One addition to this great blog—a $660M credit subsidy for 1706 (down from $5B) would theoretically be $33B in loans with the current 50x leverage ratio. BUT, if you're including critical minerals, which are riskier than utilities, that leverage ratio will shrink significantly!
With the high interest rates of today, loans for companies rated Baa or higher would actually have a negative credit subsidy—in other words, the government would still make money without any risk premium. Most investor-owned utility credit ratings hover around Baa to A.
However, going a full notch down to Ba increases default risk enough to require a risk premium in the form of a credit subsidy. The IRA currently provides $5B in credit subsidies for 1706, but the Senate ENR would take that down to just $660M.
If the loans were still targeted at investor-owned utilities, then this wouldn't be as big of an issue. However, the new version of 1706 also includes critical minerals as a potential activity for loans, which are much riskier (and thus less credit-worthy) than utilities!
Some credit subsidy modeling shows that while Baa companies and above don't require any additional credit subsidy, riskier companies (like critical mineral ventures) are much more limited! Even just one full notch down to Ba means you only have ~$6.8B in loans, or ~10x leverage.
And even riskier companies, which I would imagine many new critical mining ventures would be, have even lower leverages. Combined with only a $660.5M credit subsidy, you're probably only looking at one or two projects at most.
As a sensitivity, I've also looked at what the credit subsidy score would be if you wanted to keep that original $250B in 1706 loan authority. Riskier companies cost a lot in credit subsidy!
It's worth mentioning that 1703 was the LPO authority designed for more novel/riskier financing, whereas 1706 was designed for more mature companies like electric utilities to repurpose existing/retired energy infrastructure. ENR has stripped 1703 credit subsidy entirely.
What about a lower-interest rate environment? I also look at interest rates from four years ago,`where 10-year Treasuries were ~1.47%, compared to ~4.41% today. Note that in a lower-interest rate environment, credit subsidy doesn't go as far.
So in the 2021 interest rate world, while Baa-rated companies no longer have a negative credit subsidy, they can still leverage up to $75B from the $660M credit subsidy. But riskier companies can do a lot less, with only $5B in leverage for Ba-rated companies.