The renewable-energy sector got a boost on Oct. 7 when the Dept. of Energy announced it will expand its loan guarantee program to commercial renewable-energy projects under the Energy Policy Act of 2005. DOE also unveiled a new Financial Institution Partnership program (FIPP) to expedite the agency’s loan-guarantee underwriting process and leverage private-sector expertise in funding eligible projects.

Renewable-energy advocates say by expanding the loan-guarantee program to cover commercial, rather than just “innovative” projects, DOE will enable more renewable-energy projects to be built. But, they add, Congress should restore the $2 billion diverted from the loan-guarantee program to pay for the “Cash for Clunkers” initiative.

Under the expanded program, DOE will provide $750 million through the American Recovery and Reinvestment Act to cover the cost of loan guarantees for conventional renewable-energy projects expected to begin construction before Sept. 30, 2011. DOE says the funding could support as much as $4 billion to $8 billion in lending to eligible projects. Previously, only projects that used technologies considered innovative—new technologies not in general use in the marketplace—were eligible for the loan program.

Industry officials say the DOE announcements are good news for the renewable sector. “By expanding eligibility for the loan guarantee to ‘commercial’ projects, instead of the limited ‘innovative’ project definition, DOE is making the loan guarantee more broadly available to more solar companies,” says Rhone Resch, president and CEO of the Solar Energy Industries Association.

“DOE is making the loan guarantee more broadly available to more solar companies.”

Tom Vinson, director of federal regulatory affairs for the American Wind Energy Association, says ARRA has already helped accelerate the development of renewable-energy projects. “We’ve seen a number of deals that have closed in the first half of the year,” he says. More than 4,000 MW of wind power was installed in the first two quarters of 2009, roughly on par with the pace in 2008. “Before the stimulus was enacted, we expected a drop-off of 40% to 60%,” in 2009 he says.

The newly created FIPP is a streamlined set of standards designed to make it easier for lending institutions to underwrite loans. “The new FIPP will not only bring much-needed capital back into the solar market, but it will streamline the application process, allowing projects to be developed sooner,” Resch says.

Sen. Jeff Bingaman (D-N.M.), chairman of the Energy and Natural Resources Committee, applauded the DOE announcements but says he hopes Congress can find a vehicle to restore the $2 billion diverted from the loan-guarantee program to pay for the extension of the “Cash for Clunkers” program. “Because of the leverage in the DOE loan-guarantee program, that $2 billion could unlock up to $20 billion in additional financing for clean energy projects and the jobs they would create,” he says.