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VENTURE BEAT: DOE Loan Chief Outlines Key Investment Areas

December 16, 2010

Silver calls thermal storage "of critical importance to U.S"

by Iris Kuo

As the Department of Energy moves forward to disperse loan guarantees to grow cutting-edge cleantech, its focus will shift from the maturing sectors of solar and wind to less-developed areas like biofuels and carbon capture.

Loan guarantees promise that the government will cover a company’s debt obligation in the event of a default. Getting one is a powerful endorsement to emerging technologies that allow companies to seek better financing terms. VentureBeat spoke to Jonathan Silver, a former venture capitalist who’s now executive director of the Department of Energy’s loan programs office, a $70 billion investment program in alternative energy.

Yesterday, it closed on a $400 million loan guarantee to Abound Solar, which will use the money to expand manufacturing capacity for its low-cost, thin-film solar panels. Despite reports that China’s competitive pricing has undercut Silicon Valle  solar panel startups, Silver argues that America has a fighting chance, especially with technologies like Abound Solar’s, which makes thin-film cadmium telluride panels for large solar arrays that promises to be low-cost.

“The Chinese have focused much more on polysilicon and multicrystalline silicon. Thin-film is a much, much easier and simpler process and I think demonstrates American capacity to compete on a global level,” Silver said.

But of Solyndra’s troubles? The solar panel maker received a $535 million DOE loan guarantee, but recently closed its first factory, though Silver says it was always intended to close. “I will agree that it wasn’t ready to close quite as soon as it did. Some right sizing and restructuring was necessary to ensure the successful growth of the company,” Silver said. “Manufacturing of any kind is always challenging in this country, but if we’re going to have a successful cleantech sector, we’ve got to have manufacturing capacity.”

Looking forward, Silver likened the DOE loan program to a “shadow bank,” saying that it invests in areas that the private sector has ignored or lacks confidence to invest in. So for example, the DOE will do less with onshore wind now that it has become relatively robust.

“I think you’ll see us do large complex wind transactions, but not as active as we were in the smaller onshore wind efforts because the capital markets now support those,” Silver said. “We are trying to identify potentially transformative technologies which can grow to scale and do important things for the country, but also demonstrate to private capital markets that these projects are indeed viable,” Silver said.

He also named other sectors the DOE will do more to support in the future:

Thermal storage – Ice Energy, are you listening? Thermal energy storage systems store thermal energy generated from sources like solar. Or, in hot startup Ice Energy’s case, makes ice at night, when energy demand is lower and electricity rates are cheaper. During peak usage times in the day, it releases the cold materials to help cool buildings. Silver calls this area “critically important to the US.”

Biofuels and biomass — Many biofuels startups have yet to get to commercial-scale production, which is the focus of the DOE loan program. ”That’s still an area that remains relatively nascent without a lot of the growth patterns that wind and solar has.”

Battery and storage technologies — Silver didn’t elaborate, but given its previous investments in Fisker and Tesla and the coming rollout of electric vehicles by GM and Ford, battery technology is important as automakers and researchers try to pare down the cost of batteries — the government has about $18 billion to $20 billion for guarantees and investments in clean car technologies, Silver said. Finding ways to store energy off the grid is also a scientific holy grail of sorts in the cleantech community — it would be a game-changer, as CMEA’s Maurice Gunderson has said.

Clean coal and carbon capture — Silver said there are several billion dollars set aside for advanced fossil fuels, clean coal and carbon sequestration technologies, which look to capture carbon from CO2-emitting sites like coal-burning plants.

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