A siting provision, a few billion dollars, and a need for much more.
The bipartisan Infrastructure Investment and Jobs Act (IIJA) passed the Senate last week. The legislation includes the most significant transmission policies in the last 15 years (c.f. Division D, Title 1, Subtitle A), including two key provisions addressing Grid Infrastructure Resilience and Reliability and a few billion dollars in funding. This is a victory for transmission advocates, but not enough to ensure the high capacity, long-distance lines needed to meet decarbonization goals in a timely and cost-effective manner.
In a recent report, I showed how siting challenges have bedeviled attempts to build interregional electricity lines that would improve the reliability, cleanliness, and cost of the power grid. Siting is a challenge because there is a mismatch between the broad, national-scale benefits of interstate transmission and the narrow scope that state-level authorities over transmission lines can consider when approving a project. The Energy Policy Act of 2005 had provisions to fix this by giving the federal government “backstop authority” when states did not approve lines. But that authority accomplished nothing after subsequent litigation narrowed the conditions under which it applied.
This new bill updates existing authority for transmission lines to both fix the problems revealed in litigation and expand the criteria the federal government can consider to designate areas where transmission siting will fall under backstop authority. Under existing rules, the federal government can override state-level permitting processes that take longer than one year to approve a project in corridors the DOE declares National Interest Electric Transmission Corridors. Currently, the Department of Energy can declare those corridors based on existing congestion, i.e., areas where new transmission would allow more low-cost energy on to the grid and reduce the costs for consumers. The updates in the IIJA allow the Department to designate corridors based on current and projected congestion and to consider both energy security and the ability of generators to connect to the grid as reasons to declare a corridor in the national interest.
The bill also creates a new funding mechanism for financing lines. It allows the Department of Energy to enter into contracts for up to 50 percent capacity of a transmission line, offsetting some of the risks of building new lines that might not be fully contracted with generators and customers at groundbreaking. This financial structure, authorized for a maximum of $2.5 billion at a time, is similar to “anchor tenant” contracts that FERC regulates between transmission developers and customers, but was not previously available to the federal government. Privately financed “merchant” transmission is the likely primary beneficiary of this Transmission Facilitation provision, but incumbent utilities may be encouraged to pursue more regionally significant projects when the siting provision is eventually coupled with an expected FERC rule-making on regional planning and cost allocation.
$11B is a ceiling estimate on what might actually be spent on transmission in the IIJA, with the rest of the $20B grid funding allocated to other investments, including distribution and local resilience measures. High-voltage, inter-regional lines are likely to see an even smaller piece of that pie. High-voltage transmission accounts for about one-third of all transmission infrastructure miles, but lines connecting regions to provide low-cost renewable energy and infrastructure resilience are rare.
Missing from the legislation were provisions requiring a planning order from FERC, carving out a primary siting role for the federal government in the model of the Natural Gas Act authority, and establishing a Grid Deployment Office. The planning provision was in the bill that the U.S. Senate Committee on Energy and Natural Resources passed in July but was not included in the final IIJA text. The other two provisions were introduced as amendments at the ENR hearing but were not passed. The siting amendment, introduced and withdrawn by Senator Hickenlooper, was introduced last week as a standalone bill by Senator Whitehouse and Representative Quigley.
Without national planning, federal siting authority for significant lines, and coordination of authorities, it is not clear that we can achieve a grid that provides national benefits like the most cost-effective decarbonization. It appears that the House may pass the infrastructure bill without amendment, which means that the opportunity to help transmission in infrastructure collapses to financial support through budget reconciliation. There, Congress should include a targeted transmission investment tax credit in the budget to increase private capital in that much-needed grid capability.