In 2021, the Biden Administration set ambitious climate goals of reaching 100 per cent clean electricity by 2035 and net zero emissions by 2050. This has put the spotlight on the urgent need for rebuilding and modernising the country’s ageing electricity transmission grid, which is considered critical for integrating large-scale clean energy as well as withstanding climate change impacts. To support these goals, huge dedicated federal funding allocations have been made for grid modernisation under the Bipartisan Infrastructure Law (BIL), enacted as the Infrastructure Investment and Jobs Act (IIJA) in November 2021.
The IIJA-proposed funding includes new federal investment totalling USD65 billion dedicated to power and grids. Particularly, it has authorisation of over USD28.8 billion to upgrade the power infrastructure, including by building thousands of miles of new, resilient transmission lines to facilitate the expansion of renewable energy.
The US Department of Energy (DOE) has launched several programmes to implement the key provisions of the law in the electricity sector. At the start of 2022, DOE launched the ‘Building a Better Grid’ initiative to catalyse the nationwide development of new and upgraded, high-capacity electric transmission lines with plans to deploy over USD20 billion in federal financing tools.
In fact, DOE realigned its organisational structure with the creation of a new Office of the Under Secretary for Infrastructure in February 2022. The new office, which includes 12 departmental elements including the grid deployment office, was created to implement BIL programmes with a focus on deploying new energy infrastructure—including upgrading the electricity grid, building new battery and clean energy manufacturing capacity and building new commercial-scale hydrogen and carbon storage demonstration projects. For the next five years, BIL will put in place 60 new DOE programmes, including 16 demonstration and 32 deployment programmes, and expand funding for 12 existing research, development, demonstration and deployment (RDD&D) programmes.
Over the past few months, DOE released several notices of intent (NOIs) and requests for information (RFIs) prior to opening applications for funding under the various BIL programmes. Particularly for the transmission sector, DOE released an RFI for the USD2.3 billion formula grant funding programme for states and Tribal Nations for grid modernisation in April 2022 and an RFI for the USD2.5 billion Transmission Facilitation Program (TFP) in May 2022. Further, on July 6, 2022, DOE opened the applications for the former programme.
In the clean energy sphere, DOE released the RFI for the USD505 million Long Duration Energy Storage for Everyone, Everywhere (LD ESEE) programme to commercialise new technologies that increase grid reliability and enable large-scale clean energy integration. Further, it launched the Interconnection Innovation e-Xchange (i2X), a new BIL-funded partnership, that brings together grid operators, utilities, state and tribal governments, clean energy developers, energy justice organisations, and other stakeholders to connect more clean energy to the US power grid by solving challenges facing the power industry.
In other sectors, it had previously released two RFIs for the Regional Hydrogen Hub (USD8 billion) and Clean Hydrogen Manufacturing, Recycling and Electrolysis (USD1.5 billion) (February 2022); a grant application for USD3.16 billion in funding for residential energy retrofitting and weatherisation (March 2022); and an RFI for a USD500 million grant programme to make public schools more energy efficient (April 2022).
Global Transmission Report presents the key features of the DOE programmes under BIL for the transmission sector.
Grid resilience funding programmes
Under BIL, around USD8 billion has been allocated for improving grid resilience across three programmes—USD5 billion to the ‘Preventing outages and enhancing electric grid resilience/Hazard hardening’ programme or the grid resilience grants under Section 40101 of the law; USD5 billion to the ‘Program upgrading our electric grid and ensuring reliability and resiliency’ or innovative resilience grants under Section 40103(b); and USD3 billion to ‘Deployment of technologies to enhance grid flexibility’ or smart grid grants under Section 40107.
Under innovative resilience grants, USD1,000 million will be available annually for fiscal years 2022 through 2026. States, tribes, local governments and public utility commissions will be the eligible to receive grants under this programme. Federal financial assistance will be available to demonstrate innovative approaches to transmission, storage and distribution infrastructure to harden and enhance resilience and reliability; and to demonstrate new approaches to enhance regional grid resilience, implemented through states by public and rural electric cooperative entities on a cost-shared basis. Applications for this programme will open in the third quarter of 2022.
