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"Valley of death shallower than it's ever been"

May 6, 2022

Photo illustration: Annelise Capossela/Axios. Photo: Torsten Blackwood /AFP via Getty Images

In Axios Pro Climate Deals' first live event, Jigar Shah, director of the Department of Energy's Loan Programs Office, said he is optimistic about private and public investments in climate technology.

Why it matters: Shah manages LPO's more than $40 billion tranche for loans to climate technology and energy companies in the U.S.

Context: LPO allows companies to apply for commercial debt to help fund projects like solar or wind farms that are often capital intensive and sometimes unappealing to equity investors looking for bigger returns.

  • On April 27, LPO made a conditional commitment to provide up to $504.4 million in loan guarantees for the massive Advanced Clean Energy Storage hub in Utah.
  • On April 18, it made another conditional commitment to lend up to $107 million to expand production capacity for a critical minerals plant in Louisiana.

The latest: Shah says there are more sources of equity funding than ever before for startups looking to bridge the "valley of death," a reference to the high-risk, high-reward time when a company is in the throes of plant production at the cusp of commercialization.

  • "I'd say that the valley of death is far shallower than it's ever been. There's more equity available today than ever," Shah says.

Yes, but: There's a bit of a chicken-or-the-egg problem in the market, Shah says. Startups can often use their LPO approval as a way to better raise equity funding, but they need to hit a certain level of commercialization and project development — which requires a fair amount of early equity funding — to meet LPO's requirements for approval.

The intrigue: Finding ways to support the nascent offshore wind sector has been on the office's radar for a while, and Shah said those talks are heating up, Generate's Ben Geman writes.

  • But he signaled that offshore wind is entering a new phase, and he name-checked ways to support the development of vessels needed to build and support wind farms in particular.
  • "We have been facilitating that conversation for I'd say the better part of seven months now, and I finally got a couple of proposals from the industry last week," he said.
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