US Infrastructure Bill Is Good, but Not Enough to Transform the Electricity Grid
A modern, clean electricity grid is foundational to ensuring the United States is resilient in the face of a changing climate and can achieve a net-zero energy future by 2050. The bipartisan Infrastructure Investment and Jobs Act (H.R. 3684) represents a historic investment of about $550 billion in new spending over five years on the nation’s infrastructure, including in the energy grid. The bill is a substantial accomplishment and an essential step toward transforming the energy sector. However, realizing its commitment to modernize the U.S. grid and deploy more clean energy requires further investment and climate ambition, particularly to achieve the scale contained in the Biden administration’s American Jobs Plan.
Congress should not only enact the infrastructure bill, but also realize the full Build Back Better agenda by moving forward with a budget reconciliation package that invests in the energy grid and clean energy technologies at the necessary scale for the challenge at hand. This kind of federal investment in the energy grid can help the United States meet its climate goals and generate significant economic opportunities across the country.
Rebuilding the U.S. Grid
The nation’s aging transmission and distribution system needs a significant overhaul. Recent events show that the U.S. grid is woefully unprepared to handle cyberthreats and extreme weather events like heat waves or winter storms. When the grid fails to provide essential energy services, the impacts on individuals and communities are severe and potentially life-threatening.
A 21st-century electricity grid needs to be resilient enough to handle extreme and frequent weather events; integrate a growing share of utility-scale clean energy resources like solar and wind; support distributed energy resources, including electric vehicles, distributed solar and energy storage; and meet evolving customer needs that prioritize control over energy consumption and cost.
Modernizing the electricity grid requires massive investments in the grid hardware necessary to move electricity, including through high-voltage transmission. Investments should also go toward other energy infrastructure such as grid-scale energy storage, microgrids, advanced metering, demand response and other smart grid technologies.
While upgrading and expanding the transmission system is a central component of modernizing the energy grid, the current pace of deployment for clean electricity generation and high-voltage transmission is too modest to meet the nation’s low-carbon goals. Princeton University’s Net Zero America study found that 600 gigawatts (GW) of new wind and solar must be built by 2030 to achieve a high-electrification scenario. This corresponds to an annual deployment rate of 60 GW per year over the next decade — roughly double the 35 GW added in 2020’s record-setting year. High-voltage transmission capacity would also need to increase by 60% by the end of this decade, requiring an estimated $360 billion in transmission investments.
The scale of the challenge is compounded by issues related to siting. Siting transmission lines can often be a prolonged, contentious and expensive undertaking. This is particularly relevant for interstate and interregional projects, which are essential for the integration of renewable energy supply and demand across long distances. In some cases, projects may be tied up in approval by state regulators or litigation for years. Overcoming such challenges will require complementary policy to streamline a socially responsible and environmentally sound approval process. This could happen through designating national interest energy transmission corridors and using FERC authority to guarantee development rights in critical areas.
Building the grid of the future will require both federal money and authority. With the right scale of investment and regulatory oversight, the United States can unlock substantial private capital and build a grid that provides affordable, reliable and clean electricity to all Americans.
The Infrastructure Investment and Jobs Act Is Part of — but Not Entirely — the Solution
The bipartisan infrastructure bill includes more than $15 billion in direct funding and more than $12 billion in borrowing authority to improve the nation’s grid infrastructure and resiliency. This more than $27 billion in grid spending would happen during fiscal years 2022 to 2026. Some of its key provisions include:
- Directing the Department of Energy (DOE) to establish a $5 billion grant program for grid hardening and weatherization to help reduce the impacts of extreme weather events on the grid.
- Authorizing $6 billion toward grid reliability and resilience research, development and demonstration, including $1 billion specifically for rural areas. This new program includes innovative approaches to transmission, distribution and storage infrastructure that is implemented at the state level by publicly regulated entities on a cost-share basis.
- Authorizing $3 billion in the Smart Grid Investment Matching Grant Program to deploy technologies that enhance grid flexibility.
- Establishing a $2.5 billion Transmission Facilitation Fund and a Transmission Facilitation Program, positioning DOE to leverage federal funding to reduce the overall risks of transmission projects.
- Authorizing $500 million to the State Energy Program to support state transmission and distribution planning, among other activities.
- Authorizing $350 million to develop advanced cybersecurity technologies for the energy sector.
In addition to these funds, the bill begins to address siting and planning issues that have hindered interstate transmission development by amending the designation of national interest electric transmission corridors.
These more than $27 billion in investments are significant and would advance the grid and transmission improvements that a clean energy transition requires, but there is more needed to modernize this critical part of power infrastructure. The Infrastructure Investment and Jobs Act falls tens of billions of dollars short of the scale of investment proposed in the American Jobs Plan, and the hundreds of billions of federal and private funds needed to prepare transmission systems to meet the nation’s low-carbon goals.
The American Jobs Plan (and associated Made in America Tax Plan) proposes 10 years of investment, rather than only five, and includes increased investment and other spending mechanisms, such as a broad portfolio of clean energy tax incentives. This includes an investment tax credit to incentivize the buildout of at least 20 GW of high-voltage transmission lines — a near $24 billion incentive that could leverage tens of billions in private sector funding. This tax incentive is notably absent from the bipartisan infrastructure bill. The American Jobs Plan also includes an expanded direct pay production tax credit and investment tax credit for clean energy generation and energy storage technologies.
