Interview with Jonah Wagner (Chief Strategist at the US Department of Energy Loan Programs Office, and Principal Assistant Director for Clean Energy at the White House Office of Science and Technology Policy under President Biden)
Jonah Wagner is former Chief Strategist at the U.S. Department of Energy (DOE) Loan Programs Office, and former Principal Assistant Director for Clean Energy at the White House Office of Science and Technology Policy (OSTP).
Interview conducted 9th December, 2024.
Q: How would you characterise Bidenomics and how do you assess its performance over the last four years?
I’m better positioned to talk about Bidenomics in the context of clean energy. When we talk about America’s clean energy industrial strategy—which is underpinned by the Inflation Reduction Act (IRA), the Bipartisan Infrastructure Law (BIL), and the CHIPS and Science Act as the central pieces of legislation—the goal was to say we don’t just want to invent these technologies in America; we want to build them here, too. And that we’re going to be deliberate in the technologies and sectors that we believe are going to be most important to compete, and to support good jobs and resilient supply chains, and clean, reliable, affordable electricity for all Americans.
In practice, it was more than that. It was dusting off the Loan Programs Office (LPO) in recognition of an over 10-year history of successful management of tens of billions of dollars of clean energy loans and saying – “we are now open for business again”. One of the lessons of America’s industrial strategy is that there were programs like LPO at DOE that existed before any new laws were passed. LPO already had over $40 billion in latent loan authority. Work began before the IRA passed, with a new Director and a new team and a new Secretary saying “go out and take risks”! LPO had a ~$70 billion application pipeline before the IRA ever passed. I imagine there are other programs in the U.S. government—and in the U.K. government—that, with a different level of risk appetite and ambition, we could get a lot more out of than we do today.
Q: When we’re talking about the story of the Biden administration, we often home in on those three big landmark pieces of legislation, but how much would you say it is also about the attitudes of personnel, and the scope and ambition of leadership that moved the dial?
Obviously, it’s hard to separate them. The reason I brought it up is that we were building momentum before the Infrastructure Law passed. It’s hard to say whether that was because the Administration was already leaning so hard into infrastructure already, that it created the permission structure for us. When I joined DOE in the fall of 2021, we were already thinking through what would happen if the Infrastructure Law passes. But yes, there were already latent resources that were available to get started without that agenda in place.
Momentum is a powerful thing. One of the lessons of the Infrastructure Law is just how you think about creating momentum and ensure that you’re not going to go sideways when something interrupts that momentum.
From the beginning we took the approach of “private-sector-led, government-enabled” in how we approached investing. The theory that capital markets are the most efficient mechanism for capital allocation, and government should be judicious in steering those decisions. We should only do it in particular circumstances and ideally with a prescribed end date—for example, when it comes to demonstrating a new technology, or helping a promising new technology compete with powerful incumbents.
At the LPO, we didn’t have an agenda like that: if a company was eligible for a loan, they got a loan. We follow where the private sector leads.
That’s where the “Pathways to Commercial Lift Off” effort came from. The spirit of that was: unless we are having a very active conversation with the private sector, we are going to execute policy wrong. We’re getting tremendous insights from the hundreds of LPO applications coming in, the CEO conversations we’re having, and all of the loans in our portfolio… We’re learning. We should tell these companies and investors what we’re seeing, consistent with business confidentiality requirements. For instance, if we know that the only way that geothermal is going to move down the cost curve is if we hit a certain scale, then all of a sudden we have a benchmark to target. We can say: “Everything we’re doing is about getting to $15-20 billion of deployment over the next 10 years.” If we can do that, this thing is flying.
Q: Just one more macro-level question before we get back to the micro side. A lot of people—Biden included—have talked about Bidenomics as “bottom-up, middle-out,” rebuilding manufacturing capacity, and so on. In your work, how did you link back to those macro objectives? Did you focus on growth, CO₂ emissions avoided, jobs, or something else? Which of those objectives felt most relevant to you?
