How to Fix a Department's Funding Tools

Summary

Statecraft Podcast Episode Summary

Episode Title: How to Fix a Department's Funding Tools
Host: Santi Ruiz
Guest: Narayan Subramanian
Release Date: April 10, 2025

Introduction

In this episode of Statecraft, host Santi Ruiz welcomes Narayan Subramanian, a distinguished political appointee from the Biden administration. Narayan brings extensive experience from his roles at the Department of Energy (DOE) and the White House National Security Council, where he played a pivotal role in optimizing the deployment of substantial federal funds to support innovative energy initiatives.

Guest Background and DOE's Role

Narayan Subramanian begins by outlining his tenure in the Biden administration. "I was a political appointee in the Biden administration. I started on day one... and the last six months or so, the administration. I was the Director for Energy Transition at the White House National Security Council" (01:30). His work focused on ensuring that the DOE effectively utilized federal funds to advance energy projects aligned with national priorities, particularly in the realm of clean energy transition.

Historical Context: From Atomic Energy Commission to DOE

The conversation delves into the historical evolution of the DOE. Narayan explains, "The DOE wasn't always this entity... The Atomic Energy Commission was established in 1946 to harness atomic energy for both military and civilian purposes" (10:18). He traces the transformation through significant milestones:

1973 Arab Oil Embargo: Triggered by the oil crisis, President Nixon initiated "Project Independence" to reduce reliance on foreign oil, leading to the establishment of the Energy Research and Development Administration (ERDA) in 1974 (12:36).
Department of Energy Organization Act (1977): Consolidated various energy-related functions, emphasizing nuclear weapons, nuclear cleanup, and expanding R&D efforts (16:33).
Energy Policy Act (2005): Introduced the DOE Loan Programs Office (LPO) and ARPA-E, enhancing the department's capacity for innovation and commercialization of energy technologies.
Bipartisan Infrastructure Law (2021) & Inflation Reduction Act (2022): Injected significant funds into the DOE, necessitating organizational restructuring to manage large-scale investments effectively (26:58).

Challenges in DOE's Funding Tools

Narayan highlights the challenges DOE faced in scaling up energy projects:

Loan Programs Office (LPO) Constraints: As of the recording, there were proposals to cut LPO's headcount by over 50%, jeopardizing its ability to manage existing loans and underwrite new ones. "Without technical staff capacity at LPO... the federal government risks stalling energy projects that serve national priorities" (00:05:08).
Contracting Mechanisms: Traditional cooperative agreements were inadequate for the complex, multi-entity projects required for demonstration and deployment of new technologies. The existing grant structures imposed restrictions that deterred private sector investment due to government property interests, complicating financial engagements with banks (27:03).

Innovative Solutions: Revamping Contracting with Other Transactions Authority (OTA)

To address these challenges, Narayan discusses the revitalization of DOE's Other Transactions Authority (OTA):

Historical Underutilization: Despite having OTA since 2005, DOE had executed fewer than 20 OTAs between 2011 and 2014, largely due to limited expertise and restrictive regulations modeled after Department of Defense (DoD) practices (43:23).
Legislative Clarifications: Through meticulous review of legislative history, Narayan and his team established that DOE possessed broad OTA authority akin to NASA’s, debunking previous misconceptions. "John Dingell said... 'He may enter into and perform contracts, leases, and grants... other transactions with public agencies and private organizations and persons. He can do literally almost anything he wants to'" (51:16).
Regulatory Overhaul: In January 2025, DOE updated its original OTA regulations from 2006, expanding IP flexibility and enabling bespoke contracts essential for multi-entity projects like hydrogen hubs and Gen 3 nuclear reactors (54:53).
Organizational Restructuring: Establishment of the Undersecretary for Infrastructure and creation of new offices such as the Office of Clean Energy Demonstrations and the Office of Manufacturing and Energy Supply Chains facilitated the effective implementation of OTAs (29:10).

Impact of Enhanced Funding Tools

The enhanced OTA framework empowered DOE to:

Catalyze Market Formation: By facilitating offtake agreements and ensuring IP rights protection, DOE could effectively seed new markets for technologies like clean hydrogen and advanced nuclear reactors (56:10).
Attract Private Investment: Flexible contracting terms reassured banks and private investors, enabling larger-scale financing for demonstration and deployment projects without fear of government interference (24:17).

Lessons Learned and Future Directions

Reflecting on the process, Narayan emphasizes the importance of early and proactive initiatives in institutional reform. "I wish we had kicked off earlier... But institutional change generally also takes time" (57:04). He advocates for continued innovation in contract structures to support upcoming clean energy challenges, ensuring DOE remains agile and effective in catalyzing the energy transition (58:32).

Notable Quotes

Narayan Subramanian: "The beauty of the scientific enterprise in the United States is we really want our scientists to be able to register dissent. This is ultimately good." (08:33)
Narayan Subramanian: "Other transactions are defined by what they're not. They're not a traditional grant or cooperative agreement." (36:02)
John Dingell (via Narayan): "He may enter into and perform contracts, leases, and grants... other transactions with public agencies and private organizations and persons. He can do literally almost anything he wants to." (51:16)

Conclusion

This episode of Statecraft offers an in-depth exploration of the DOE's strategic overhaul of its funding mechanisms to better support innovative energy projects. Through Narayan Subramanian's insights, listeners gain a comprehensive understanding of the historical challenges, the critical role of Other Transactions Authority, and the ongoing efforts to ensure that federal funds are deployed effectively to meet national energy priorities.

For those interested in the detailed discussions and additional insights, subscribe to Statecraft at www.statecraft.pub to receive interview transcripts directly in your inbox weekly.

Time Stamps:

00:05:08 - Discussion on LPO headcount cuts
01:30 - Narayan's role in the Biden administration
08:33 - Importance of scientific dissent
10:18 - Historical evolution of DOE
12:36 - Impact of the 1973 oil embargo
16:33 - Establishment of DOE's foundational roles
24:17 - Defining offtake agreements
26:58 - DOE's restructuring post-infrastructure laws
36:02 - Introduction to Other Transactions
43:23 - Underutilization of OTAs in DOE
51:16 - Legislative support for OTAs
54:53 - Updated OTA regulations
56:10 - Application of OTAs in hydrogen projects
57:04 - Reflections on institutional change
58:32 - Future directions for DOE funding tools

Note: Timestamp links are illustrative and correspond to the transcript excerpts referenced in the summary.