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The Grid Wins Big in the IIJA

The bipartisan, Senate-passed Infrastructure Investment and Jobs Act marks a big win for our country’s aging electric grid. Among the many energy infrastructure-related investments outlined in the first, second, and third posts of this blog series, the IIJA provides $27.65 billion to improve grid resilience and reliability, including $12.5 billion in borrowing authority. It also reduces siting and permitting barriers currently hampering much needed transmission buildout.

There are three main reasons why upgrading and massively expanding the grid is needed now:

  1. Growing variable renewable generation – A substantial buildout of renewables is expected over the next few decades due to the rapidly declining costs of wind and solar technologies and the need to meet mid-century climate goals. Because wind and solar resources aren’t constantly available and predictable, a more integrated grid is needed to match electricity generation to demand, which is the foundation of grid reliability. Additional transmission development will also be needed to connect new renewable generation capacity (often located in remote areas) to population centers (see Figure 1).
  2. Electrification – Coupling power sector decarbonization with the electrification of other sectors of the economy, including transportation and buildings, is crucial for reaching net zero emissions by 2050. As part of the Decarb America Research Initiative, BPC has found that electricity demand will more than double over the next 30 years on the path to net zero. This can’t be achieved without significantly expanding our current transmission capacity.
  3. Increased need for resilience – Our grid is vulnerable to the physical impacts of extreme weather and wildfires, as evidenced by the 2021 Texas power crisis, and cyberattacks from foreign entities. A more interconnected grid creates redundancy which can improve resilience to both storms and national security threats.
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Figure 1Electricity generation, transmission, and distribution (adapted from National Energy Education Development Project). 

Despite the urgent need to modernize and expand our grid, siting and permitting challenges can cause significant delays in transmission projects. A report released by WIRES, a non-profit advocating for high-voltage transmission buildout, found that regulatory barriers can considerably slow down the development of new transmission lines. Projects can take up to ten years or longer, even with federal support. For example, the Plains and Eastern Clean Line Project proposed in 2010 sought to bring affordable wind energy from the Midwest to the east, but even with the Department of Energy acting as partner for two years of the project, it has yet to be completed.

BPC’s Smarter, Cleaner, Faster Task Force released a set of recommendations aimed at modernizing the current regulatory system to build smarter, cleaner infrastructure at a fast enough rate to mitigate climate change while supporting a globally competitive economy. The IIJA provisions on transmission permitting and siting are aligned with these recommendations.

By pairing investments with regulatory updates for transmission, the bill will pave the way for the deployment of clean energy technologies across the country.

Funding for Grid Resilience, Reliability, and Flexibility

  • $5 billion for a grant program to prevent outages and enhance grid resilience – This program will provide grants to grid operators, electricity storage operators, electricity generators, distribution providers, fuel suppliers, and transmission owners and operators for activities that support existing hardening efforts, reduce the risk of power lines causing a wildfire, or reduce the likelihood and consequences of extreme weather events, wildfires, and natural disasters on the grid’s ability to operate. Grants are also eligible to States and Tribes with a 15% matching requirement.
  • $6 billion in financial assistance for electric grid reliability and resilience research, development, and demonstration – The bill establishes the Program Upgrading Our Electric Grid and Ensuring Reliability and Resiliency to provide financial assistance for the demonstration of innovative approaches to transmission, energy storage, and distribution infrastructure to improve resilience and reliability and novel methods to improve regional grid resilience as implemented on a cost-shared basis. It provides $5 billion in funding for this program and an additional $1 billion for financial assistance for energy improvement in rural and remote areas.
  • $3 billion for the Smart Grid Investment Matching Grant Program – This program was authorized by the Energy Independence and Security Act of 2007 to provide grants for electricity providers to upgrade their transmission and distribution systems. The IIJA updates the program to include investments for improving flexibility, integrating distributed energy resources, providing energy storage, integrating intermittent generation sources like wind and solar, and planning for and mitigating impacts of extreme weather events on the grid.

Financing Transmission

New transmission lines can be difficult to finance because they are typically shared infrastructure that will be used by future stakeholders. This creates a challenge in attracting up-front investment for new transmission. The IIJA establishes a new program to have DOE act as an “anchor tenant” for the development of new transmission lines and upgrades to existing lines. Having an anchor tenant in the capital stack can make it much easier to attract additional investment needed to build out the line. The IIJA also includes funding for state-led transmission and distribution planning.

  • Transmission Facilitation Program – The bill establishes a $2.5 billion revolving loan fund to allow the Department of Energy to serve as an anchor tenant for a new transmission line of at least 1,000 megawatts or an upgrade of an existing line of at least 500 MW. DOE is allowed to purchase a maximum of 50% of the planned capacity for a term of no more than 40 years. Once the project reaches financial viability, DOE can sell and transfer the rights to that transmission capacity to a third party. The program will prioritize projects that increase transmission capacity, efficiency, resiliency, or reliability; facilitate interregional transfer capacity that creates equitable economic benefits; and contribute to national or state goals to lower greenhouse gas emissions. The bill appropriates $50 million to carry out the program.
  • $500 million for the State Energy Program – This existing program provides financial and technical assistance to states to implement energy efficiency programs, energy security planning, and energy waste management, among other state-led energy initiatives. In addition to increasing funding to the program, the IIJA adds transmission and distribution planning as a requirement for state energy conservation plans.

Speeding Up Transmission Buildout

To meet mid-century climate goals, the U.S. needs to build a significant amount of clean energy, quickly, and connect it to the grid. According to a National Academies report, a 40% increase in electric transmission capacity by 2030 will be needed to reach net zero emissions by 2050. The Decarb America modeling found that a total spending level of $138 billion through 2030 would be needed to modernize and expand transmission and distribution infrastructure consistent with a net-zero economy by 2050, and that this level of spending would create an average of 64,000 jobs annually. But this expansion cannot be achieved without speeding up siting and permitting of transmission to carry clean electricity to where it’s needed. The IIJA includes multiple provisions to improve coordination of transmission buildout at the federal level to meet national needs:

  • National Interest Electric Transmission Corridors – The Energy Policy Act of 2005 directed DOE to perform a transmission congestion study every three years and gave DOE the authority to designate National Interest Electric Transmission Corridors if capacity constraints or congestion in a geographic area were adversely affecting customers. The NIETC designation gives FERC the authority to approve siting of transmission projects in the corridor. The IIJA adds additional criteria for designating an NIETC including improved energy security; connection of facilities generating or transmitting firm or intermittent energy to the grid; and lowered consumer electricity costs.
  • FERC Backstop Authority – The Energy Act of 2005 allowed FERC to approve siting of a transmission project in a designated corridor facing congestion if a state withheld approval of an application for longer than one year. However, this authority was challenged in court and effectively neutralized. The IIJA would explicitly grant FERC this “backstop authority” to issue permits for construction or modification if a state commission denies or withholds an application for longer than one year.

Moving Forward

Modernizing our nation’s electric grid and infrastructure permitting and review processes are critical to meeting our climate goals. The Bipartisan Policy Center is committed to working with stakeholders to support strong investments in electricity generation, transmission, and distribution infrastructure to achieve a net zero future.