ClimateIntel has been chronicling the advantages of developing a quasi-governmental agency, the Renewable Energy Private Investment Corporation (REPIC), to assist the financing and growth of renewable energy industries.  In the short term, REPIC can provide market-based lending and loan guarantees to help unfreeze and lower the cost of capital during these difficult market conditions.  In our view, REPIC can provide services beyond lending and loan guarantees to benefit private capital investments, such as technology and project insurance, and private equity support to small scale and emerging technologies.  In the long term, REPIC can mobilize private investment capital, promote social and environmental goals, and ultimately lower the cost of capital to renewable energy industry.  In this post, we explore the administrative advantages of REPIC.

As discussed in prior posts, REPIC can be structured similarly to the Overseas Private Investment Corporation.  We envision an advisory council and staff that are specialists in environmental/energy policy, renewable technologies, and finance.  These experts can provide a streamlined and single source review process for REPIC programs, while depoliticizing the selection of projects to be funded or insured.  Like any other commercial lender, REPIC would evaluate project and transactional risks to ensure that financing is commercially, technically, and financially sound.  Interest rates and fees for financial products would be based on the cost of U.S. government issued securities, plus a premium based upon the project’s perceived commercial, managerial, and technical risks.   One major advantage to REPIC, as compared to the DOE Loan Guarantee program, is that commercialization specialists within REPIC would  work with applicants during the early stages of the application process, giving companies an early indication in the event a particular project does not fit within REPIC’s project selection criteria .  Under the DOE Loan Guarantee program, applicants must complete a costly and expensive application before a project is even considered. There is no early warning that a project will not qualify.

Accordingly, REPIC would house four discrete divisions that would collaborate, but have their own areas of competence: private equity; structured finance; insurance; and policy.  Each division would have the discretion to meet with applicants, guide the application process and assist with the eventual loan or insurance negotiation.  Through this collective expertise, REPIC would have a greater understanding of the risks associated with emerging technologies than traditional lenders so the cost of lending would more closely reflect the risks involved in a particular project or technology.

By housing a multidisciplinary panel of experts within REPIC, inherent efficiencies and synergies will reduce transactional costs and time for project review in contrast to the high costs and administrative delays associated with traditional loan guarantee programs that hamper project development.  At the same time, REPIC can promote broader US policy and economic development goals by establishing lending criteria designed to advance certain environmental, social, and regulatory objectives.  REPIC’s lending criteria can prioritize funding for projects that will provide lasting benefits to the US economy, including those projects that:

• Promote sound environmental standards
• Encourage job creation, training, and economic development
• Contribute to reductions in greenhouse gas emissions
• Advance the competitiveness of U.S. technologies
• Meet federal renewable fuel standards and forthcoming renewable energy standards

Similarly, REPIC’s staff can provide advice and support to other project lenders and work with the private sector to ensure these goals are met.

As such, REPIC can act as a conduit for U.S. government policies by supporting not only sound renewable energy projects and technologies, but also advancing broader economic development and environmental goals.  REPIC could work with Congress, administrative agencies, civil society, and the private sector to develop clear, transparent, and objective criteria in which to apply to funding projects.  These criteria can provide lasting benefits to the wider economy.

A streamlined and multidisciplinary advisory council within REPIC will lessen the cost and timeline for project and loan evaluation.  REPIC can ultimately attract additional financing and business support for existing and emerging renewable technologies.  Ultimately, REPIC can drive down the costs and lower the risks associated with renewable energy lending.

For further information about this topic, please contact Akin Gump.