Under smart grid grants, USD600 million will be appropriated annually for fiscal years 2022 through 2026. Utilities will be able to avail grants for eligible investments including metering, control, and other devices, sensors, and software; communications and broadband technologies to support smart grid deployment; technologies and programmes to integrate electric vehicles to the grid; devices and software for buildings support demand flexibility and other smart grid functions; operational fibre and wireless broadband communications networks enabling data sharing between distribution system components; and advanced transmission technologies, including dynamic line rating, flow control devices, advanced conductors, and network topology optimisation, to increase the operational transfer capacity transmission networks. Applications for this programme will open by the end of 2022.
The grid resilience grants programme has two provisions—one is the state, territory and tribes formula grant funding programme and the other is a competitive solicitation for utilities and industry. While the NOI and RFI for the former programme (worth USD2.3 billion) has already been released as mentioned earlier, that for the latter programme is expected to be announced shortly.
Formula grant funding programme
The overall formula grant funding amount is spread over five years for fiscal year 2022 through 2026 or about USD459 million annually. The states, territories and tribes have to provide 15 per cent cost share, and up to 5 per cent of the funds can be used for technical assistance. In line with the legislation, the DOE will consider five criteria to develop the formula for the programme—population, area, probability of a disruptive event, severity of disruptive events and expenditure of mitigation efforts. States, territories and tribes need to submit to DOE the programme narrative, which comprises the criteria to award or pass-through grants to subgrantees and their plan for the distribution of funds; and a formula grant application every year although grants may cover multiple-year deployments.
The states, territories and tribes may further subgrant to eligible entities such as electrical grid operators, energy storage operators, electricity generators, transmission owners and operators, distribution providers and fuel suppliers. An eligible entity that receives a subgrant must match 100 per cent of the amount of the subgrant. There are some exceptions. If the subgrant entity sells 4 TWh of electricity or less per year, the required match will be one-third of the amount awarded to the subgrantee. In addition, there is a small utility set aside proportional to the percentage of customers in the state or Indian tribe that is served by those entities. Therefore, there is an opportunity within a state to ensure that small utilities get their proportional allocation.
The list of investments eligible for grants are pole management, hardening, undergrounding, replacement, relocation of power lines as well as technologies for weatherisation, monitoring and control, adaptive protection and advanced modelling.
In July 2022, DOE opened the application period for the programme with a deadline of September 30, 2022.
Transmission Facilitation Program (TFP)
The launch of this new programme with an authorisation of USD2.5 billion is one of the first down payments of over USD20 billion of investments under DOE’s Building a Better Grid Initiative. Essentially, TFP is an innovative revolving fund programme that will provide federal support to overcome the financial hurdles to eligible projects. This includes either construction of a new or replacement transmission line of at least 1,000 MW; upgrade of an existing transmission line or construction of a new transmission line in an existing transmission, transportation or telecommunication infrastructure corridor of at least 500 MW; or connection of an isolated microgrid to an existing infrastructure corridor located in Alaska, Hawaii or a US territory.
Entities eligible to apply for support from the TFP include investor-owned utilities, community-owned, not-for-profit electric utilities, independent transmission project developers and states, tribes or other government entities.
Under the TFP, three financing tools are available—DOE loans; DOE participation in public-private partnerships (PPPs); and capacity contracts with eligible projects in which DOE would serve as an ‘anchor customer’. DOE can extend loans at a fixed rate, considering current market conditions. Under PPPs, DOE can participate with eligible companies in designing, developing, constructing, operating, maintaining or owning projects that are either within a national interest electric transmission corridor (NIETC) or are necessary to accommodate an increase in electricity demand across more than one state or transmission planning region.
Through capacity contracts, DOE will commit to purchasing up to 50 per cent of the maximum capacity of the transmission line for up to 40 years. Thus, DOE can lessen financial challenges often facing new transmission programmes or upgrades to existing transmission lines by encouraging and de-risking additional investment. DOE will continue buying capacity until customer demand increases enough to cover those costs and the project’s financial viability is secured. Thereafter, DOE will sell the capacity, thereby replenishing the fund. The TFP capacity contract essentially represents the contractual right to schedule and use the transmission service for the term of the agreement. It should ensure marketability of the DOE’s interest to enable it to rapidly recycle funding for additional projects. Further, payment for service begins after the transmission line is in commercial operation.
