Expanding the US Grid: DOE announces $13 billion funding for transmission

The Biden administration has been working on advancing transmission buildout to deliver 100 per cent clean electricity by 2035 and reducing greenhouse gas emissions to 50-52 per cent below the 2005 levels by 2030. 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. Notably, on November 18, 2022, the US Depart­ment of Energy (DOE) announced the opening of the first round of applications for competitive grants under two BIL progra­m­mes – the Grid Resilience In­novative Partnership (GRIP) progra­m­me ($10.5 billion) and the Transmission Facilitation Programme (TFP) ($2.5 billion).

The $13 billion funding support to expa­nd and modernise the nation’s power grid under the two programmes together represents the largest single direct federal investment in critical transmission and distribution (T&D) infrastructure. It is one of the first down payments on an over $20 billion investment under DOE’s Building a Better Grid Initiative launched in January 2022. The latest funding opp­ortunity announcement (FOA) (DE-FOA-0002740) will catalyse the development of thousands of miles of long dis­ta­n­ce, high capacity transmission lines ne­eded to renew the country’s ageing infrastructure, 70 per cent of which is estimated to be over 25 years old. DOE’s Grid De­ployment Office (GDO), which was created to implement BIL programmes, is administering these initiatives.

Grid Resilience and Innovation Partnerships

This $10.5 billion programme will assist the nation in enhancing grid flexibility and improving the resilience of the po­wer system against growing threats of extreme weather and climate change. The goals of the GRIP programme are tr­a­ns­forming community, regional, interregional, and national resilience, particularly in consideration of future shifts in generation and load; catalysing and leveraging private sector and non-federal public capital for impactful technology and infrastructure deployment; and advancing community benefits.

Funding under the programme is further divided across three subprogrammes:

Grid Resilience Grants (Utility and Ind­u­stry) ($2.5 billion): The larger 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 DOE op­ened the applications for the formula grant programme (worth $2.3 billion) on July 6, 2022 (it will continue till March 31, 2023), the applications for the latter programme, which is part of GRIP, was opened recently.

The grid resilience grants programme for utility and industry focuses on funding comprehensive transmission and di­stribution technology solutions that will mitigate multiple hazards, including ex­tre­me weather events that can disrupt the power system. Electric grid operators, st­o­rage operators, generators, tra­ns­mis­si­on owners, distribution provi­de­rs and fuel suppliers are eligible for this funding. The funding is capped at the amount the eligible entity has spent on resilient in­vestments over the past three years or $100 million, whichever is lo­w­er. An eligible entity that receives the grant must ma­tch 100 per cent of the gr­ant amount. There are some exceptions. There is a small utility set aside (at least 30 per cent of the programme) for entities that sell 4 TWh of electricity or less per year. Small utilities will be required to match one-third of the grant amount awarded.

Eligible entities must address at least three of the dozen requirements including utility pole management, hardening, undergrounding, replacement, relocation of power lines and electrical equipment as well as technologies for weatherisation, monitoring and control, adaptive protection and advanced modelling. The programme does not cover the construction of new generation facilities; large-scale battery storage facilities that are not used for enhancing system security during disruptive events; and cybersecurity investments.

Smart Grid Grants ($3 billion): This programme aims to increase transmission capacity through grid-enhancing techno­logies (GETs); mitigate wildfires via asset management technologies; enable electrification of edge devices [Such as electric vehicle (EV) charging infrastructure, vehicle to grid (V2G) and smart building technologies] for better load management; and incorporate secure communications and cybersecurity. It is open to domestic entities including ins­titutions of higher education, state and local gov­er­nment entities and tribal nations. Eli­gible entities will be able to avail grants for increasing transmission capacity and operational transfer capacity through GETs such as dynamic line rating (DLR), flow control devices, ad­van­ced conductors, and network topology optimisation; improving visibility of the electric system to grid operators th­ro­ugh data analytics, software, and se­n­sors; enhancing secure communication and data flow between distribution co­m­ponents through investments in optical ground wire, operational fibre and wireless broadband communications networks; aggregation and integration of distributed energy resources (DERs) and other grid-edge devices to provide system benefits; enhancing in­ter­operability and data architecture of systems; and ma­king investments to mitigate the im­pacts of extreme weather or natural disaster on grid resilience. Eligi­ble entities must match at least 50 per cent of the grant amount.

