Clarifying the T&D Vision of the Future

On August 16, 2022, President Joe Biden signed into law the Inflation Reduction Act (IRA) of 2022, designed to help Americans that are struggling with rising costs. However, the law also includes nearly $370 billion in incentives for clean energy and climate-related programs and is considered one of the most significant spending packages in history for climate change mitigation and adaptation. This blog is part of a series whereby Guidehouse Insights’ subject matter experts cut through the 755 pages of legislation to identify the IRA’s most significant elements and synthesize what they really mean for the future of clean energy technologies.

The IRA is a deliberate step toward grid readiness for a resilient low carbon future. The IRA has been heralded as the single most important step the US government has taken to address climate change to date.  While greenhouse gas reduction targets are established and the nation is already moving to transition from fossil fuel-based energy sources to clean generation and electric end use technologies, critical underlying grid readiness initiatives are just beginning to take shape.

The IRA is an important step toward clarifying the transmission and distribution (T&D) vision of the future, and quantifying the investment required to make that vision a reality. The IRA addresses aging grid infrastructure with a three-pronged approach, including direct capital investment, expediting existing processes, and planning for long term grid optimization.  

The law provides direct capital investment for T&D through several channels. First it provides $9.7 billion to rural electric cooperatives for upgrades and decarbonization of rural networks throughout the US. This funding will be made available by the US Department of Agriculture through loans and financial assistance. Another $5 billion will go to replacing the aging and failing components of the electric grid through Department of Energy (DOE) financing programs to repower, rebuild, and replace components of the grid that have ceased operating or can otherwise enable the reduction of greenhouse gas emissions.  An additional $2 billion is set aside for financing electric transmission projects of significant importance, which will also be available through DOE loan programs financing up to 80% of the project costs.  

Next, the IRA aims to expedite the development of transmission projects that have already been planned by streamlining the siting process, which can be notoriously complex. $760 million in grants will be available to transmission siting authorities to facilitate impact analyses and arrive at a final decision on transmission project approval within 2 years of accepting the grant.  This will provide resource-strapped local governments and regulatory agencies with dedicated funds and deadlines for project determination.

Finally, this law sets the stage for future grid transformation by dedicating $100 million to conduct planning, modeling, and analysis of expansions to the bulk power system to enable large quantities of offshore wind generation. Specific concepts that are to be explored and analyzed by the DOE include: 

The benefits of increased connections between regional grid interconnections 

• Cost allocation methodologies to expand the bulk power system 
• Opportunities for non-transmission alternatives such as distributed energy resources (DER)
• Power flow modeling 
• Clean energy integration and the effects of electrification on the grid 
• A planned national transmission grid, with networked systems for optimizing offshore wind generation 

When layered on top of the T&D-focused measures of the 2021 Bipartisan Infrastructure Law, the financial and planning commitments of the IRA set the stage for an unprecedented level of federal support of grid investment. Stakeholders should continue to monitor the DOE infrastructure programs for funding opportunities.  

For more information on how Guidehouse Insights can help you navigate the impacts of the IRA, please reach out to richelle.elberg@guidehouse.com.