What the infrastructure deal means for energy

Source: By E&E News staff • Posted: Sunday, August 1, 2021

The $550 billion infrastructure package that moved through Congress this week stops short of President Biden’s climate ambitions but could still have broad ramifications for the country’s energy sector.

From new funds for transmission critical to renewables to GOP-backed language calling for a report on job losses associated with the now-canceled Keystone XL pipeline, the measure could influence what type of power comes online and where — and shape politics heading into the 2022 midterm elections.

In a statement this week, Biden called the bipartisan package the “most significant long-term investment in our infrastructure and competitiveness in nearly a century,” although the administration and its allies made clear that the Senate legislation is only a first step.

Biden’s allies pointed to investments in the grid, the first federal funding for electric vehicle charging stations, and funding for demonstration projects as major wins. The package also calls for new programs at the Department of Energy, an assessment on electric vehicle emissions and new rulemakings at the Federal Energy Regulatory Commission. Many of the provisions were originally part of an energy bill backed by Sen. Joe Manchin (D-W.Va.) that cleared the Senate Energy and Commerce Committee earlier this month.

“There are a huge number of demonstration projects on hydrogen, electricity storage, direct air capture that’s crucial innovation spending and funding that can have huge, long term dividends,” said Paul Bledsoe, an adviser at the Progressive Policy Institute.

He said it was significant that the legislation cleared its first hurdle in the Senate with 17 Republican votes: “The climate change effects that have become manifest around the country are moving Republicans toward more serious engagement, and that’s a good sign.”

The plan is “clearly just a down payment on the full Biden clean energy-climate agenda, but it’s a significant down payment,” he added.

Seventeen Senate Republicans joined all 50 Democrats on Wednesday to move forward with the bipartisan legislation. The text of the bill still has to be written, and it must still clear the chamber with a final vote. Before it can get to Biden for his signature, it also needs approval from the House, where Speaker Nancy Pelosi (D-Calif.) has said she will not take up the bipartisan plan until the larger reconciliation bill has also passed the Senate.

Democrats plan to follow the bipartisan infrastructure deal with a $3.5 trillion package that would include a host of other measures, including a clean electricity standard to require utilities across the country to slash emissions.

Senate Majority Leader Chuck Schumer (D-N.Y.) said yesterday that Democrats, who hope to pass that legislation with a simple majority, would “move forward on both tracks.”

Energy Secretary Jennifer Granholm, one of the members of Biden’s Cabinet charged with pitching his infrastructure efforts, said yesterday that both pieces of legislation would be a “generational investment.”

“We’re talking a massive investment in federal purchasing power so the government can buy clean energy and electric vehicles,” she said as she participated in a virtual event to announce a DOE effort to spend $42 million on grants and pilot projects aimed at reducing carbon emissions in the manufacturing sector.

Granholm noted that the Senate package includes money for efforts to support the supply chain for batteries and includes $8 billion for the so-called 48C tax credit, which promotes advanced clean energy manufacturing.

Reed Hundt, chairman of the Coalition for Green Capital, whose priorities did not make it into the Senate legislation, hailed its release nonetheless. Hundt, whose group is advocating for the creation of green banks to finance private investment in green energy, said critical clean energy initiatives will have to be dealt with in the broader budget reconciliation measure.

“The fact of a bipartisan bill is a very big accomplishment,” Hundt said. “But the transformation of the energy sector will be the job of the reconciliation package.”

Green groups welcomed some provisions in the legislation, but were quick to point out what they view as its shortcomings.

“We will support efforts to get the legislation through both chambers of Congress and to the president’s desk. We cannot quit there, however,” said Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association.

Hopper said the use of solar needs to grow four times faster to reach Biden’s climate targets, adding that it can’t happen without a long-term extension of the investment tax credit, with a direct pay option, or the equivalent to drive more solar installations.

Evergreen Action Executive Director Jamal Raad called the legislation “further evidence that Democrats must pass an ambitious reconciliation package to meet this moment,” noting that it falls far short of Biden’s climate ambitions.