Grid Innovation Programme ($5 billion): It focuses on providing financial assistan­ce to one or multiple states, tribes, local governments and public utility commissions to collaborate with electric grid owners and operators to deploy projects that use innovative approaches to transmission, storage and distribution infrastructure to harden and enhance grid 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-sharing ba­sis. Eligible entities must match at least 50 per cent of the grant amount. Some ex­amples of projects that could be eligible for funding are transmission system capacity enhancement and renewable energy integration; advanced distribution grid assets and functionality; and demonstration of innovative approaches for improved joint resilience and fun­ctionality across both T&D.

DOE has announced the first round of funding for GRIP worth $3.8 billion for fis­cal years 2022 and 2023. Concept pa­pers, which are a required first step in the application process, were due by De­cember 16, 2022 for the Grid Resilience Utility and Industry Grants, and Smart Gri­d Grants. Concept papers for the Grid Innovation Programme are due by January 13, 2023. Full applications are due bet­ween March 17 and May 19, 2023 depen­ding on the programme.

Transmission Facilitation Programme

This $2.5 billion programme aims to es­tablish an innovative revolving fund to help overcome the financial hurdles facing large-scale new transmission lines, upgrades of existing transmission lines, and, in select states and territories, the establishment of microgrids. 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”. Under the first requ­e­sts for proposal (RfPs) (GDO-TFPFY­23CAP), released on November 18, 2018, DOE has solicited applications for capacity contracts, under which it will commit to purchasing up to 50 per cent of the maximum capacity of the transmission line for up to 40 years. 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. The latest RfP proposes to offer capacity contracts to “shovel ready” transmission projects that are likely to begin construction by end 2027. The TFP is designed for projects that would otherwise not be constructed, or be constructed with less capacity, without federal support.

The first RfP involves a two-part application, screening and in-depth review process. Part 1 involves the initial re­view of applications to assess if the project is in public interest and its eligibility, the readiness to commence construction, the need for TFP support, and DOE’s ability to receive repayment of its investment in facilitation. Shor­tlisted projects will be invited to submit a more in-depth Part 2 application. Based on Part 2 evaluation results, DOE will invite successful project applicants into a due diligence phase and to negotiate a capacity contract and other award documentation. The submission deadline for Part 1 is February 1, 2023 and that for Part 2 is 45 days from invitation to apply. DOE selection notification and contract execution is expected in the summer of 2023.

DOE expects to issue a second RfP in 2023, which is expected to include loan and PPP financing opportunities.

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 materialise, effective and timely implementation is key.

The federal government is taking several steps to accelerate the buildout of long distance, high capacity transmission lines. In addition to BIL funds, the Infla­tion Reduction Act (November 2022) provides nearly $3 billion in transmission funding, including $2 billion that will unlock additional billions in federal lending for DOE-designated national interest electric transmission corridor (NIETC) projects. It is also fast-tracking the permitting process for key transmission lines that cross federally managed lands besides advancing environmental re­views for several new transmission lines. Further, the government is supp­orting next-generation transmission pl­anning through studies such as the Na­tional Transmission Planning Stu­dy, National Transmission Needs Study, At­lantic Offshore Wind Transmission Study and an analysis of west coast offshore wind transmission needs to help identify necessary transmission system requirements both onshore and offshore so as to meet regional and national inte­rests. In the immediate term, the transmission industry can take advantage of the latest funding available under the BIL programmes and advance the timely execution of projects. Net, net, the US electricity transmission sector is poised for exciting times ahead.