The Bipartisan Infrastructure Package: What it Means for Energy and Climate
President Biden today signed the Infrastructure Investment and Jobs Act (IIJA), also known as the Bipartisan Infrastructure Package. The bill, roughly 2,700 pages in length, mirrors the bipartisan legislation passed by the U.S. Senate in August, which addresses a range of topics related to environment, energy, and climate policy, summarized by B&D. That bill was adopted by the House of Representatives late in the evening of November 5 after months of fractious negotiations between different factions of the Democratic caucus. It calls for spending approximately $1.2 trillion, including approximately $550 billion in new spending, over the next eight years. In addition to significant spending on “traditional” infrastructure like roads and bridges, the IIJA includes major provisions important to the energy industry, ranging from significant support for electrification of the transportation system to building out the nation’s electric transmission grid and renewable power. The IIJA creates major new investments, and major new programs, touching nearly every aspect of the energy industry.
With the enactment of the IIJA, the onus now falls on federal agencies to administer the many programs created, expanded, or supported by the legislation. In many cases, the IIJA simply adds funding to existing programs. In those cases, the administrative apparatus necessary to carry out the programs is already in place and it should therefore be relatively easy for the agencies to revamp the program. In other cases, new programs have been created, and it is likely to take considerable time for the agencies to develop the necessary administrative mechanisms to roll out the programs. Companies should pay close attention to these programs, both as a potential source of grants or other financial support, and for the systemic impacts programs of this size are likely to have on the industry.
Additional energy and climate measures are contained in the reconciliation package, dubbed “Build Back Better,” that is now pending in the House. If Build Back Better is enacted, it would add additional measures aimed at energy and climate issues to those enacted in the IIJA, including, for example, long-term extensions of tax credits for renewable energy.
Summary of IIJA Energy and Climate Provisions
The IIJA’s energy and climate-related provisions fall within several categories, including transportation electrification and alternative fuels; climate; electric transmission; energy cybersecurity; energy storage; critical minerals; carbon capture; hydrogen energy; nuclear energy; hydroelectric power; energy efficiency; vulnerable communities; and public utilities. The provisions are numerous, and the details for implementation will be important going forward.
Electrification of Transportation and Alternative Transportation Fuels
- The bill appropriates $7.5 billion to support construction of electric vehicle charging infrastructure, as well as hydrogen and natural gas fueling infrastructure, and propane fueling infrastructure for medium- and heavy-duty trucks. Grants of up to $15 million each will be allowed, with up to 80% of the cost of a project covered by the federal government.
- The IIJA appropriates $5 billion over five years for grants and rebates to states, school districts, tribes, and bus operators to support purchase of electric and hybrid-drive school buses as well as low-emissions buses that operate on hydrogen, natural gas, or propane. At least half of the appropriated funds must be made available to support zero-emissions buses, prioritized support to rural, tribal, and low-income schools.
- $250 million is appropriated over five years for pilot programs to support the conversion of ferries to electric drives or alternative fuels, including ferries with on-board energy storage systems.
- The IIJA also provides for a grant program, with a federal share of up to 80%, to support reduction of GHG emissions from idling trucks at port facilities. Grants can be used for electrification of port equipment as well as for efficiency programs that reduce emissions from idling-related exhaust.
- The IIJA directs the Department of Energy (DOE) to develop a demonstration project in which used electric vehicle batteries are redeployed to support grid-scale energy storage.
- Several additional provisions lay the groundwork for further advancements to support vehicle electrification or to study the potential impacts of transportation electrification. These include creation of an Electric Vehicle Working Group, composed of government officials and industry representatives from relevant sectors, which is charged with making periodic reports on the rate of adoption of electric vehicles, barriers to adoption, and strategies for increasing adoption. DOE is required within 120 days to issue a study on the cradle-to-grave environmental impact of electric vehicles and a study of the impact of forced labor in China on the electric vehicle supply chain. In addition, the legislation includes provisions directed at improving data collection by the Energy Information Administration, including a directive to collect data on the integration of electric vehicles into the electric grid, which may lay the groundwork for vehicle-to-grid services such as using electric vehicle batteries as energy storage devices.
