This is the fifth installment in a multi-part series of client Alerts that breaks down the Infrastructure Investment and Jobs Act (HR 3684) (the “IIJA”). The IIJA provides needed funding for many infrastructure programs, including transportation infrastructure, electric vehicles, water and energy infrastructure, broadband, resiliency, environmental remediation, among other things. It is the most significant bipartisan legislation enacted in decades to invest in the nation's infrastructure.
Part V of the series focuses on the provisions and programs that target the modernization, hardening and expansion of the nation’s electric grid and are found in Division D – Energy, Title 1 (Sections 40101 – 40127) of the law. These investments seek to make the grid more resilient and minimize outages in response to challenges posed from physical and cyber-attacks as well as climate induced extreme weather. In addition to the electric utility industry which is eligible for billions of direct funding from the Department of Energy (DOE), States, Indian Tribes, local governments, public utility commissions also will also have a say in how these funds are use. Downstream participants, such as suppliers of equipment and services to the electric utility industry, may find opportunities at each of these points of distribution.
Preventing Outages and Enhancing the Resilience of the Electric Grid
The IIJA provides $5 billion in grant funding over the five-year period of FY 2022 through 2026, $1 billion per year, to support grid hardening activities that will reduce the likelihood and consequences of the impacts to the electric grid from extreme weather, wildfires, and other natural disasters. Thirty percent (30%) of the funding is reserved for small utilities with annual sales of not more than 4,000,000 MWh of electricity.
To ensure the grant funding is not used to substitute for planned investments, and to avoid rewarding complacency by the industry, the law requires that applicants submit a report detailing past, current, and future efforts by the eligible entity to reduce the likelihood and consequences of disruptive events. It also limits grants to an amount no greater than the total amount the entity has spent in the prior 3 years on efforts to reduce the likelihood and consequences of disruptive events.
Half of the funding will be distributed by DOE and half through States and Indian Tribes. Grants must support activities that are “supplemental to existing hardening efforts” already planned and which will either reduce the risk of any power lines owned or operated by the eligible entity causing wildfire, or will increase the ability of the eligible entity to reduce the likelihood and consequences of disruptive events. Despite the split distribution method, the ultimate destination of this funding is electric grid owners, operators, and suppliers, who can only apply to funding from one distribution channel each annual funding cycle.
Electric Grid Reliability and Resilience Research, Development and Demonstration
Another $5 billion will fund demonstrations of advancements in grid hardening technology, such as storage, microgrids and distribution infrastructure, over the five-year period of FY 2022 through 2026, with an additional $1 billion set-aside for rural or remote areas. The law limits eligibility to States, Indian Tribes, local governments, and public utility commissions, who will compete for the funding on a competitive basis and must contribute at least 20% of the cost of the project. This is a new program that DOE must launch within 180 days of enactment. Private companies are not eligible to apply for this funding directly. However, interested parties should monitor its development at DOE and contact eligible entities as soon as possible to participate in proposal teams.
New Funding for the Smart Grid Investment Grant Matching Program
The IIJA provided the existing Smart Grid Investment Grant (“SGIG”) Program with $3 billion in new funding for FY 2022 through 2026. The SGIG program funds up to 50% of eligible costs of qualified investments that accelerate the integration of smart grid functionality into the nation’s electric transmission and distribution systems. The last significant funding of the SGIG program was from the American Recovery and Reinvestment Act, which provided $3.4 billion to 99 projects, which when combined with private investment delivered a total infusion of $8 billion in the electric grid. A significant amount of this investment went to the installation of advanced metering infrastructure and adding smart grid functionality to distribution and transmission systems.
