Audit Report "The Department of Energy's Loan Guarantee Program for Innovative Energy Technologies"

The Energy Policy Act of 2005 authorized the Department of Energy to guarantee loans for new or significantly improved energy production technologies that avoid, reduce, or sequester air pollutants and other greenhouse gases. As of December 2008, Congress authorized the Department to make $42.5 billion in loan guarantees to support innovative energy projects. These guarantees were authorized for up to 80% of the total project costs and were designed to promote the commercial use of innovative technologies. Under the terms of the Act, the loan guarantees are contingent upon reasonable prospect of repayment by the borrower. Consistent with the Energy Policy Act, the Department is responsible for soliciting and evaluating loan applications, approving loan guarantees, and monitoring project and loan guarantee performance. through December 2008, the Department had issued five solicitations for projects that support innovative clean coal technologies, energy efficiency, renewable energy, advanced electricity transmission and distribution, and nuclear and fossil energy projects. These solicitations were issued in three phases with the first in August 2006, and the final in September 2008. Eleven substantially complete applications requesting approximately $8.2 billion in loan guarantees had been received by the Department in response to the first solicitation. The Department had begun the review of applications and was in the process of completing due diligence procedures necessary to evaluate projects received in response to the first solicitation. Under current plans, the Department is to issue its first loan guarantees in the spring of 2009. Because of the importance of this program as part of an effort to address the Nation's most challenging and pressing energy needs; and, the potential risk of loss to the United States taxpayers should default occur, we initiated this review to evaluate the Department's progress in establishing internal and operational controls over its Loan Guarantee Program.