- The legislation also authorizes $3 billion to support the battery supply chain, which is, of course, critical for expanding the supply of electric vehicles. The legislation authorizes demonstration projects for the processing of materials used in batteries, support for commercial-scale battery processing facilities, and for retrofitting or retooling existing battery processing facilities, with individual grants as large as $100 million. The legislation authorizes another $3 billion for a similar program to support manufacturing of advanced battery components and battery recycling. The bill also supports research into battery materials and battery recycling, including a specific research program aimed at improving the recycling and re-use of used electric vehicle batteries.
- The legislation expands DOE’s existing loan guarantee program to cover investments in trucks, trains, and other heavy equipment that use alternative fuels like hydrogen or fuel cells, or that employ ultra-efficient technology.
Climate Response and Resiliency
The IIJA includes provisions aimed at addressing climate change by improving infrastructure resiliency or mitigating the adverse effects of climate change. These include:
- A grant program to improve the resiliency of infrastructure in the face of extreme weather events and to move coastal infrastructure to higher ground.
- A “Healthy Streets” program aimed at improving tree cover in cities as a means of reducing extreme temperatures caused by heated pavement and concrete.
- Major new programs aimed at reducing the nation’s methane emissions, including a $4.5 billion program to support grants to states and Indian tribes to locate and plug orphaned oil and gas wells.
- Funds for research into new renewable energy technologies, including geothermal, solar, and wind energy.
- $500 million to support demonstration projects that reduce GHG emissions from industrial sources.
A major expansion of the nation’s electric transmission system is widely considered necessary to achieve the Biden Administration’s climate goals, which include a GHG-neutral electricity sector by 2035 and net-zero GHG emissions economy-wide by mid-century. To respond to this need, the IIJA includes provisions aimed at promoting construction of new electric transmission and easing regulatory barriers to transmission development. It authorizes a total of $65 billion for these purposes. Specific provisions include:
- A $5 billion grant program to support utilities, states, and tribes to harden the grid against extreme weather, wildfires, and similar hazards. Grants are subject to a 15% matching requirement and may be used for a variety of hardening measures (e.g., undergrounding or relocating electric lines, constructing microgrids, and electricity storage systems). The legislation also clarifies that federal disaster assistance can be used to fund repairs to wildfire-damaged electric systems and that repairs may include undergrounding or adding fire-resistant equipment. Another $5 billion is allocated for a matching grant program aimed at assisting states, tribes, and utilities in developing innovative approaches to improving grid resiliency, and at reducing GHG emissions from rural electric utilities. The IIJA also directs the Federal Energy Regulatory Commission (FERC), DOE, the North American Electric Reliability Corporation, and the Department of Homeland Security to develop a program aimed at ensuring that the grid can recover from the loss of high-voltage electric transformers by, for example, identifying the nation’s stock of mobile high-voltage transformers that can be deployed in an emergency.
- Amendments to the Federal Power Act’s provisions on National Interest Electric Transmission Corridors (NIETC) to revitalize that program. The NEITC provisions were originally enacted as part of the Energy Policy Act of 2005 to ease the permitting of high-voltage transmission lines in corridors where DOE determined that new transmission lines would relieve significant constraints or congestion. Two Federal Circuit court decisions rendered the program largely ineffective. The amendments attempt to overcome those decisions, particularly by placing specific constraints on the timing of state permitting decisions and how states can condition their permits.
- A “Transmission Facilitation Program,” which authorizes DOE to take “anchor tenant” positions in high-voltage transmission projects. DOE may enter into long-term contracts for up to 50% of the capacity of a high-voltage transmission project and may agree to sell the capacity to other market participants or enter into a public-private partnership. The program is intended to leverage DOE’s financial support to encourage private investment in high-voltage transmission. The legislation creates a revolving loan fund, initially authorized at $2.5 billion, to carry out this program, with loans to be repaid from revenues created by the transmission projects.