The IIJA expands the SGIG program to include the following five new categories of qualified investments:
data analytics that enable software to engage in Smart Grid functions
devices and software, including installation, which allow buildings to engage in demand flexibility or Smart Grid functions
operational fiber and wireless broadband communications networks that enable data flow between electric utility distribution system components
cost to purchase and install advanced transmission network technologies such as dynamic line rating, flow control devices, advanced conductors, network topology optimization or other hardware, software and associated protocols applied to existing transmission facilities that increase the operational transfer capacity of the transmission network
the ability to redirect or shut off power to minimize blackouts and avoid further damage in the case of extreme weather or natural disasters
The ILJA also updated the definition of “smart grid functions” to reflect technological advancements. DOE distributes the SGIG funds through a merit-based competitive solicitation. Because this program is well-established, interested parties should expect to see a funding opportunity announcement for this program in early 2022.
Transmission Facilitation Program
To support large scale construction of new, replacement and upgrade transmission projects, the ILJA establishes a new $2.5 billion revolving fund. DOE can use this fund through three avenues: (1) buy up to 50% of the planned capacity from the developer, serving as an anchor customer for the project; (2) issue loans to support the cost of carrying out eligible projects, and (3) enter into public-private partnerships to co-develop projects located in a National Transmission Corridor.
Utility Rate Reform Incentives
The ILGA amended the Public Utility Regulatory Policies Act (PURPA) to direct States with any unregulated utilities to conduct a regulatory review to consider measures that will advance electrification of the transportation sector, including rate policies that promote affordable and equitable electric vehicle charging infrastructure installation and electric vehicle charging times. The review must begin within one year and be completed within two years.
The Cybersecurity provisions within Division D employ multiple tools and approaches to foster efforts by the electric utility industry to enhance the security of the electric grid from cyber threats.
The IILA directs the Secretary of Energy to develop a Public-Private Partnership, with electric utilities and the electric reliability organizations, to advance physical and cybersecurity of the electric utilities. The Public-Private Partnership will assist utilities with cyber threat self-assessments, cybersecurity training, technical assistance, and the sharing of best practices and data collection within the industry.
The law directs the Secretary of Energy to develop a voluntary Energy Cyber Sense Program, to address supply chain cybersecurity risks through establishing a testing process, cybersecurity vulnerability reporting processes and related database, and technical assistance to electric utilities, product manufacturers and other energy sector stakeholders to develop solutions to mitigate identified cybersecurity vulnerabilities.
The new Rural and Municipal Utility Advanced Cybersecurity Grant and Technical Assistance Program will provide $250 million in competitive grants to electric cooperatives, municipally owned utilities and small electric utilities (that produce less than 4 million MW per year) to support cybersecurity projects
The law also authorizes DOE to require recipients of any ILJA funding under Division D of the law, which includes not only direct funding for Grid Infrastructure but also related topics such as supply chains, fuels, energy efficiency, building infrastructure, to submit a Cybersecurity Plan that demonstrates the entity’s cybersecurity maturity in the context of the project and the recipient’s plan for maintaining and improving cybersecurity throughout the life of the project.
Office of Clean Energy Demonstrations
Stakeholders interested in advancing the technology of the electric grid will also want to know that the ILJA establishes a new Office of Clean Energy Demonstrations within DOE. The new Office will conduct project management and oversight over energy technology demonstration projects receiving DOE funding, including in clean hydrogen, carbon capture, grid-scale energy storage, and small modular reactors. DOE formally announced the formation of the new Office of Clean Energy Demonstrations in late December 2021. The Office will oversee the distribution more than $21 billion in grant funding for demonstration projects, including $505 million for Energy Storage Demonstration Projects and $2.5 billion for Carbon Capture Demonstration Program.
Who to Watch
On January 11, 2022, the Secretary of Energy introduced its Building a Better Grid Initiative that will coordinate DOE’s efforts to accelerate the modernization, expansion, and resilience of the Nation’s electric grid, including preexisting programs and the new tools and funding provided in the ILJA. Interested parties should anticipate further guidance and solicitations from DOE through this initiative, in addition to monitoring activity by States, Indian Tribes, local governments, and state regulators.
The Grid Infrastructure and Resiliency programs are high priority items which DOE is expected to push out quickly. Stakeholders should expect additional announcements from the DOE’s Building a Better Grid Initiative in the upcoming weeks and months, and primarily before April 2022 (within the first 180 days following enactment of the ILJA).