Under TFP, the DOE should select only those projects that are in the public interest and are unlikely to be constructed in as timely a manner or with as much transmission capacity in the absence of support provided from the programme. Further, it should ensure that the earnings from the project will be adequate to recover the cost of a capacity contract, repay a loan, or repay any amounts borrowed from the US Treasury as part of a TFP PPP. While considering TFP applications, the DOE will prioritise projects that use advanced technology that enhances transmission system capacity, efficiency, resilience or reliability of a transmission system; improve transmission system resilience and reliability; facilitate interregional transfer capacity; and contribute to national or subnational goals to lower electricity sector greenhouse gas emissions.
DOE is planning a phased approach for TFP solicitation starting in 2022. The first solicitation will be limited to applicants seeking capacity contracts for eligible projects that will begin operation before end-2027. DOE expects to issue another notice of intent/RFI in early 2023, which will incorporate the loan and PPP financing tools in addition to the capacity contracts.
DOE had sought feedback on the proposed implementation approach for the TFP and accepted comments on the RFI until June 13, 2022. It also organised a related public webinar earlier in May 2022. In August 2022, a technical conference on capacity contracts will be held while the release of Phase 1 solicitation for capacity contracts is expected in September 2022.
Clean energy programmes
The LD ESEE initiative is a four-year programme (2022-25) to validate new grid-scale long-duration energy storage technologies and enhance the capabilities of customers and communities to integrate grid storage more effectively.
Administered through DOE’s new Office of Clean Energy Demonstrations, the initiative includes four energy storage demonstration programmes—energy storage demonstration projects (Demo Projects); Energy Storage Pilot Grant Program (Pilot Grants); Long-Duration Demonstration Initiative (Demo Initiative); and Joint Program. Under the latter, DOE will collaborate with the Department of Defense (DOD) for long-duration demonstrations on government facilities. An allocation of USD355 million has been made for Demo Projects and Pilot Grants, while the remaining USD155 million is dedicated to Demo Initiative and the Joint Program.
The Demo Initiative will prepare a cohort of promising technologies for eventual utility-scale demonstration. Particularly, the field demonstrations are intended at the scale of 100 kW or less and have already been proven at lab-scale. Demo Projects aims to help commercialise new energy storage technologies that can power the grid for at least 10 hours and drive down the levelised cost of storage (LCOS) to USD0.05/kWh by 2030. DOE is required to fund three energy storage demonstration projects by September 30, 2023. The Pilot Grants programme will address institutional barriers to technology adoption in the marketplace. The initiative aims to lower grid energy storage barriers and support both small-scale behind-the-meter pilots and major utility-scale demonstrations.
Some of the eligible uses for Demo Projects include improving the security of critical infrastructure and emergency response systems; improving the reliability of transmission and distribution (T&D) systems; optimising T&D system operation and power quality to defer or avoid costs of replacing or upgrading electric grid infrastructure; providing ancillary services for grid stability and management; integrating renewable energy resource capacity; improving energy efficiency and integrating fast charging of electric vehicles among others.
DOE had solicited feedback from stakeholders on its implementation strategy and eligibility requirements storage technologies under the initiative. Applications for this programme will open in the third quarter of 2022.
Long-duration storage facilitates higher levels of renewable energy penetration without having to overbuild on the generation and transmission sides. Besides lithium-ion batteries, which currently dominate the energy storage market, other long-duration candidates include sodium-ion batteries, vanadium flow batteries and fuel cells powered by renewable gas and green hydrogen.
In a related development, DOE’s Solar Energy Technologies Office (SETO) and Wind Energy Technologies Office (WETO) launched the i2X partnership to help reduce wait times for clean energy sources in interconnection queues and lower costs to connect to the grid. i2X is supported by the Pacific Northwest National Laboratory (PNNL), National Renewable Energy Laboratory (NREL), and Lawrence Berkeley National Laboratory (LBNL).
Given the emerging dynamics of the sector, more clean energy sources will join the queue for grid integration, particularly as a result of the clean energy investments from BIL. Current interconnection procedures are not designed to accommodate the deployment of hundreds of gigawatts of solar and wind energy resources needed each year to meet clean energy goals. To resolve this, i2X is developing a five-year interconnection roadmap to systematically improve interconnection processes, reduce interconnection timelines and costs, and maintain grid reliability to meet local, state, regional and federal decarbonisation goals.
The US has embarked on an extensive journey to renew its transmission system and deploy new technologies to meet the country’s energy transition goals. Sizeable federal funding has been dedicated for the purpose under BIL. DOE is making sincere efforts to put in place the frameworks for disbursing the funds to deserving candidates. For the grand vision to translate on the ground, effective and timely implementation is the key.