Jigar Shah Just Became One of the Most Important Players in the Energy Transition

Joe Weisenthal (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:15)

And I'm Tracy Alloway.

Joe Weisenthal (0:17)

Tracy, we have guests come back on the show from time to time, and we have guests come on multiple times, but it's not every day, or it's not common that we have a guest, and then not long thereafter, something major happens to them, and they're in the center of the news, and we immediately have to get them back.

Tracy Alloway (0:35)

No, that's true. So you make it sound like a bad thing, but this is a good thing.

This is a good thing for the guest. So one of the things that happened earlier this year, we had the Inflation Reduction Act that got passed, and tucked inside that very big act is $350 billion that our previous All Thoughts guest gets to play around with, invest.

Joe Weisenthal (0:59)

Yeah, so earlier in the year, we spoke with Jigar Shah. He is the head of the loan program at the Department of Energy, and I think that he had a loan budget somewhere around $30 billion, essentially a way for the public sector to provide backstop or provide accelerated financing for new energy technologies. Kind of an interesting conversation, but I don't think in the grand scheme of the energy transition, you necessarily expect $30 billion to really move the needle.

Tracy Alloway (1:29)

Right, but $350 billion might do.

Joe Weisenthal (1:32)

Right, so as part of the Inflation Reduction Act in August, there's a lot in there. It's a huge bill. Much of it related to climate, energy transition, energy security.

Tucked into that bill basically is money that will turn the loan program at the Department of Energy into a major player. It now has, as you said, over $300 billion to lend out to accelerate clean energy finance. And so rather than just being sort of this small office, Jigar, our guest, is a crucial player in the energy transition.

Tracy Alloway (2:07)

Yeah, a major player. So we should definitely talk to him about what's interesting him right now and how he might actually deploy some of that money.

Joe Weisenthal (2:14)

Jigar, thank you so much for coming back on Odd Lots.

Jigar Shah (2:18)

Thanks for having me back.

Joe Weisenthal (2:19)

So this is very exciting. Let's go really big picture to start. Talk to us about what you had to deploy or sort of the size of the DOE loan office when we talked to you in June, when it didn't look like there was gonna be some major changes, and now what the law means for your role.

Jigar Shah (2:37)

Yeah, look, I think that the Loan Programs Office has always played a critical role in figuring out how to get debt into infrastructure, right? Infrastructure projects don't get built to make 20% unlevered returns. They generally need an equity debt split, and debt really doesn't wanna get involved early in technologies that it perceives as risky.

And so you have this fundamental disconnect where you've got a bunch of awesome R&D happening at the Department of Energy and a lot of technologies that gather dust waiting to get deployed at scale because first of a kind deployments are really difficult. So our office has put about $35 billion out the door, mostly in 2009 and 2011, and then has roughly $39 billion left to deploy into what's called 1703, Title 17, which is where a lot of the solar and wind projects got funded. We had the ATVM, the Advanced Technology Vehicle Manufacturing Program, which is where Tesla and Ford got their loans. And then we have the Tribal Energy Loan Guarantee Program. So that's what we had when we last talked, was roughly around $39 billion of remaining authority.

And then we got more out of the Inflation Reduction Act.

Tracy Alloway (3:54)

Almost 10 times more.

So I have a conceptual question about the program. And I know it's been going on for a while. You mentioned the loans to Tesla and Ford, but why did the government or the department settle on loans versus grants? Like what was the thinking there?

Jigar Shah (4:13)

Well, we do both, right? So I mean, when you're the federal government, you can do both. So we have the Office of Clean Energy Demonstration, which has over $20 billion worth of grants that I can put out the door. And I think it got an additional $8 billion in the Inflation Reduction Act for industrial decarb. But ultimately grants don't actually cross, help you cross the bridge to bankability, right? So when you think about where we are in the commercialization spectrum, we have a whole bunch of technologies that work, right? That we, it physically works in the lab and the national laboratories, et cetera.