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Climate Bill Targets Transmission to Unjam Clean Energy Backlog

Aug. 9, 2022, 9:30 AM

Senate Democrats’ climate bill includes $3 billion in loans and grants for electric transmission projects—money that, in addition to tax incentives for electricity generators, would break down a significant barrier to a large-scale clean energy rollout, advocates said.

The Inflation Reduction Act (H.R. 5376) that senators passed Sunday would authorize the Energy Department to issue $2 billion in loans to support new and upgraded electric transmission lines that are deemed part of national corridors. The department would have $760 million in grants to siting authorities—namely state governments—to aid developers in navigating the review and approval processes. An additional $100 million is dedicated to offshore wind transmission.

Transmission projects have been stalled by regulatory delays, hindering renewable projects waiting to connect their power to the grid.

“It’s great to see really every aspect of transmission siting and permitting being addressed in the IRA,” said Christina Hayes, executive director of Americans for a Clean Energy Grid.

Last year, the grid advocacy group highlighted 22 “shovel-ready” projects in every region that could be finished if federal officials smoothed the regulatory process.

Complementing FERC

The bill—which is scheduled for a House vote on Aug. 12—complements efforts underway at the Federal Energy Regulatory Commission to overhaul regional transmission’s planning and cost allocation process, said Hayes, who worked at FERC from 2007 to 2015 and at the Oregon Public Utility Commission for the four years prior.

The commission is also reassessing how transmission providers connect generators to their systems.

Transmission siting falls to state commissions, though Congress has provided federal officials a “backstop” authority to approve a transmission line even if one state rejects it. That authority hasn’t been used yet.

More than 8,100 generation projects totaling 1,400 gigawatts of generation and storage were stuck waiting in interconnection queues throughout the country at the end of 2021, according to FERC.

That’s more than triple the total volume just five years ago and more than the total installed US generation capacity today. Virtually all of the projects are wind, solar, and energy storage.

The bill is “a tremendous positive for clean energy development and for transmission, and the two are connected,” said Larry Gasteiger, executive director of WIRES, a trade association that advocates for more investment in transmission infrastructure to support clean energy integration. “This just continues to demonstrate that nexus.”

Transmission, by unlocking renewable energy, could lower electric bills, researchers studying the bill said.

Resources for the Future estimated the legislation as a whole would save the average household approximately $170 to $220 per year in electricity costs and reduce 2030 power sector emissions by 70% to 75% compared to 2005 levels.

“The tax credits can lower the electricity rates everyone in the economy faces and shield us from potential swings in natural gas prices like we’ve been seeing and feeling this year,” Nicholas Roy, the study’s lead author, said in a statement. “Under an array of future natural gas prices trends, reductions in electricity rates should happen soon and be long lasting.”

Regulatory Hurdles Remain

Other industry watchers, however, argued that further subsidies for clean energy and transmission—without any final regulatory actions from FERC—could wind up sticking taxpayers with a bad deal.

“Clean energy suffers from a kinked regulatory hose—subsidies, including those in the IRA, mostly increase the pressure in the hose,” said Devin Hartman, director of energy and environmental policy at the R Street Institute, a free-market research organization in Washington.

There’s no lack of interest in building transmission or clean energy projects, he said. Rather, more competition should occur in building those connecting lines.

“Policymakers should prioritize overhauling generator interconnection and transmission regulation to achieve far greater emissions cuts,” Hartman said. “This would also benefit the economy, whereas most of IRA’s subsidies risk carrying costs that exceed benefits.”

Bureaucratic snags could also result in issuing the $2 billion in loan money. A transmission project would qualify only if it were located in a National Interest Electric Transmission Corridor, an Energy Department designation of an electric power route that promotes energy security or use of intermittent energy generators such as wind and solar.

The department hasn’t identified any corridors yet. So far, energy officials seem to have held the corridor option in reserve as a motivator for other parties to get transmission built, Gasteiger said.

“I’ve never gotten the sense they want to lead the charge on building transmission,” he said. “Maybe that could change.”

To contact the reporter on this story: Daniel Moore in Washington at dmoore1@bloombergindustry.com

To contact the editor responsible for this story: Chuck McCutcheon at cmccutcheon@bloombergindustry.com