For example, Raad said, negotiators committed a month ago to spend $7.5 billion on electric buses and transit, but the plan only allocates $2.5 billion for electric buses, with ferries and “low-emission” buses receiving $5 billion.

Here are six ways the package affects energy, according to a 58-page summary of the legislation first reported by POLITICO.

1. Transmission

One disappointment for some clean energy advocates is funding for expansion of the nation’s high-voltage power networks, which could link vast amounts of electricity from new wind and solar projects to utilities and their customers.

Two provisions of the bill would authorize $5 billion each over the next five years for a wide range of energy projects that could include certain transmission projects.

Yet that figure lags behind what some researchers say is needed to achieve Biden’s low-carbon goals. For example, a computer modeling analysis last year by Princeton University researchers, the Net-Zero America study, concluded that meeting Biden’s goal of a net-zero carbon emissions economy by 2050 would require a 60 percent expansion of the U.S. high-voltage transmission network by 2030, as a head start. Transmission line capacity would have to be tripled through 2050 to connect the needed wind and solar power to the grid.

Capital investment for new power lines would need to total $360 billion through 2030 and $2.4 trillion by 2050, the Princeton study estimated.

Another study, by the Americans for a Clean Energy Grid organization, identified 22 high-voltage projects that could significantly increase wind and solar power connections to the grid. The average cost for each one is $1.5 billion.

The legislative summary appears to strengthen federal authority to approve high-priority, regional transmission projects that are stalled by state opposition, reopening what has been an intensely controversial issue between energy developers and environmental activists opposing major transmission projects.

The language also seems to confirm the authority of the Federal Energy Regulatory Commission to approve eligible high-priority transmission projects if state agencies reject the proposals or fail to act on them within a year. But before exercising its so-called backstop siting authority, FERC would need to consider whether the applicant for a transmission project had “engaged states and non-federal entities in good faith consultations and in a timely manner,” according to the summary.

Congress enacted a similar provision in 2005 in responding to the Northeast blackout two years earlier. But a ruling by the 4th U.S. Circuit Court of Appeals drastically limited FERC’s authority, holding that it could use its “backstop” siting authority only if a state agency failed to act, not if the proposal were rejected.

A second part of the 2005 law directed the Energy Department to designate “National Interest Electric Transmission Corridors” as pathways where FERC’s siting authority would apply, but that was successfully challenged in court, and the entire process was shelved.

“FERC has never used its backstop siting authority because that court case diminished the commission’s authority on the backstop siting provision,” said Jeff Dennis, general counsel at Advanced Energy Economy, a clean energy trade group. “[This] would breathe new life into this statute, but it’s not an extensive grant of authority to FERC to site transmission lines.”

Rob Gramlich, executive director of Americans for a Clean Energy Grid, said the most important federal policy supporting major power line expansion would be approval of an investment tax credit for priority projects.

“We would like to see the tax credit for regionally significant transmission included in this package,” Gramlich said. Proposals for the credit are pending in House and Senate tax-writing committees, he said, but not in the infrastructure bill currently. “Hopefully, there will be another opportunity for that to pass in a future bill,” he added.

Other provisions in the draft legislation instruct FERC and DOE to take steps to support grid reliability and resilience. One section would direct the Energy secretary to work with the Department of Homeland Security, the North American Electric Reliability Corp. and FERC to “develop a framework to assess the resilience of energy infrastructure” in rural areas.

The independence of FERC’s newly established Office of Public Participation might also be shifted under a separate provision.

Congress directed the commission last year to establish the office to help members of the public who wish to intervene in commission proceedings. Environmentalists and consumer advocates say its creation was long overdue, since aspects of the commission’s processes for permitting energy projects can be difficult for members of the public to navigate.

The bipartisan legislation, however, would strike provisions in the Federal Power Act that dictate that the director of the office would serve a four-year term and that the director could only be removed “for inefficiency, neglect of duty, or malfeasance in office.”