We were most focused on financing big clean-energy projects that met our eligibility requirements. I’d say that the thing that we added to them – in some cases it was required and in others we did it anyway – was what we called Community Benefits Agreements. Those were to encourage our applicants to help make sure they had a plan in place to engage communities, environmental groups, local universities, and how to work with labour organisations to ensure they had the talent they needed. We didn’t pay lip service to it; we thought it was good business. It de-risked the project and strengthened a social license to operate. We did it for all of those reasons.
When you step back from our portfolio, you found that most of these projects that were getting built were happening in communities that were below median income. They were happening in communities that were often historically disadvantaged or had pollution issues. That’s because we have a whole program focused on repurposing existing infrastructure – we’re going to places that lost a coal plant. Almost by definition that was a coal town. And now we’re building a manufacturing facility or we’re building clean energy and bringing it there because it has transmission, water, roads, a workforce. The community is keen to bring those jobs in – that’s great that ticks all of our boxes too.
So we start with: can we invest in a successful project—one that gets built on time and on budget? That means that the community necessarily is involved. When you do all those things and you step back, we have found our track record of achieving those broader goals is met as well.
Q: So if you take LPO under the Biden administration—how would you characterise the key differences in approach or mechanisms compared to previous iterations?
LPO spent about a decade without a permission structure to make new loans. That’s a big difference. In terms of the structural changes that we’ve made, we’ve done a lot organisationally to set ourselves up for scale. When I joined, we had around 80 people; now we’re at about 350. We’ve got an entirely new operating model.
We categorise loans and applications coming in by type of loan, so if a project has a parent guarantee from a company with a good credit rating, we don’t need to do the same level of due diligence as with a growth company where it’s the first time anyone’s done this thing and it’s barely hanging on. We’re just as excited about financing those projects — even more so, because those guys really need us. Not to say the others don’t need us, but if they don’t have a parent guarantee, it necessarily means it’s going to be trouble for them to get that low-cost capital. So we’ve done more to segment our deals coming in.
We made a decision to pull forward the timeline for “conditional commitments.” If we can give a conditional commitment to a project earlier —with all kinds of conditions that they need to meet before we can close—then they can take that conditional commitment to the market. They can say, “Look, we’ve got $1.5 billion lined up from the LPO once you sign on the dotted line.” That gives other stakeholders in the mix confidence and we’ve found that can speed the process up.
It’s a number of incremental improvements to a process. But if you look at our track record, our initial rating of our portfolio a decade ago would have suggested that we might have had more than twice the expected losses than we ultimately realised. That’s because projects performed better and because of the quality of portfolio management by the team. This is a program that was run well and has been very successful in the past and we were building from a strong foundation when we went out to build this next thing.
Q: You went from 80 to 350 people. Was that a matter of rebooting existing capacity or bringing in a whole new toolkit and set of capabilities into government?
I wouldn’t underestimate the power of having existing processes and experienced people who already know the ropes. At LPO, we actively created a healthy tension between new talent and existing expertise. We brought in a lot of folks from the private sector—myself included—and they brought a set of skills, and expectations that were very healthy but sometimes in tension with existing processes. That’s a healthy tension if you manage it right. You want some folks asking, “How do we go faster and bigger? Why can’t we make this thing work? Show me the rule that says we can’t do this.” That’s healthy. It’s also healthy having someone on the other side saying, “Here’s the rule” or “You’re right, there isn’t a rule.” You can’t just rewrite the whole thing, there are guardrails for a reason. I think we’ve mostly been able to maintain that healthy tension.
In the last six months it’s really ratcheted up. It took us a couple of years to get the thing in place but we’re doing three deals a month now which was a dream of ours two years ago. One of the things that we’re seeing is that our borrowers, because of the pending change of the administration and some of the uncertainty that is associated with that, are very motivated to get these deals done. It’s actually often borrower motivation that is the thing that drives the deal timeline more than us.
Q: You used the phrase “private-sector-led, public-enabled.” In practice, how do you design deals so that they really crowd-in private finance?
