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Infrastructure bill contains less transmission funding than advertised

The White House says the bill contains $65 billion for power infrastructure,” but only $2.5 billion is explicitly for new power lines.
By Jeff St. John

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News articles on the $1 trillion infrastructure bill, which passed the Senate last week, have reported that it contains $73 billion for power grid upgrades and transmission, a figure drawn from a July 28 White House fact sheet. The deal’s $73 billion investment is the single largest investment in clean energy transmission in American history,” the fact sheet states.

An updated fact sheet released by the White House on Aug. 2 reduced that number to $65 billion, yet retained the description of its impact in building thousands of miles of new, resilient transmission lines to facilitate the expansion of renewable energy.”

But a close look at the bill’s specifics reveals that very little of that $65 billion is dedicated to building the high-voltage transmission lines that experts say the U.S. must have to enable the level of wind and solar power deployment necessary to decarbonize the grid.

Instead, much of the power infrastructure” funding is dedicated to research and demonstration of batteries (about $6 billion), carbon capture and storage (about $8 billion), clean hydrogen production (about $9.5 billion) and nuclear power (about $6 billion). Of the funding that is dedicated to the power grid, most of it — between $11 billion and $14 billion — is aimed at making the existing grid more resilient, not necessarily building new power lines.

Only $2.5 billion is explicitly targeting transmission grid expansion, in the form of federal loans to help projects reach financial viability. Other funding streams could be directed toward new transmission, but likely little more than $5 billion total, according to an analysis by Rob Gramlich, executive director of Americans for a Clean Energy Grid.

And the bill’s other transmission-specific provision — giving federal agencies more authority over siting new power lines — doesn’t address the cost challenges that have stymied new transmission development over the past decade. So says a letter sent last week from 50 companies and groups to the leaders of the House Ways and Means Committee.

The letter notes that the infrastructure bill — which is expected to be passed by the House and signed by President Biden — does not contain the advertised $73 billion for transmission. It asks lawmakers to boost federal transmission grid support in a separate $3.5 trillion budget reconciliation bill being crafted by Congressional Democrats and the Biden administration.

Specifically, the utilities, renewable energy groups, labor unions and environmental organizations that signed the letter are asking Congress to pass an investment tax credit for transmission projects, similar to those now offered for solar and wind power projects. Such a tax credit could give private capital the certainty it needs now to invest in the national, high-priority lines that will serve as the backbone for America’s clean energy grid,” the groups state in the letter.

The bipartisan infrastructure deal made an important down payment on the transmission we’re going to need to decarbonize the grid,” Bill Parsons, chief operating officer of the American Council on Renewable Energy, one of the groups that signed onto the letter, told Canary Media in an email. But its transmission-related provisions are in and of themselves clearly not enough to get the job done.”

The hard math on the transmission buildout needed to decarbonize the grid

The Biden administration’s target of a 100 percent carbon-free national power grid by 2035 will require hundreds of billions of dollars in new transmission lines, according to multiple studies. The U.S. would need to roughly triple the current, already record-setting pace of solar and wind power growth, and that can’t happen without new transmission capacity to carry the renewable power to where it’s needed.

An April report from Americans for a Clean Energy Grid identified 22 existing transmission projects, requiring about $23 billion in investment, as being poised to unlock about $100 billion in new renewable energy development. Those projects include Midwest-to-Eastern lines such as the Grain Belt Express and SOO Green HVDC Link; Rocky Mountains-to-Western lines such as TransWest Express and Gateway West and South; and the SunZia, Southline and Western Spirit projects to connect wind- and solar-rich New Mexico to more populous Arizona and California.

The $2.5 billion revolving loan fund in the infrastructure bill would allow the Department of Energy to serve as an anchor tenant” for up to 50 percent of the capacity of a new or upgraded transmission line, according to the bill’s text. That could help bridge a critical financing hurdle for projects that need commitments from buyers of the power they would deliver and help kick-start the construction of new interregional lines,” Parsons said.

But as last week’s letter pointed out, $2.5 billion in federal borrowing authority is only enough to provide support to less than a quarter” of those 22 projects. That explicit support for transmission is smaller than previously announced amounts of federal lending, including $5 billion from DOE’s Loan Programs Office and $3.25 billion for a revolving loan program from the DOE’s Western Area Power Administration.

Other provisions in the infrastructure bill could expand the financial support for new transmission. Gramlich told Canary Media in an email that up to $5 billion could be directed to new regionally significant transmission that would access new renewable energy sources.”

For example, the infrastructure bill contains a $10 billion increase in borrowing authority for the Bonneville Power Administration, which manages hydropower and transmission resources across the Pacific Northwest, and a portion of that could be applied to new transmission, he said.

Likewise, the bill directs $3 billion toward DOE’s Smart Grid Investment Grant program — which funded nearly $4 billion in grid technology investments after the 2008 recession — and part of that could also go to transmission, Gramlich said.

