What was once considered activities of the Utility of the Future has quickly been reshaped to actionable items for the Utility of Now. In the past 12 months the Infrastructure Investment and Jobs Act (IIJA) and Inflation Reduction Act (IRA) were signed into law and aim to drive infrastructure modernization, programs to accelerate the deployment of clean energy and reduce greenhouse gas emissions and increased accessibility and opportunity for consumer-driven change at home. The historic investments provide an opportunity for the energy industry to develop and scale clean energy infrastructure unlike ever before.
Signed into law at the end of 2021, IIJA provided utilities with funds to help modernize the grid and expand customer outreach with broadband, cybersecurity and resiliency programs. The addition of IRA this year provides new opportunities for clean energy investments and production, while also allocating funds to customers to help increase energy efficiency.
With IIJA building the underlying physical system capacity and structure to support future change and the IRA serving as the mechanism to catalyze this change, the two investments are somewhat of a complement to each other. Together, nearly 2 trillion federal dollars are allocated towards modernizing infrastructure and helping drive the reduction of greenhouse gas emissions by 40% relative to 2015 levels by 2030.
To fully maximize the benefits, utilities now need to take a close look at what they are eligible for and understand the impacts of the Acts on their organization and customers.
Electric Grid resiliency and transmission
IIJA, through its GRIP Program, will dramatically help upgrade the electric grid, allowing for greater grid capacity and resiliency, along with the ability to adequately integrate and handle the increases in Distributed Energy Resource (DER) power integrations, shifts to electrification and Electric Vehicle (EV) adoption.
From a consumer-facing perspective, the IRA complements this through its home appliance electrification incentives and Residential Clean Energy tax credits. On the transmission side, the IRA makes available loans and loan guarantees for the construction and modification of electric transmission to further promote energy security and/or enabling the use of intermittent energy sources such as wind and solar, grants to facilitate the siting of interstate electricity transmission lines and funding to the U.S. Department of Energy (DOE) to support interregional and offshore wind transmission planning, modeling and analysis.
IRA and IIJA both provide opportunities to help lower costs across the value chain and build the hydrogen production-to-consumption industrial ecosystem. Combined with ITCs for renewable power production and energy storage infrastructure, the upstream value chain for domestic green hydrogen production infrastructure is now subsidized by the U.S. government. IIJA provides opportunities for hydrogen innovation and scaling under 40311 to 40318, authorizing $9.5 billion in grants. IRA can help further reduce costs of utility hydrogen projects through production and investment tax credits. Clean Hydrogen Production Tax Credits can lower costs for qualified hydrogen production based on the carbon intensity. Existing investment tax credits are now expanded to cover hydrogen and energy storage.
There are certain programs included in IIJA, such as the extension and expansion of the Smart Grid Investment Matching Grant Program, that help utilities enhance their smart grid capabilities. One of the many benefits of smart grid investments is that they increase utilities’ customer data collection capabilities which, in turn, help customers make informed choices on energy usage to reduce their monthly electricity bills.
IIJA grants such as this can be paired nicely with the IRA consumer tax credits that help customers increase the energy efficiency of their homes and businesses. These energy efficiency tax incentives in the IRA are primarily focused on low and medium-income customers. They include a wide range of options, from rebates on home energy audits, to appliance rebates and thus provide many opportunities for utilities to further engage with their customers.
Clean Fuel Opportunities
Utilities can expedite and expand existing plans for zero emission vehicles and embark on other clean fueling projects with IIJA and IRA. IIJA’s grants for clean fueling stations, such as the NEVI program, primarily focus on public charging, both along transportation corridors and within communities to provide more equitable and convenient access to charging infrastructure. Hydrogen, propane and natural gas fueling infrastructure can also qualify as eligible for grant funding. Utilities can partner with municipalities to help provide enhanced services for these charging stations with grant funding.
To supplement these charging stations, utilities can evaluate whether IRA’s Qualified Commercial Vehicle Tax Credit can help cover costs of a utility’s medium and heavy-duty fleets that can utilize the charging infrastructure installed along transit corridors or in communities. In addition, IRA’s Alternative Fuel Refueling Property Incentives can lower costs of fueling stations for clean fuels, further supporting utility’s decarbonization goals while keeping costs low.
Within IIJA, utilities can apply for funding opportunities for cybersecurity, community engagement, environmental impacts and equity and workforce development programs to enhance and grow their internal initiatives. Additional opportunities within IRA include robustly funded loan guarantee programs that utilities may be eligible for depending on their infrastructure project, extension of carbon sequestration tax credits and methane emission reduction program grants, among others. Additional impacts from IRA include minimum corporate income taxes that many large utilities are subject to, waste methane emissions fees, among others.
Utilities are presented a historic amount of opportunity in the energy space with IIJA and IRA that should not be missed out on. It’s vital to start analyzing and taking advantage of these opportunities to help position for a clean energy future. In addition to evaluating existing roadmaps to understand the impacts of the legislation on upcoming activities and pursue relevant grants/credits, utilities should:
- Restructure existing strategies and expedite clean energy action items: Utilities now can re-evaluate their long-term roadmaps and expedite plans to achieve local decarbonization goals. The new legislation reduces risk and decreasing cost for these activities, enabling utilities to turn long-term visions into near-term projects.
- Identify parallel pathway opportunities for decarbonization: IRA targets investments to reduce emissions with a technology-agnostic approach. This means utilities across the country can now identify additional, more local, opportunities to achieve clean energy goals. By increasing accessibility to additional opportunities and project, Utilities can then look to IIJA to help support these projects as well.
- Understand new regulatory priorities with clean energy and community engagement at the forefront: As official Funding Opportunity Announcements (FOAs) are released by key federal agencies; the inclusion of Community Benefit Plans can be a key component of the full application. Paired with the Justice40 initiative, there is a push to include local impacted communities in the planning of federally funded projects. It is imperative to analyze and engage the community early on to make a more attractive case when pursuing federal funds and, ultimately, have an effective project roll out.