On Monday, November 15, 2021, President Biden enacted the $ 1.2 Trillion Infrastructure Investment and Jobs Act (the “Act”), commonly referred to as the Biparty Infrastructure Bill. The package offers funding opportunities for a variety of traditional infrastructure projects, including around $ 65 billion for energy and grid development. Among others. This update focuses on a subset of the energy provisions contained in the Law: direct investment in the country’s electricity transmission and distribution facilities.
Excluding the research and development parts of the Law, the five provisions providing opportunities for transport developers and owners as of fiscal 2022 are of particular interest.
Transmission facilitation program
The law establishes a transportation facilitation program – funded by a $ 2.5 billion revolving loan fund – which allows the Department of Energy (“DOE”) to offer loans and enter into capacity contracts with transport developers to ensure the financial stability of transport projects. As planned, the implementation of the transport facilitation program by the DOE will include contracting by the DOE with the transport developers for long-term capacity service with contractual terms of up to 40 years, and for a capacity not exceeding 50% of the total transport capacity proposed for a transport project. In addition to entering into such long-term transportation service contracts, the DOE is now empowered by law to lend to eligible transportation projects and provide technical assistance for “design, development, construction, operation. , maintenance or ownership of an eligible project ”.
The transport facilitation program specifically targets large transport projects – for new projects, only those capable of transmitting at least 1000 MW are eligible. However, upgrade projects may also be eligible to participate as long as the upgrade is capable of transmitting at least 500 MW.
The law funds the program but expects the DOE to recover its costs on eligible projects either as the eligible project lender or, in the case of a transmission capacity contract, the DOE can recoup its investment from the revenues. collected by the end customers of the project. The law orders the DOE to terminate its capacity contracts “as soon as possible” – that is to say, once the DOE determines that the project is independently financially viable – by reselling the capacity to third-party traders or ceding the capacity to the developer. The law also states that the implementation of the transport facilitation program by the DOE provides that DOE funds that a developer spends on studies of projects that are never built do not need to be repaid.
DOE Competitive Grants Program
The law provides $ 5 billion in funding to DOE to establish a competitive program to fund network resiliency projects. Half of the funds will be allocated by the DOE directly to eligible entities (which include owners and transport operators) and the other half will be distributed to states and Indian tribes to fund their own resilience grant programs. In addition, the small “set aside” law utilities provide that at least 30% of grant funds must be made available to entities that do not sell more than 4 million megawatt hours of electricity per year. The DOE Competitive Grants Program must be launched by the DOE by May 14, 2022.
An interested candidate, in addition to abiding by the rules established by the DOE, will be required to provide a report detailing their “past, current and future efforts … to reduce the likelihood and consequences of disruptive events”. At least part of the rationale for this provision is that entities will be limited to receiving a grant that does not exceed the total amount they have spent in the previous three years on “efforts to reduce the likelihood and consequences. disruptive events ”.
Grant recipients are required to spend the funds on one of the following activities:
(A) weather protection technologies and equipment;
(B) fire resistance technologies and fire prevention systems;
(C) monitoring and control technologies;
(D) burial of electrical equipment;
(E) management of electric poles;
(F) relocation of power lines or renewal of power lines with advanced low sag conductors;
(G) management of vegetation and fuel load;
(H) the use or construction of distributed energy resources to improve the adaptive capacity of the system during disruptive events, including: (i) micro-grids; and (ii) battery storage subcomponents;
(I) adaptive protection technologies;
(J) advanced modeling technologies;
(K) hardening of power lines, facilities, substations, other systems; and
(L) replacement of old overhead conductors and underground cables.
Reform of the Federal Transmission Siting Authority
The act amends Section 216 of the Federal Electricity Act to revitalize the safety authority of the DOE and the Federal Energy Regulatory Commission (“FERC”). Originally established by the Energy Policy Act of 2005, section 216 allows FERC to issue permits with eminent domain authority for transmission projects located in electricity transmission corridors of national interest (“corridors of national interest). ‘national interest’). The corridors of national interest are designated by the DOE through a study and a report which is required to complete every three years. most recent from DOE report, however, issued in 2020, did not designate any Corridor of National Interest. Department of Energy, National study on electric transport congestion vi (2020).
The ability of FERC to issue permits under Section 216 was limited following a 2009 Fourth Circuit ruling which interpreted the wording of Section 216 as prohibiting FERC from issuing permits in the case where a state body expressly refuses the request for the establishment of a transport project. Piedmont Environmental Council c. FERC, 558 F.3d 304, 309 (4th Cir. 2009). In other words, by following Piedmont, FERC could use Section 216 when a state agency failed to act within a certain time frame but could not issue a license under Section 216 after a state agency effectively refused. a request for implantation.
The Law aims to “cancel” the negative impact of Piedmont on the DOE protection authority and includes express language authorizing FERC to issue a permit when a state authority “has refused an application for approval” for the siting of power transmission facilities located in a corridor of national interest designated by the DOE.
In designating corridors of national interest, the DOE must consider various factors, including whether a lack of adequate electricity places economic constraints on a particular region of the country, and non-economic factors such as whether a designation would serve national interests and whether that would promote energy independence. The law expands the scope of the DOE’s review by providing additional factors that the DOE may consider in providing a designation of a corridor of national interest. Specifically, the DOE can now consider whether a designation will “improve the ability” of power generation facilities “to connect to the grid”, whether the designation will reduce electricity costs for consumers, and also whether the designation will improve the energy consumption of the United States. Security.
Whether this extension of the federal authority to protect transportation sites and the additional factors the DOE may consider in designating corridors of national interest will result in a change will depend on how the DOE and the FERC are implementing the new provision. The DOE is not required to publish a new transport site study until 2023. Since there is currently no DOE designated corridor of national interest, the FERC is not able to issue permit under section 216 today. Nonetheless, the Act’s amendments to section 216 could significantly redefine the role of the federal government in determining the location of power transmission projects – a role that has always been almost exclusively the purview of the states.
Smart grid investment
The law provides additional funding – $ 3 billion – and expands the scope of eligible projects under the DOE’s Smart Grid Investment Matching Grant program, 42 USC § 17386. As part of this program, DOE can provide grants covering up to 50 percent of the costs associated with qualifying “Smart Grid Investments. Transmission owners and developers can now apply for and receive grants to cover expenses related to the purchase and the installation of “advanced transmission technologies such as dynamic line evaluation, flow control devices, advanced conductors, network topology optimization or other associated hardware, software and software. protocols. applied to existing transmission facilities that increase the operational transfer capacity of a transmission network we.
Federal financial assistance to non-federal entities for network reliability and resiliency projects
The law provides $ 5 billion for the DOE to provide grants to non-federal entities (state and local governments, state utilities commissions and Indian tribes) to work with owners and operators of the electricity sector on “approaches”. innovative… to strengthen and improve resilience and reliability. . “This program is specifically targeted to enable states to develop resilience programs in coordination with municipal entities and rural power cooperative entities“ on a cost-sharing basis. ”The program also appropriates $ 1 billion in funding. financial assistance to rural and remote areas for the same purpose.The program must be established by the DOE before May 14, 2022.