital.] We’re averaging over an application a week.

Where we really supported the existing staff is with people with more private-sector experience just in the last five years, folks who came out of industry. We were able to attract a lot of senior executives. These are people who recently sold a company and have real-world experience. We have 17 people, for instance, in the office of outreach and business development that really holds the hand of a lot of these applicants to our office. Because for a lot of these applicants, they are America’s finest innovators. They’ve raised hundreds of millions of dollars from venture capitalists or private-equity firms, or they’ve SPACed and gone public on Wall Street. And they’re scared of debt. They’re really scared of debt, because equity doesn’t ask tough questions.

We’re trying to make this a safe place to say, ‘Look, we get it. You’re promising these big things. You haven’t quite accomplished it yet. We’re not going to judge you negatively for it, but we do have to know the truth of exactly what has been accomplished before we can give you debt. And that’s not scary. That’s just debt. And debt and equity work together like peanut butter and jelly. You can’t just have jelly sandwiches. That’s just gross. You need a little peanut butter, too.

Are there any areas that you’re particularly focused on? Or technology sectors you want to see more applications from?

We’ve received a lot of applications, which has been wonderful. We even have almost, I think, $9 billion worth of applications in the nuclear title, which is great.

Where I think we continue to be light is in the energy-efficiency category. There’s so many technologies that have come out recently around how to make commercial buildings more energy efficient, how to turn those buildings into connected buildings, and participating in demand flexibility markets. How to help residential homeowners really achieve net zero for their homes. Most of those technologies are continuing to be viewed as pilots. With the conflict in the Ukraine, some of these technologies could be scaled in the next 12 months to save 5% of total US gas consumption—super strategic to the country. And I don’t think that they’re thinking big enough.

What else are you keeping an eye on to determine the success of scaling climate tech?

I do think that capital formation is an extraordinary metric. And I think we’re not tracking it well. How much money is actually chasing nuclear? How much money is actually chasing sustainable aviation fuel? How much money is actually chasing this sector? I think we continue to focus only on venture capital money, which is fine. But venture-capital money is corporate money. Project finance money is infrastructure money. That’s where you’re going to see trillion-dollar scale. And as you know, nothing gets decarbonized at less than trillion-dollar scale. So I think we need a better way of tracking infrastructure dollar flows, and that really is the barometer around whether it’s being successful or not. It’s like, ‘Okay, we have a lot of hype here, but are we actually seeing allocations from infrastructure investors?’ If we are, then we’re winning there. If we’re not, then we still haven’t taken off.