It’s a great question. I’m going to give you a slightly long-winded answer because I don’t have a perfect encapsulation. I think there are three or four elements:
First is there are a whole range of tools you can use to crowd in private capital. We provide debt, but there are also grants, tax credits, prizes, and demand-side tools. We actually drew a lot of inspiration from the UK when we were designing our demand-side model for hydrogen. Depending on where the technology is – and the state of supply chain, talent, capital markets, insurance markets – different tools are relevant. It’s not homogenous. You can get a lot more bang for your buck depending on the technology by using different tools – if you’re thoughtful about it. That’s where having private-sector input is so important to know which tool to deploy to maximise taxpayer dollars.
The second thing when you look at specific technologies, one of the things that the government misses is the timeframe that is needed for support. Having the ability to be flexible around a timeframe but making it clear that it is a timeframe. To give the example of geothermal, this was a technology that received limited support through the IRA and BIL. That is a choice that was made in Congress. But this is a next-generation technology with a steep learning curve. You could imagine in a decade or less this technology will be competitive with anything else on the grid. You can therefore imagine designing policy where you say for the first 3-5 years the subsidy framework is X, after that it’s Y, and beyond that it’s on its own.
Third, the reality is that policy makers must care both about the specific projects getting funded, and about the overall trajectory of the technology and sector as a whole. The LPO invested in the first five utility-scale solar farms in the US in 2011/2012. That is now a trillion-dollar business. That’s what you want to see.
For the U.K., there’s another layer. The US has an advantage of unparalleled market depth, so we may prioritise less than we should. The UK is likely getting quite strategic about prioritisation within competitive global supply chains. There needs to be recognition about where you want to play so that you can compete and win.
Q: So if the IRA never passed and instead of $400 billion you had just $50 billion, how would you approach prioritisation? What framework would you use to prioritise?
I would do debt over grants most of the time. The LPO is technically cost-neutral to the government, other than the subsidies that are associated with our programs. We can get tens of billions of dollars of loans out the door with a little bit of subsidy. With grants, the earlier you are in the funnel from an R&D standpoint the more bang you get, which is why it’s so hard for some of these big first of a kind projects. If you are going to put grant dollars into a big first-of-a-kind project—$100 million instead of $1 million— you need to be very strategic about where those big grant dollars go from a tech or sector standpoint.
And then there’s the demand side, which is a place where we’ve learned a lot from the UK. For example, by creating off-take certainty through advanced market commitments, the public sector can stabilise and encourage market expansion even prior to any funding dispersal.
Q: Given everything you’ve said, if you reflect on these past four years, what would you hold up as the biggest positive lesson to take from the US’s approach to the energy transition or the broader economy?
I’ll offer a specific lesson that could be relevant to the UK. The UK doesn’t have an LPO—an entity with real risk appetite lending into emerging clean energy technologies. The demand for our program is astonishing: we have $320+ billion in our pipeline. We could work our existing pipeline for the next four years. That is a really powerful tool that the UK doesn’t have.
Q: And if you wanted to “activate” a U.K. equivalent right away, bearing in mind the LPO was dormant for eight years, what’s the one thing you’d do?
Two things. First, look at your existing lending programs like the UK National Wealth Fund to see if you can tweak the risk framework to allow them to lean into risk. Second, get the right person in place with the political cover to do it.
The U.K. has many advantages—the UK’s views on climate, clean energy, clean tech have been very consistent. You are in many ways a model for the rest of the world for how to do this. You view it as a trade advantage, you view it as a competitive thing – these are the technologies of the future – and the momentum should be there.
One of the theories behind the IRA is that you’re not just buying down the risk for these new technologies, you’re also creating buy-in and focusing on the political economy of the investments. You’re creating special interests and communities that have a vested interest in these technologies being successful. That’s how you start to create an incumbency advantage for these new technologies. I don’t think we’ve fully seen how it’s going to play out, hopefully that’s going to start next year. I hope a lot of these debates in the US are going to become less forceful – it’s going to become “we’re building affordable energy, we’re building the best cars” vs. “we’re building renewables” and “we’re building EVs”.
Obviously, there are things you can’t control, but I do think there’s a very positive story here if you can get the right public sector institutions around it. But I will say if the UK government is choosing what sector to target, you have to be thoughtful. Because if the private sector is not leading, that’s where you might run into trouble. It’s hard to get out ahead of some of these industries, otherwise the government and the taxpayer wind up holding the bag.
ENDS