The Infrastructure Act: What does $1.2 trillion buy these days?
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The Infrastructure Act: What does $1.2 trillion buy these days?

An easy-to-understand analysis of the Infrastructure Investment and Jobs Act.

On November 15, 2021, President Biden signed into law the $1.2 trillion Infrastructure Investment and Jobs Act (IIJA,) also known as the Bipartisan Infrastructure Framework or simply the Infrastructure Act. This mammoth piece of legislation, topping out at over 2,700 pages provides the largest investment in physical infrastructure in decades and represents the first of the Biden Administration’s two-part commitment to new infrastructure and decarbonization.

Of the $1.2 trillion in spending, the lion’s share represents the reauthorization of expiring existing infrastructure programs for surface transportation associated with highways, transit, and rail. However, the law includes over $550 billion in new spending above that baseline. About half that, or $284 billion, represents increased funding to more traditional transportation infrastructure. Another $63 billion will fund upgrades to aging drinking water infrastructure and Western water resources, while $65 billion will assist in the rollout of high-speed broadband to rural and other underserved areas.

However, over $88 billion (including $15 billion of the $284 billion transportation budget noted above) is directly related to improving the nation’s aging electrical infrastructure, deploying smart energy technologies, and supercharging the deployment of electric vehicles.

Top-line appropriations

The top-line appropriations for the energy industry include the following:

  • $65 billion to upgrade power infrastructure by building new transmission lines to facilitate the expansion of renewable energy, R&D for advanced transmission and distribution technologies, promoting smart grid technologies, and investing in demonstration projects and research hubs for next-generation technologies like advanced nuclear reactors, carbon capture, and clean hydrogen.
  • $7.5 billion to build a national network for electric vehicle (EV) charging to accelerate the adoption of EVs to reduce transportation emissions, alleviating “range anxiety”, and making EV charging more convenient for consumers.
  • $550 million for cybersecurity, energy security, and emergency response.

The Department of Transportation will be responsible for distributing the largest amount of money, and unlike past efforts, Secretary of Transportation Pete Buttigieg will have broad discretion to allocate nearly $120 billion of those funds. However, the Department of Energy will largely oversee programs modernizing the electric grid. The Department of Commerce and Environmental Protection Agency will also play major roles in the broadband and water programs.

Recognizing the economic (and political) value in moving such vast sums of money out into the economy as quickly as possible, the law envisions that the federal agencies would leverage existing programs and funding vehicles as much as possible, but also calls for much of the funding to flow through (or to) state governments or instrumentalities such as state energy agencies or regulatory commissions. Many of the Act’s provisions have deadlines that run 180 days from enactment, or May 14, 2022, so expect a lot of activity during the next six months.

Notwithstanding the leveraging of existing institutions, there remains a concern that it could take many months to spend such an unprecedented amount of money quickly enough to advance the Administration’s climate change and economic development agendas as quickly as possible. Accordingly and immediately following passage of the Infrastructure Act, President Biden issued an Executive Order establishing a task force Co-Chaired by former New Orleans Mayor Mitch Landrieu and Director of the President’s National Economic Council Brian Deese, that will coordinate the implementation of the new law. The task force will include Cabinet members from the responsible federal agencies, including Transportation, Interior, Energy, and EPA, as well as the heads of the Office of Management and Budget, the Domestic Policy Council, and the White House Climate Policy Office.

Of particular interest to Centrica customers may be some of the following programs to be administered by DOE, in consultation with other affected agencies:

  • $6 billion - Preventing outages and enhancing the resilience of the electricity industry - Establishes a grant program to support hardening the electric grid, reduce the risk of wildfires, and decrease the impacts of disruptive events. Eligible recipients include grid operators, storage projects, generators, utilities, fuel suppliers, and other relevant entities. Customer-sited distributed energy resources (DERs) could find many opportunities here.
  • $5 billion - Electric grid reliability and resilience research, development, and demonstration - Establishes a competitive financial assistance program supporting innovative approaches to transmission, storage, and distribution infrastructure hardening and new approaches to regional grid resilience, some of which should provide opportunities for DERs.
  • $7 billion – Energy Efficiency - Includes $500 million for energy efficiency and renewable energy improvements at public school facilities.
  • $500 million - Energy Storage Demonstration Projects - Authorizes $350 million over five years to fund energy storage projects and $150 million in additional funding for Long Duration Storage demonstrations jointly administered by DOD and DOE.
  • $500 million - Industrial GHG Emission Reduction - Supporting demonstration projects that reduce GHG emissions from industrial sources.
  • Utility Demand Response - Requires state regulators to consider establishing rate mechanisms to allow electric utilities to recover the costs of promoting demand response to reduce electricity consumption during periods of unusually high demand. 
  • Interconnection Issues – Requires DOE and FERC to review existing interconnection rules for generation with a nameplate capacity of up to 150 MW connecting at either distribution or transmission voltage levels to identify barriers to the deployment of combined heat and power systems as well as waste heat to power systems. As interconnection is one of the most time-consuming and expensive aspects of deploying new DER projects, this could reduce barriers to such projects.

DOT’s EV initiatives could prove beneficial to consumers and localities as well as they seek to meet their own decarbonization goals:

  • $7.5 billion – EV Charging Infrastructure – Supporting the 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. There is a focus on public-private partnerships supporting publicly accessible charging and fueling infrastructure.
  • $5 billion - Clean School Bus Program – Provides grants to states and local governments to replace their existing fleet of school buses.  Half of the funding is reserved for electric vehicles, the other half is set aside for low-emission vehicles (gas, hydrogen, propane, biofuel).  Can cover 100 percent of the cost of the replacement.

The vehicles for disbursing funds under the Infrastructure Act will run the gamut from directly funding and expanding new and existing federal agency programs, grants, matching grants, loans, and credit supports, as well as direct funding to states. The latter would be determined in many cases through competitive bid processes, but in others through specific formulas keyed to population or other factors. All mechanisms would give priority to solutions that are Made in America and that support union and prevailing wage requirements.

As noted at the outset, the new Infrastructure Act represents the first part of the Biden Administration’s two-pronged plan for federal investment in U.S. infrastructure. The second piece is the President’s Build Back Better Act recently passed by the House but headed toward an uncertain future in the Senate. The BBBA is (currently) a nearly $2 trillion social spending and climate change package. It contains most of the tax and other incentives that would directly fund EVs and renewable energy investments including rebates, and extensions or increases in energy tax credits for solar, wind, geothermal, waste, fuel cell, and energy storage technologies. 

The investments made in the Infrastructure Act include those that would facilitate the construction of new transmission that could be used to move renewable power to load centers and assist in the development and deployment of technologies such as storage, hydrogen, and DERs that will help to balance a grid that relies on intermittent resources. But it is not, by itself, likely to result in the sort of game-changing carbon reductions necessary to meet the Biden Administration's goals of a decarbonized grid by 2035 and a net zero carbon economy by 2050. It is better thought of as a necessary, but not sufficient condition for the US to achieve its decarbonization goals and commitments. In addition, something like Build Back Better will be necessary.

I am hopeful that December will bring a blog post that describes the terms of the final version of the Build Back Better Act - as passed by the Senate and signed into law by the President.