“The impact of removing these two provisions would significantly limit the independence of the office, and essentially tie the director to the whims of whomever was FERC chairman,” Tyson Slocum, director of the energy program at Public Citizen, said in an email.

2. Cybersecurity

The infrastructure bill also includes several major investments in cybersecurity for both the energy sector and federal government, which have faced a recent spate of cyberattacks, according to the summary.

The plan would direct FERC to initiate a rulemaking to develop incentives for cybersecurity investments and utility participation in threat sharing clearinghouses.

FERC has been exploring cybersecurity incentives since last year with the publication of a white paper and notice of proposed rulemaking. Initial comments and reply comments have already been submitted and the commission is in the process of reviewing them. A FERC spokesperson said the agency is waiting for the final bill before evaluating its potential impact.

The infrastructure agreement would also establish a cybersecurity grant and assistance program for rural and municipal utilities, authorizing $250 million in new spending from fiscal 2022 to 2026. The effort would largely aim at providing government assistance to smaller utilities that typically lack resources to keep up with the barrage of cyberthreats from criminal and state-backed hackers.

DOE would also be required to carry out a program to beef up the digital defenses of utilities “with fewer resources” and report to Congress on ways to improve electricity distribution systems, which are typically not subject to mandatory cyber regulations.

The bill would also set aside $50 million for DOE to test emergency response capabilities, and an additional $50 million for DOE to conduct cybersecurity assessments to “increase the functional preservation of electric grid operations or natural gas and oil operations in the face of threats and hazards.” Another $250 million would go toward an energy-focused research, development and demonstration program to improve cybersecurity applications and technologies.

Also included is the Senate Cyber Sense Act bill that would create a DOE program to test equipment on the grid for vulnerabilities. The House has already passed its version, H.R. 2928.

Any federal contractors would also be required to demonstrate the “cybersecurity maturity” relating to a project before being awarded.

The federal government cybersecurity programs would also see additional funding as the administration grapples with the challenges of ransomware hackers targeting critical infrastructure.

The newly created Office of the National Cyber Director would see $21 million in initial funding under the deal, a $6 million increase from Biden’s budget request in May.

Chris Inglis was formally sworn in as the White House cyber director earlier this month, but some experts are concerned that the office, which is authorized to have 75 staffers, has yet to receive funding. The position was established with last year’s National Defense Authorization Act with the aim of coordinating federal cyber policy and strategy.

The bill would also create a $100 million cyber response and recovery fund over five years, giving the secretary of the Department of Homeland Security the authority to declare a significant incident following a major breach and allowing DHS’s Cybersecurity and Infrastructure Security Agency to provide support. CISA would also see a $35 million one-time investment.

States would see a $1 billion over four years to create a new grant program aimed at improving the cybersecurity posture of state, local, tribal and territorial governments. The Federal Emergency Management Agency would administer the grant in consultation with CISA.

Jim Cunningham, executive director at advocacy group Protect Our Power, said it is “encouraged that the infrastructure package will contain funding to address some cybersecurity needs.”

“At the same time, the short-term needs to make the electric grid more secure and resilient will require additional funding,” Cunningham said in an email.

Cunningham said that Protect Our Power recommends $22 billion over five years to fund securing control power system communications, supply chain testing centers and funding for under-resourced municipal and rural power companies to “offset the cost impact on consumers from cybersecurity investments.”

3. Keystone XL

Republicans scored a number of political wins in the legislation, including a provision that would direct the Department of Energy to prepare a study and report on the “job loss and impacts on consumer energy costs” stemming from Biden’s decision in January to revoke a key cross-border permit for the Keystone XL pipeline.

In June, developer TC Energy Corp. terminated the controversial project, which would have moved oil sands crude from Hardisty, Alberta, to Steele City, Neb.

Shortly after Biden pulled the permit, Keystone XL President Richard Prior said more than a thousand jobs would be cut as a result of that decision (Energywire, Jan. 21).

Environmental groups said Biden was right to rescind the permit, and some rejected the need for such a report.

