Fed seeks to spur green energy investment with guarantees

The Federal government is backing investments in clean energy projects, providing $2 billion in loan guarantees to 16 companies.

The guarantee program differs from recent Department of Energy grants (our coverage on some of those here and here) in that the companies are not given money by the government. The program is more akin to having a cosigner on a loan.

If the company defaults on its loans, the DOE will step in and repay the investors. The guarantees are meant to spur investment and increase investor confidence in clean energy projects.

The program was initiated two year ago, and so is independent of the recent significant lobbying by local venture capitalists and others to get Washington to do more for the environment.

Although 16 companies are receiving the guarantees, the pool of applicants included 143 companies asking for over $27 billion.

Applications for the guarantees were opened a year ago; recipients of the loan guarantees include Tesla Motors, Blue Fire Ethanol and Solyndra, a solar company. For the full list, see the DOE’s release.

The DOE is now seeking $9 billion for a second round of guarantees, to be disbursed in 2008.