While transmission is necessary, it will not be sufficient to reduce electricity sector emissions 80% by 2030 and 100% by 2035. Other clean energy investments will also be critical to mitigate climate change. The bipartisan infrastructure bill contains some limited provisions on nuclear and hydropower. The future reconciliation package should include measures that support the full range of clean energy technologies, including wind, solar and energy storage.
Federal Investment in the Energy Grid Represents a Tremendous Economic Opportunity
The urgency of addressing climate change requires an immediate and bold agenda from the federal government. With that agenda also comes significant opportunity to create millions of jobs, build a clean energy economy and generate economic benefits for local communities.
New research from WRI highlights the extent to which federal investment in the nation’s energy grid can generate significant economic benefits for the whole nation, including the rural areas where many of these projects will be located. WRI analysis modeled the economic impact of $98 billion in federal investment, with $17 billion targeted to rural areas, over a period of five years in the transmission, distribution and storage (TDS) sector.
The $98 billion in federal investment aligns well with the $100 billion in federal investment for power infrastructure envisioned by the American Jobs Plan. The federal investment modeled in this analysis is made through a combination of tax credits, grants, loans and loan guarantee programs.
Federal Policy Opportunity in Transmission, Distribution and Storage Sector
|Federal Policy Opportunity||Federal Investment ($, Billions, Over 5 Years)|
|Create tax credits to incentivize the build out of transmission projects that are regionally significant and can enable renewable energy integration on the grid and stand-alone energy storage technologies.||$40.05|
|Reauthorize tax credits to incentivize domestic clean energy manufacturing facilities (sec. 48C).||$2.70|
|Reauthorize the Department of Energy’s Smart Grid Investment Grant program to promote investments in smart grid technologies.||$20.00|
|Authorize the Department of Transportation to make transmission infrastructure projects, especially those that emphasize the integration of renewable energy, eligible under the Transportation Infrastructure Finance and Innovation Act loan guarantee program.||$25.00|
|Expand loans and loan guarantees through USDA Electric Infrastructure Loan & Loan Guarantee to help finance transmission and distribution systems in rural areas.||$10.00|
|Create a program to provide grants and technical assistance to rural electric cooperatives to deploy energy storage and microgrid technologies.||$0.25|
Note: Federal investment values are modeling assumptions made for the purpose of illustrating potential impact and are not necessarily representative of specific policy or appropriations recommendations on the part of the authors.
Source: The Economic Benefits of the New Climate Economy in Rural America, 2021
The construction, engineering and financing associated with this investment would support 244,000 job-years — meaning one job for one year — in rural counties across the country over a five-year period. Rural counties in California, Texas, Tennessee, Nevada and Florida would account for over one-third of total rural jobs supported by the federal investment. The investment would also yield $5.8 billion in value added for rural economies each year for five years, including $3.1 billion in employee compensation and $362 million in tax revenues.
This analysis focused on estimating economic benefits from federal investments in rural areas for two reasons: First, rural America is indispensable to the success of the nation’s climate policy. Rural areas host most utility-scale wind and solar projects. Additionally, a significant portion of transmission lines will go through rural areas to carry the clean energy produced in rural areas to their urban and suburban neighbors. Second, as the federal government plans to make climate-friendly infrastructure investment, it is essential that the economic benefits of a low-carbon economy flow to rural areas so that all communities can access these jobs and economic opportunities While rural America is not a monolith, many rural counties have faced declining economic opportunities and are lagging on a number of economic indicators such as income, educational attainment and job growth.
Nationally, the impact from this level of federal investment is even greater. A $98 billion investment in transmission, distribution and storage would support 1.4 million job-years over the next five years, with California, Texas, Tennessee, Nevada and Florida once again emerging as the top five states in terms of total job-years supported. It would also generate more than $33 billion in GDP each year for the next five years, including $18 billion in employee compensation and $2 billion in total tax revenues.
Additional research has also shown that investment in this sector has a higher potential to generate jobs within the United States. Transmission facilities, for instance, source 82% of construction services, materials and equipment domestically, and therefore carry significant economic opportunity to create U.S. manufacturing and construction jobs. Jobs in the transmission, distribution and storage sector also tend to pay prevailing wages and have one of the highest rates of unionization, at 17% compared to 6.2% in the national workforce.
This analysis quantifies what has been well known: Investment in the energy grid creates jobs and can deliver a significant boost to national, regional, urban and rural economies. These economic benefits will far exceed the costs of investment, especially when combined with other benefits, including reduction in electricity prices, increased renewable energy deployment and reduction in power losses and congestion.
What Else Is Needed to Transform the U.S. Electricity Grid?
There’s much to celebrate in the bipartisan infrastructure bill, especially as it relates to investment in the energy grid. However, this level of federal funding is not enough to build the necessary grid infrastructure to meet the United States’ ambitious climate goals and avoid the worst damages of climate change.
The bill’s funding to upgrade and expand the nation’s high-voltage transmission network is inadequate to reach 100% clean electricity by 2035 and net-zero emissions across the economy by 2050. Improving, building out and modernizing the grid and transmission system is a foundational part of the clean energy transition. This transmission system must underpin the deployment of new clean energy, the adoption of electric vehicles and more to achieve national and global climate goals. Structural investments in the energy grid can serve as a launch pad, but additional policies like clean energy tax incentives and a clean electricity standard are needed to decarbonize the power sector.
Congress must pass the Infrastructure Investment and Jobs Act alongside a reconciliation spending package that rachets up the scale of ambition. The bipartisan infrastructure package, alongside a broader reconciliation package, can serve as a transformative investment in the grid to grow the U.S. economy and achieve the nation’s climate goals.