- $3 billion for a matching grant program to expand use of smart technology that enables more efficient use of existing transmission lines, enables demand response, and improves grid reliability, especially in response to extreme weather events.
- Support for states to develop Energy Security Plans to reduce risks of and develop response plans for cyberattacks and other events that disrupt energy delivery systems, and assistance to states to improve energy planning.
- An increase in the Bonneville Power Administration’s borrowing authority to $10 billion to support expansion of transmission in the Pacific Northwest. Because Bonneville owns and operates the largest share of the transmission system in the Pacific Northwest, this provision is particularly important for the energy industry in that region.
- The IIJA also authorizes Bonneville to spend $100 million to upgrade the pumped storage facilities at Grand Coulee Dam, which should significantly increase the ability of the Columbia River power system to integrate renewable generation in the region.
- Authorization to construct transmission facilities to increase the transfer of renewable power between Canada and the U.S. under the Columbia River Treaty. This provision appears to be aimed at jump-starting negotiations for renewal of the Columbia River Treaty, which have been stalled for several years. A related provision authorizes a study of coordination of hydroelectric and storage facilities on the Columbia River system in the U.S. and Canada. This is a critical element of the Columbia River Treaty because the bulk of hydroelectric storage capacity in the region is located in Canada and one of the key elements of the Columbia River Treaty is the compensation of Canada for the use of this storage capacity to support optimization of power output from dams on the U.S. side of the border.
The IIJA includes provisions aimed at protecting the nation’s electricity system from cyberattacks. These are:
- A new program to provide technical support to electric utilities in identifying cyber threats and protecting themselves against those threats, including a study of the vulnerability of electric distribution systems to cyber attacks.
- A new “Energy Cyber Sense” program to test products used in the electric industry and to certify products that do not create cyber threats.
- A directive to FERC to establish by rule a system of incentive rates to encourage FERC-regulated utilities to adopt measures to protect against cyberattacks and to participate in information-sharing systems related to cyber security.
- A new program, authorized to spend $250 million per year for five years, to support grants to small utilities, rural electric cooperatives, municipally-owned utilities, and joint action agencies to support deployment of advanced cybersecurity technology for these utilities.
- Authorizations to improve the operations and technical capacities of the Electric Information Sharing and Analysis Center (E-ISAC). E-ISAC is a federal agency primarily responsible for day-to-day protection of the electric industry from cyber attacks.
- The legislation also authorizes the Secretary of Energy to require any utility or other entity receiving a grant under the IIJA to develop and submit an acceptable cybersecurity plan as a condition of receiving the grant.
Three provisions in the IIJA are aimed at supporting energy storage systems:
- A study aimed at identifying different standards applicable to energy storage systems across different sectors and providing recommendations for unifying those standards.
- The addition of energy storage to the list of permissible uses for an energy lease on the Outer Continental Shelf.
- Authorization of more than $500 million to support energy storage pilot and demonstration programs that were initially enacted in the Energy Act of 2020, which was part of the COVID relief package adopted in the waning days of the Trump Administration.
Recognizing that rare earth minerals like lithium will be essential for the rapid expansion of electric vehicles, utility-scale energy storage technologies, and other technologies that depend on high-capacity batteries, the IIJA includes several provisions aimed at identifying and securing supplies of these critical materials. These include provisions to improve the United States Geological Survey’s capacity to map the location of critical minerals, to share information about those locations, and to support research related to supplying those minerals. The legislation also includes a provision to expedite and streamline the federal permitting process so that critical minerals can be obtained domestically, and particularly from U.S. public lands, rather than from overseas sources. It also directs the Energy Information Administration to assemble forecasts of demand for critical minerals based on demand from electric vehicles and other battery-based devices in the electric sector. Finally, it expands DOE’s existing loan guarantee program to include projects that increase the domestic supply of critical minerals.
