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.