“Forcing the Department of Energy to relitigate that decision is a waste of time and money,” said Mahyar Sorour, deputy legislative director at the Sierra Club, in a statement.

Yet Jane Kleeb, founder of the group Bold Nebraska, said she welcomed the provision calling for a DOE report on Keystone XL.

“Please, let the secretary of Energy put out a report showing that Keystone XL would have provided up to 50 permanent jobs in the United States at the risk of taking thousands of miles of productive farmland out of production by the use of eminent domain,” said Kleeb, citing a 2011 report by Cornell University’s Global Labor Institute.

The American Petroleum Institute, which represents the oil and gas Industry, said it would welcome “further demonstration of the economic, energy security and environmental benefits that modern pipelines provide.”

“But the simple truth is that the damage is done and no level of study is going to bring back the tens of thousands of good-paying union jobs as well as the economic and environmental benefits that Keystone XL would have supported,” Robin Rorick, the group’s vice president of midstream, said in a statement.

4. Clean energy

With clean energy, the package directs federal researchers to investigate several issues pivotal to Biden’s climate targets. They include how forced labor accusations in China might affect supply chains of electric vehicles, the usefulness of advanced nuclear for climate goals, and the cradle-to-grave emissions of EVs.

The infrastructure deal also enshrines recent guidance from DOE’s Loan Programs Office to consider critical minerals and heavier vehicles when awarding loan guarantees for innovative clean energy projects. It calls for a new Office of Clean Energy Demonstrations that would coordinate pilots and other work intended to help scale up new clean technologies.

One notable area of emphasis is the plan’s embrace of young energy industries and technologies that are popular in conservative circles. Advocates of hydrogen, carbon capture and U.S.-made batteries, for instance, saw many of their big-ticket ideas appear in the legislation, along with a windfall in funding.

“It’s really a watershed moment,” said Ben Steinberg, a lobbyist and spokesperson for the Battery Materials & Technology Coalition. “We’re absolutely thrilled.”

The companies that make up Steinberg’s coalition are focused on battery mining, materials processing and cell manufacturing — sectors that generally don’t exist in the United States, but that are central to Biden’s goal of building up a domestic supply chain for electric cars and grid storage.

Among the benefits to those sectors in the deal are $3 billion in grants for battery material processing, to be disbursed through DOE’s Office of Fossil Energy, and another $3 billion for battery manufacturing and recycling grants, through the Office of Energy Efficiency and Renewable Energy.

Under the plan, hundreds of millions of dollars would flow into DOE’s existing programs for battery recycling and reuse and for research into the mining and recycling of battery minerals. A new demonstration program for batteries’ second-life applications would pop up within DOE. Federal geologists would receive hundreds of millions to map the subsurface to better understand where battery minerals lie, among other research ventures. And battery manufacturers are among those that could claim a new 30% investment tax credit.

“We think this’ll bring in a ton more private investment,” said Steinberg. “We think people will strongly consider putting factories in the U.S., when they were maybe on the fence before.”

The deal is less generous, however, to other clean energy industries.

Funds for electric vehicles, for instance, fell far short of what climate advocates and the Biden administration itself have been asking for.

Aside from the trimmed-down funds for electric school buses, the package offers $7.5 billion for EV chargers. That’s less than a fifth of what some EV analysts, like those at Atlas Public Policy, say would be necessary for a national build-out.

5. Hydrogen and CCUS

Other young industries that could see their futures influenced by the package are hydrogen, carbon capture and direct air capture.

For that technological triad, the Energy Department would oversee the emergence of several regional “hubs” of demonstration projects, while directing funds to projects.

For instance, $8 billion would go toward producing, transporting and storing lower-carbon forms of hydrogen — a category that would include types made from natural gas and paired with carbon capture systems. Direct air capture hubs would get $3.5 billion for similar purposes.

Carbon capture would be targeted through the expansion of multiple programs at DOE, including the agency’s carbon storage validation and testing program. That program would receive $2.5 billion over four years and would be expanded to include “large-scale commercialization of new or expanded carbon sequestration projects and associated carbon dioxide transport infrastructure,” according to the summary.

