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Can federal tax credits help build the transmission needed to green the US grid?

President Biden and Democrats in Congress home in on support for hard-to-build transmission as a linchpin for meeting clean energy goals.

Emma Foehringer Merchant
Emma Foehringer Merchant
4 min read
Can federal tax credits help build the transmission needed to green the US grid?

President Biden’s quest to power the U.S. grid with 100 percent clean energy by 2035 is beset with hurdles. One of the thorniest — potentially tougher even than the massive deployment of renewables the target requires — is building out the transmission grid to support it.

In an attempt to spur a major expansion of the grid, Biden has proposed a transmission tax credit via his $2 trillion American Jobs Plan, an infrastructure proposal that contains numerous incentives for clean energy technologies. Sen. Martin Heinrich and Reps. Steven Horsford and Susie Lee recently introduced a bill that would offer the federal Investment Tax Credit to transmission projects.

The legislators say the financial support will offer certainty to projects, encouraging investment and speeding deployment. That could help solve one challenge for transmission development, but it will leave many more awaiting solutions.

Transmission construction has historically proven an “intractable issue,” according to Heinrich. Projects bogged down in land fights and extensive permitting processes often take decades to trudge from proposal to approval. Many don’t ever get that far.

Traction for policies to change that may be hard to attain in the current political climate. Biden has already encountered opposition to his infrastructure plan, though Heinrich told Canary Media transmission projects may be able to garner bipartisan interest.

“It’s one of those pieces of infrastructure that can generate bipartisan support,” Sen. Heinrich said. “Now the question is in getting a particular infrastructure bill across the finish line in this sort of partisan environment.”

Heinrich's bill, the Electric Power Infrastructure Improvement Act, would allow high-voltage transmission projects built before the end of 2031 to take advantage of a 30 percent tax credit. Biden has also proposed the creation of a Department of Energy-based Grid Deployment Authority to smooth permitting. And Heinrich has reintroduced a 2019 bill directing the Federal Energy Regulatory Commission to kick off a rule-making process to encourage interregional transmission projects.

Thus far, the proposals depend on the whims of Congress. And even if transmission receives bipartisan support, it could be tied to a large infrastructure package that does not. Heinrich said the budget reconciliation process, which Democrats are exploring to push through numerous measures, could be a solution, but one that his staff is just beginning to explore.

Creating an easier mechanism to recover costs is “the biggest barrier to large-scale transmission,” said Rob Gramlich, executive director of Americans for a Clean Energy Grid, in a statement. The nonprofit group advocates for the construction of high-voltage transmission.

But others argue that more money may not address all of the barriers that obstruct transmission deployment, even though they recognize the proposed tax credit as a positive step.

“[A tax credit] doesn’t do anything, as I see it, from addressing the lead times and challenges of permitting projects,” said Mitch Colburn, vice president of planning, engineering and construction at Idaho Power, which has partnered with PacifiCorp on the 1,000-mile-long Gateway West transmission project that has been in development since the late 2000s.

This also isn’t the first time the federal government has made efforts to ease the long development process for transmission projects. The Obama administration created a Rapid Response Team for Transmission to coordinate permitting across the many state agencies responsible for evaluating transmission projects. In 2015, Congress passed the Fixing America’s Surface Transportation Act, which included a new system and permitting dashboard to increase cooperation among agencies when assessing projects.

“It’s always great to see interregional transmission as a priority, but it’s been a priority” for a while now, said Kara Choquette, a spokesperson for TransWest Express, a transmission line project planned to transport wind resources generated in Wyoming to Arizona, Nevada and California.

“This type of critical transmission is widely recognized as the most difficult to put in place, especially when those transmission projects are being developed by private investors instead of utilities,” Choquette added. “It takes a long time and it’s not a certain process, and you can’t predict necessarily what the timeframe will be.”

The TransWest project, now owned by Anschutz Corporation, a Denver-based oil and gas developer, could be complete as soon as 2024, but that timeline is not guaranteed. The project was first initiated by Arizona Public Service in 2005.

The need for transmission

Building transmission is widely recognized as a key element of transitioning toward more renewables.

A 2019 analysis from energy consultancy Wood Mackenzie suggests the U.S. would need to double its 200,000 miles of high-voltage transmission lines to reach 100 percent clean energy.

A study released in October from the National Renewable Energy Laboratory showed that the benefits of increasing transmission links between the Eastern and Western United States outweighed the costs in all scenarios. Current transmission capacity only allows for the connection of about 1.3 gigawatts of capacity between the regions, although the eastern grid system is home to 700 gigawatts of generation and the western grid has 250 gigawatts of capacity.

And a late 2020 study from researchers at the Massachusetts Institute of Technology found that coordinating transmission expansion across state lines would nearly halve the price of a 100 percent renewable grid in the U.S. compared to costs associated with a state-by-state strategy.

Democrats in Congress have set a goal of passing infrastructure legislation by this summer. Upcoming negotiations could determine if the widening interest in transmission build-out — and buy-in on Biden’s clean energy goals — will translate to policies that exceed past efforts.

“There’s broader recognition that we can’t get to where we need to go unless we take transmission much more seriously,” said Heinrich. “We’re going to pursue every avenue to try to move this forward.”

Biden administrationclean energydecarbonizationtransmission grid

Emma Foehringer Merchant

Emma is a contributing writer at Canary Media. She has covered clean energy and climate change at publications including Greentech Media, Grist and The New Republic.