Potential opportunities for utilities under the Biden clean energy investment stimulus plan

The newly inaugurated Biden/Harris Administration is looking to prioritize for congressional approval an ambitious clean energy investment agenda and with it, the potential for new funding avenues for U.S. utilities to advance energy projects. Utilities should be planning now on identifying and shaping conceptual project proposals.

In the wake of the U.S. re-entering the Paris Climate Agreement and emphasizing climate change as a strategic global priority, there will be a renewed push for U.S. public policies to achieve complete carbon-free electric generation by 2025 and a clean energy U.S. economy with net-zero emissions by 2050.  U.S. utilities – along with their ecosystem partners, customers, and communities they serve – are poised to be big beneficiaries of a clean energy investment economic stimulus plan that could approach as high as $2 trillion.  This investment plan reflects the intersection of the next generation of clean energy with job creation and equitable community redevelopment.

Components of the proposed clean energy investment stimulus plan

To achieve the proposed clean energy goals, the new Administration plans to reform and extend certain tax incentives like the production and investment tax credits for wind and solar projects; help develop financing mechanisms to deliver private sector funding for clean energy projects; and establish a technology-neutral Energy Efficiency and Clean Electricity Standard (EECES) for utilities and grid operators. By coupling front-loaded investments with a clean electricity standard, the Administration hopes to increase market competition for clean energy assets.

The underlying guiding principle of the plan is to widen the aperture of value creation from this planned clean energy investment – not just driving decarbonization but doing it in a way that balances economic recovery, health outcomes, equity, and affordability.

The starting points for policymaker consideration of a clean energy infrastructure package are the seven broad areas in the Biden campaign’s proposed $2 trillion clean energy investment plan:

Several areas of utility investment that would be candidates for funding.

1. Infrastructure – modernizing transportation infrastructure, promoting climate resilience and expanding broadband access
2. Automotive – targeting 500,000 electric vehicle charging stations, promoting advanced biofuels and enhancing U.S. vehicle fuel economy standards
3. Carbon-Free Power Sector – modernizing the grid for more distributed energy, electric transmission, improved utility-scale renewable generation, and advances in green hydrogen
4. Buildings and Energy Efficiency – upgrade 4 million buildings and weatherize over 2 million homes through advanced energy efficiency
5. Clean energy innovation – accelerate clean energy R&D investment on a scale well beyond the Apollo-program and create a new Advanced Research Projects Agency on Climate (ARPA-C)
6. Sustainable agriculture and conservation – reimagine agriculture through new technologies, techniques, and equipment
7. Equitable economic opportunities – direct investments in a way where disadvantaged communities receive 40% of benefits

The Administration is expected to work with key members of Congress to further develop the above seven-part investment plan, which will likely echo – and build upon the lessons of – legislation from the earlier Obama administration that fought the Great Recession in part by including clean energy in its 2009 American Recovery and Reinvestment Act (ARRA) stimulus package.  The 2009 ARRA provided the U.S. Department of Energy with $4.5 billion to modernize the electric grid, with 99 different cost-shared projects involving more than 200 electric utilities and other organizations.   

Congress also got an early start on this process with its approval of the Energy Act in December 2020, the first comprehensive national energy policy update in more than a decade. The new law heavily invests in research and development of new technologies, and appropriates $2.36 billion for smart grid technologies and $1 billion to support energy storage technologies.

What are the funding opportunities for U.S. utilities?

Similar to the earlier ARRA plan, it’s likely the clean energy investment plan will authorize significant grant funding to catalyze utility investments to help accelerate the clean energy transition and support the stimulus principles of equitable job creation.

There are several areas of utility investment that we anticipate will be candidates for funding, including additional grid infrastructure investments that go even beyond the Energy Act and enable distributed energy resources and construction job creation (such as physical grid upgrades, energy storage, digital devices on the grid, edge computing on the grid, and advanced communications); electric vehicle enablement (charging station infrastructure, “make-ready” grid investments); and advanced grid operations capabilities (DERMS, DLSE, voltage optimization).  

Several areas of utility investment that would be candidates for funding.

And unlike the 2009 ARRA plan, gas distribution utilities will not be on the outside looking in as they will play a major role in decarbonization. Investment to make green hydrogen cost competitive with conventional hydrogen is expected to be a component as well.

 What moves should utilities be making now?

As we’ve seen before, some of the more ambitious components of the Administration’s clean energy investment could face headwinds from Congress, which means the new Administration will look for other ways to advance large portions of its climate agenda. Either way, it is prudent for utilities to be planning now for the actions that could occur in the first year of the Administration.

Looking back at the 2009 ARRA funding disbursement, there is one major lesson learned: The utilities that acted early were generally the biggest winners. These were the utilities that ultimately received funding for their smart meter / smart grid programs that are the foundations for today’s grid modernization programs.

Today, utilities should be framing potential solutions with a “system value” lens that examines opportunities in a more holistic manner, by advancing the clean energy transition while balancing economic, environmental, societal, and energy value.

The System Value framework more holistically evaluates economic, environmental, social and technical outcomes of potential energy solutions.

The specific steps utilities should be considering include:

• Reflect on your multi-year strategic and investment plans to isolate planned projects or aspirational projects that align with the clean energy investment goals and a possible Clean Energy Standard policy
• Seek opportunities to align proposed project candidates with jurisdictional and state goals (areas such as disadvantaged community support, economic development, resiliency of critical facilities, etc.)
• Understand gaps that would need to be closed in order for a project to be considered “shovel ready” (i.e., business case, technology or supplier selection, project feasibility)
• Build a messaging platform to garner support with key stakeholders

Reinforcing utility leadership

Utilities have a long and proud history of visible leadership in the communities they serve – driving economic development with safe, reliable, and affordable service.   As we emerge from the pandemic, utilities can even further amplify their leadership by being one of the primary platforms for equitable economic recovery and acceleration of the clean energy transition on a resilient digital grid. The new Administration’s proposed clean energy investment plan can serve as a catalyst for the visible utility actions required to put the U.S. on a trajectory to meeting its ambitious goals of 100% carbon-free electric generation by 2035 and a clean energy economy with net-zero emissions by 2050.  

Utilities that act soon will be best positioned to benefit from this catalyst. Please contact me to find out more and how.

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