But this level of funding still isn’t commensurate with the need, according to last week’s letter. The Princeton University Net-Zero America study released in December estimated the need for about $360 billion in U.S. transmission capacity investment over the next decade to enable the renewable energy growth needed to decarbonize the grid by 2035. At present, by contrast, the high costs and slow growth of new transmission are forcing the withdrawal of renewable energy projects from grid interconnection queues.

What’s more, much of the transmission that should be added in the next decade will need to be built across the borders of states and regional grid systems to achieve the greatest benefits. The National Renewable Energy Laboratory’s Interconnections Seam Study found that linking the Eastern and Western U.S. with high-capacity transmission would yield more benefits than costs, and another study from MIT indicates a nationwide transmission network could cut the cost of decarbonizing the grid nearly in half, compared to today’s system.

Permitting and siting transmission projects vs. paying for them

Proponents of transmission development warn that existing policy won’t enable the massive interregional transmission growth needed to achieve these targets, however. It’s devilishly hard to secure cooperation from the state and local governments, private landowners and environmental stakeholders involved in projects that stretch across thousands of miles.

There’s also the challenge of getting utilities, state regulators and the groups representing electricity customers to agree on who should pay for those projects and how to measure the benefits those projects will deliver them.

The infrastructure bill does take aim at the first of these problems, in the form of new provisions regarding National Interest Electric Transmission Corridors. The NIETC designation was created by the 2005 Energy Policy Act and allows DOE to expedite siting and permitting processes — and potentially use federal eminent domain authority — to enable transmission projects deemed to serve the national interest.

The infrastructure bill’s provisions direct the DOE to study capacity constraints and congestion when designating an NIETC area, expanding the scope of authority to include solving potential renewable energy bottlenecks. It also clarifies the authority of the Federal Energy Regulatory Commission to issue permits for such projects even if a state regulatory commission withholds or denies them — a power that’s been placed in question after court decisions made early last decade.

FERC already has similarly broad authority over the siting and permitting of natural-gas pipelines, although that authority is under pressure by court decisions and advocacy aimed at forcing the commission to consider the climate change impacts of its decisions. The new provisions on NIETC in the infrastructure bill could give FERC greater power to push through transmission projects that haven’t won approval from regulators in states they cross.

Whether FERC will use that authority in a way that supersedes states is another question. FERC Chair Richard Glick, a Democrat, recently launched a process to consider wide-ranging changes to the commission’s transmission policy framework. But FERC Commissioner Mark Christie, a Republican and former Virginia state utility regulator, warned the industry in a speech last month that federal authority was unlikely to succeed in enabling projects that state agencies have nixed or tabled.

Last week’s letter noted that previous efforts by FERC to use its authority in opposition to state decisions has historically been time-consuming, characterized by significant uncertainty and subject to lengthy judicial review.” FERC has also engaged states on cooperative efforts to build new transmission, indicating a strong interest in finding ways to avoid conflicts.

No matter how this federal siting and permitting authority ends up being used, however, it will not resolve the cost-allocation hurdle that has stymied transmission buildout for over a decade,” said ACORE’s Parsons. Industry observers and studies have found that disagreements on apportioning the costs of new transmission projects have been a bigger challenge than siting and permitting barriers over the past decade.

Most of the new transmission buildout over the past decade has been carried out by individual utilities or transmission developers outside of a shared cost or planning process. A few regional grid projects in the Midwest and Texas have succeeded in getting multiple parties to agree on cost-sharing to enable large-scale renewable energy growth, but it took years of debate and compromise.

Given how hard it can be, and how long it can take, to create this kind of consensus, the best way to start moving on the massive growth the country needs is to pass a federal tax credit for transmission projects, the signatories of last week’s letter argue.

A well-designed transmission [tax credit] with appropriate guardrails on eligibility and usable by all types of transmission developers, can spur needed investment in large-scale transmission necessary to cost-effectively decarbonize the electric grid,” the letter states. It will also help to keep customer electric rates affordable by directly reducing, through the tax credit, the customer cost of transmission.”

The infrastructure bill comes up short on meeting other clean energy goals as well. The $7.5 billion for electric vehicle charging infrastructure in the bill, for instance, is much less than what many independent studies indicate is needed to reach the Biden administration’s goal of halving economywide carbon emissions by 2030.

These various competing demands for clean energy and decarbonization spending are jockeying for position in the reconciliation package. Whether they’ll all make it in — and how they’ll fare in a Senate with a razor-thin Democratic majority that includes senators who have raised concerns about the size and scope of the legislation — remains an open question.

(Lead image: Jeremy Zero)

Jeff St. John is director of news and special projects at Canary Media. He covers innovative grid technologies, rooftop solar and batteries, clean hydrogen, EV charging and more.