In another provision, a grant program for state and local governments would help them buy and use products made using captured carbon. Other measures would support the build-out of more carbon dioxide transportation infrastructure.

The Carbon Capture Coalition, a group of more than 80 businesses and organizations working to grow the sector, welcomed the new package, saying it includes “groundbreaking provisions to scale deployment” of carbon capture, removal and utilization, as well as related transport and storage infrastructure.

The coalition said it was “encouraged” that the framework includes the full text of the “Energy Infrastructure Act,” which advanced out of the Senate Energy and Natural Resources Committee earlier this month.

Inside that legislation is the “Storing CO₂ and Lowering Emissions (SCALE) Act,” which includes a low-interest loan program for carbon dioxide transport infrastructure projects and grants for initial excess capacity on new infrastructure and a CO2 storage commercialization program.

The support for carbon capture and hydrogen in the infrastructure plan could open a contentious new chapter in those technologies’ histories, however.

One provision, for example, defines what should qualify as “clean” hydrogen. For each kilogram of “clean” hydrogen made, it specifies, no more than 2 kilograms of CO2 should be emitted. That’s roughly a fifth of the typical amount of CO2 released when hydrogen is made now, using natural gas.

The definition would mean that “blue” hydrogen — made from natural gas but paired with carbon capture — qualifies as “clean.” That type is seen as having a quicker path to market than renewable hydrogen made with wind or solar, which doesn’t release emissions. But its emissions profile, which may also include nitrogen oxides and other criteria pollutants, has raised the hackles of environmental justice advocates, who want to keep projects out of front-line communities.

Some emissions researchers and past critics of the Biden administration’s embrace of “blue” hydrogen said they disagree with the new definition.

“That’s not clean,” said Seth Mullendore, vice president of Clean Energy Group, a Vermont-based clean-energy policy nonprofit. “2 kilograms of CO2 is not insignificant.”

Spokespeople from the Clean Hydrogen Future Coalition, whose members include several of the largest natural gas utilities and Chevron Corp., defended the definition as fair, saying it would “ensure up to an 80 percent reduction of CO2 intensity in hydrogen production from how it is produced today.”

Every five years, the definition would come up for review, under the infrastructure package. And the other research and development investments would help bring hydrogen’s CO2 profile down to zero over time, added Shannon Angielski, the hydrogen coalition’s president.

The legislation would also channel about $1 billion toward demonstrations of hydrogen electrolyzers, the chief piece of equipment used in making renewable hydrogen.

Promoting that type should have been the exclusive focus of the legislation’s hydrogen provisions, said Mullendore.

The two types of hydrogen “are extremely different and have different impacts,” he said. “It’s unfortunate. They shouldn’t be bottled together like this.”

6. Orphaned wells

The package also includes a $16 billion appropriation for cleaning up abandoned mines and orphaned wells, oil and gas wells that are no longer producing but that have become wards of state or federal agencies after companies go bust.

It includes several compromises on how to fund mine cleanup, including a $3 billion program to address half a million hardrock mines littered across the West. Sens. Martin Heinrich (D-N.M.), Steve Daines (R-Mont.), Mark Kelly (D-Ariz.) and Lisa Murkowski (R-Alaska) had pressed to include the program in the deal.

For orphaned wells, the deal would authorize $4.7 billion. Plugging and reclaiming orphans has been a popular provision on both sides of the aisle, and a particular area of interest for the White House, which views it as both a job creator for oil workers and a climate action due to the methane leaking from orphaned wells. EPA estimates there are more than 3 million orphans in the United States today, most of them unaccounted for.

Biden celebrated that provision Wednesday, telling a crowd in Pennsylvania as he touted the bipartisan plan that many of the abandoned wells are leaking methane, a climate pollutant.

“And guess what?” Biden said. “The same union guys that dug those wells, they can make the same union wage capping those wells.”