Carbon Capture, Storage, and Utilization
The IIJA significantly expands federal support for carbon capture, sequestration, and utilization technologies. New programs include a grant program to support utilization of captured carbon in new products, a program of loan guarantees and grants to expand pipelines that transport captured carbon to sites where it can be utilized, a new program aimed at supporting large-scale commercialization of carbon capture technologies, and amendments to the permitting process for carbon sequestration projects located both onshore and on the Outer Continental Shelf. The IIJA also amends the Internal Revenue Code provision governing issuance of tax-free bonds for public facilities to allow bond proceeds to be used for carbon capture projects. The legislation also authorizes federal support for four regional hubs to support direct air capture technology that would remove carbon dioxide directly from the atmosphere and sequester it or incorporate it into usable products. Finally, the legislation authorizes about $4.6 billion over five years to support carbon capture pilot and demonstration projects.
Hydrogen Research, Development, and Deployment
The IIJA expands federal support for the use of hydrogen as an energy source. Specifically, the legislation includes expanded federal support for research on the use of “clean hydrogen,” including research to improve hydrogen electrolysis technology and reduce its cost. It also includes federal support for developing at least four clean hydrogen hubs that would promote new technology and commercialization of that technology. The legislation defines “clean hydrogen” as hydrogen that produces no more than 2 kilograms of carbon dioxide for each kilogram of hydrogen produced, although that definition can be revised by the Secretary of Energy after five years, ostensibly via notice and comment rulemaking.
The IIJA contains a subsidy mechanism aimed at preserving existing nuclear plants operating in the nation’s “organized” electricity markets, those that are administered by regional transmission organizations, or independent system operators. In recent years, nuclear operators have struggled to break even when selling power into these organized markets. The mechanism is designed to ensure that these nuclear reactors, and the carbon-free power they provide, remain in operation despite unfavorable economic conditions. The legislation also expands nuclear research programs to cover small modular reactors and other advanced nuclear technologies. It includes an appropriation of slightly more than $3.2 billion to support research into advanced nuclear technologies.
The IIJA contains several provisions concerning hydroelectric power, primarily aimed at encouraging the installation of new generation on existing dams or improving the safety and environmental performance of that nation’s stock of existing dams.
- Hydropower Production Incentives: The new bill revives a DOE program that encourages new small hydro generation on existing dams and conduits such as irrigation canals. The incentive covers the addition of new generators to an existing dam or conduit or the addition of a small generator (up to 20 MW) to a FERC-licensed dam in an area that lacks access to the grid, has a high frequency of outages, or has high electricity prices. The incentive is 1.8 cents per kWh (adjusted for inflation since 2005, when the original program was adopted) up to $1 million per year for each year through 2027. The legislation appropriates $125 million for this program.
- Hydropower Efficiency Incentives: The new bill also extends an existing DOE program providing incentives for improvements to hydro facilities that increase their efficiency by at least three percent. Incentive payments of up to $5 million per year per facility are authorized provided that the incentive payment does not exceed 30% of the costs of the capital improvement. The legislation authorizes $75 million for this program.
- Hydropower Safety/Environmental Improvement Incentives. The IIJA creates a new program that provides incentives for improvements to existing hydroelectric facilities that would support capital improvements to: (1) improve grid resiliency by adopting more quickly to changing grid conditions, by providing ancillary services (like spinning reserves), by integrating variable sources of generation like solar, or by managing reservoir sediments; (2) to improve dam safety by maintaining spillways and related structures, by improving dam stability, or by improvements to floodgates or similar measures to improve flood control; (3) improve environmental compliance, including fish passage facilities, water quality, sediment transport processes, and recreational access. Incentive payments can be up to 30% of the cost of the capital improvement, not to exceed $5 million in any one fiscal year. The legislation authorizes $553,600,000 for this program.
