Washington (Platts)--7Oct2009/719 pm EDT/2319 GMT

The US Department of Energy has launched a new program that will transfer some of its loan-making responsibilities to banks and other private-sector financial institutions to bankroll mature renewable energy projects.

Under the new Financial Institution Partnership Program, seeded with up to $750 million in stimulus funds, DOE would preapprove several banks to provide financing for these projects, backed by partial, risk-sharing loan guarantees from DOE, the agency said Wednesday in a statement.

DOE said the program would enable applicants to leverage as much as $4 to $8 billion in private lending to cover their projects, while reducing taxpayer risk.

"A renewable energy economy is a true opportunity to create new jobs, reinvigorate America's competitiveness and support the president's goal of doubling renewable energy in the United States," said Energy Secretary Steven Chu. "American innovation can be the catalyst that jump starts a new clean energy Industrial Revolution."

Up until now, DOE has largely been financing itself loans offered through the Section 1705 loan guarantee program, DOE officials have said.

With FIPP in place, proposed borrowers would work directly with banks to apply for financing and if the application is approved, the bank then would be eligible to apply through an expedited process for a DOE loan guarantee covering up to 80% of the loan. DOE said a credit agency must rate the project's debt at least BB or equivalent.

FIPP targets applications for conventional renewable energy projects, such as wind, solar, biomass, geothermal and hydropower, unlike previous loan guarantee solicitations, which focused on new or innovative clean energy technologies.

ANOTHER 'INDUSTRIAL REVOLUTION' NEEDED IN COMING DECADE: CHU

"What we need in the coming decade is an industrial revolution," Chu told energy sector officials Wednesday at a Clean Energy Economy Forum in Washington. "With a comprehensive climate change and energy bill we can get the country in the right direction so we can lead this revolution."

Chu said that he was told during a visit to China over the summer that China, with its huge investment in renewable energy, planned to use clean energy technology as a basis of its economy.

"China has replaced the United States the leader in high tech," said Chu. "There is no reason why we should be allowing this to happen."

To that end, Chu said DOE has created FIPP and he is urging that a cap be set on carbon. A cap on carbon emissions through federal legislation would be a "long-term signal" that would "drive most serious investment," he said.

Department of Commerce Secretary Gary Locke, who joined Chu at the forum, told energy business leaders that "We need the support of the business community."

Carbon cap-and-trade and energy policy legislation is "crucial for our economic competitiveness," he said. "It's absolutely essential we pass this energy and climate change legislation."

Currently, the US Senate is working on a carbon cap-and-trade bill based on legislation that cleared the US House of Representatives in June.

Senate Energy and Natural Resources Committee Chairman Jeff Bingaman, a New Mexico Democrat, said he was "delighted" with the DOE's announcement to launch FIPP.

"This is an important step forward for the development of the US clean energy technology industry," said Bingaman. His committee earlier this year completed an energy policy bill that is expected to be joined with the cap-and-trade bill for a Senate vote.

"We need to build on this new program to keep America from falling further behind our foreign competitors in clean energy technology," he said.

--Herman Wang, herman_wang@platts.com

--Cathy Cash, cathy_cash@platts.com