- Pumped Storage: The bill includes specific provisions designed to resolve conflicts that have arisen between sponsors of a proposed pumped storage project on the Columbia River and Native American tribes.
- Research: The bill appropriates approximately $150 million to support research in hydroelectric technologies, including the development of a research center dedicated to research on marine energy technologies.
The new legislation includes a variety of programs aimed at promoting energy efficiency, including both new programs and new funding for existing programs. These include:
- A new $250 million revolving fund to support grants and loans to state-administered programs that finance commercial and residential energy audits and energy efficiency retrofits and a $40 million fund to support state efforts to train energy auditors.
- Support for energy efficiency in commercial buildings, including a $1.125 billion authorization to provide technical support to states and other relevant agencies to update building codes and to provide training to contractors, architects, engineers, and other building industry professionals in energy efficiency technologies, and another $20 million to support development of training centers and career recruitment for these purposes.
- Support for energy efficiency in industry, including making municipal wastewater treatment plants eligible for DOE’s existing program to support industrial energy efficiency improvements, support for developing five regional “Centers of Excellence” to study technologies and methods for improving industrial energy efficiency and reducing GHG emissions, and establishing a new program requiring DOE to consult with industries to identify opportunities to improve sustainability.
- A new $2.5 billion competitive grant program for the nation’s schools to support energy efficiency and other energy-related measures that will reduce energy costs for those schools.
- A new grant program, authorized at $50 million per year for the next five years, to support demonstration projects for the installation of energy-efficient windows, roofs, and related measures to improve energy efficiency at buildings owned by non-profit institutions.
- An appropriation of $3.5 billion to fund DOE’s existing program for low-income weatherization.
- $550 million to support DOE’s Energy Efficiency and Conservation Block Grant Program, along with expanding the eligibility for block grants to include programs for zero-emissions vehicles and related infrastructure, and for renewable energy projects.
- $250 million in new funding for DOE’s existing program providing conservation technology grants to federal facilities.
- $20 million in new funding to support DOE’s existing rebate program for advanced industrial equipment and energy-efficient electric transformers.
Programs Supporting Communities Affected By Abandoned or Shuttered Fossil Fuel Facilities
The IIJA includes several programs aimed at easing the economic effects of shuttered coal facilities or addressing abandoned fossil fuel facilities.
- The legislation authorizes $750,000 per year over five years for grants to support “Advanced Energy Manufacturing” in census tracts where a coal mine or coal-fired power plant has recently closed. Advanced Energy Manufacturing includes new or revamped manufacturing facilities that produce equipment for renewable energy production, electric vehicles, carbon sequestration, hybrid vehicle technologies, and similar products, or else retrofits an existing manufacturing facility with zero-emissions, renewable, or carbon capture technology.
- It also creates a program to study and create demonstration projects for construction of renewable energy facilities on abandoned mine sites with priority for economically distressed communities.
The Public Utility Regulatory Policies Act of 1978 requires state utility regulators and the governing bodies of publicly-owned utilities to consider, but not necessarily adopt, a list of recommended policies. The IIJA adds two policies to this list:
- State regulators and publicly-owned utilities are required to consider policies to promote the availability of electric vehicle charging infrastructure, to improve the customer experience for vehicle charging, and to encourage third-party investments in charging infrastructure.
- They are also required to consider policies, including appropriate rate mechanisms, to promote demand response as a means of mitigating stress on the electric system during periods of high electricity demand if they have not already adopted such policies.
The relevant bodies must begin consideration of the policies within one year and complete consideration of whether to adopt the policies within two years.
The IIJA creates major new investments, and major new programs, touching nearly every aspect of the energy industry. Companies in the industry should pay close attention to these programs, both as a potential source of grants or other financial support, and for the systemic impacts programs of this size are likely to have on the industry.
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