How Will Energy Dollars in the Bipartisan Infrastructure Law Be Spent?
In November President Biden signed into law the signature legislation of his Presidency to date, the $1.2 trillion bipartisan infrastructure bill, also known as the Infrastructure Investment and Jobs Act. The bill includes more than $100 billion dollars in funding for clean energy technology, infrastructure and climate preparedness, making it the most significant federal commitment to clean energy and climate to date.
Leah Rubin Shen, a policy director with Advanced Energy Economy, discusses spending priorities for energy-focused dollars in the infrastructure bill. Leah also explores the limitations of infrastructure bill funding, and state and federal spending priorities that AEE is advocating for. Advanced Energy Economy is a national business association that advocates for clean energy and transportation on behalf of U.S. technology and clean energy companies.
Andy Stone: Welcome to the Energy Policy Now podcast, from the Kleinman Center for Energy Policy at the University of Pennsylvania. I’m Andy Stone.
In November, President Biden signed into law the signature legislation of his presidency to date, the $1.2 trillion bipartisan infrastructure bill, also known as the Infrastructure Investment and Jobs Act. The legislation includes more than $100 billion in funding for clean energy technology, infrastructure and climate preparedness, making it the most significant federal commitment to clean energy and climate to date. On today’s podcast, we’re going to explore where and how the energy focused dollars in the infrastructure law are likely to be spent. My guest is Leah Rubin Shen, a policy director with Advanced Energy Economy, which is a national business association that advocates for clean energy and transportation on behalf of many of the US’s largest technology and clean energy companies. We’ll discuss the direction and limitations of infrastructure, law funding and the state and federal spending priorities that AEE is advocating for. Leah, welcome to the podcast.
Leah Rubin Shen: Thank you. Great to be here.
Stone: To get us started, I wonder if you could tell us about AEE’s mission and who the organization serves.
Shen: Absolutely. So as you mentioned, we are a multi-technology trade organization that advocates for the full breadth of the clean energy industry. So we have over 100 member companies that run the gamut from large scale wind and solar developers, residential and small commercial solar, electric vehicle manufacturers, charging infrastructure providers, energy storage and energy efficiency providers. We have some companies that are providers of software that manage energy usage as well as data about that usage. And we have a group of large energy consumers that have ambitious sustainability goals. So colloquially, we like to say that we want to grow the pie for the clean energy industry and open markets for the full range of technologies that our members provide. And our formal mission is 100% clean energy and electrified transportation in the United States. So we’re, of course, designed to serve our members who are interested in those market opportunities and growth of those opportunities, but also anyone who shares that broader mission.
Stone: So the bipartisan infrastructure bill is a law now; it’s the largest such law that has been passed in this country federally to date. Tell us a little bit about your advocacy efforts at the state and federal level around the law.
Shen: Sure. So we were very supportive of the bill as it was being developed. And of course, when it passed, we did advocate at the federal level with members of Congress in support of it. We also worked with our teams that advocate in states to interact specifically with the federal delegations from those states to make the case for why the funding could help accelerate goals that the states already had. And, of course, now our aim is to ensure that the funding is being implemented well in those states.
Stone: So there are a bunch of different kind of funding vehicles or earmarks here. We’ve got two and a half billion dollars revolving loan fund for new transmission, $21.5 billion to establish the Office of Clean Energy Demonstrations, billions of dollars for carbon capture and storage for hydrogen energy, direct their capture etc., all over the place. Could you do us the favor here of maybe boiling that down to the major focus or focuses of the law? What’s it going at?
Shen: Yeah. So when we think about the funding in this law, we divided into four main buckets that we’re paying attention to and tracking. So the first is electrifying transportation. That includes charging infrastructure as well as electric school busses and electric transit busses. The second is energy efficiency. There’s a handful of programs, and they’re mostly funding that’s flowing directly to states to save energy in public buildings, including public school buildings, nonprofits, and to do some workforce development as well. There’s a bucket of funding that really focuses on the electricity grid and sort of the infrastructure related to that. So there’s some funding for new generation. You mentioned the Office of Clean Energy Demonstrations. That’s a big part of that. The funding for transmission as well as funding that specifically for grid resilience and grid modernization. And then the fourth bucket that we’re paying close attention to is on advanced energy manufacturing. So there’s some funding that specifically for battery manufacturing and recycling, as well as funding that is designed to invest in manufacturing in communities that are transitioning away from coal and to help manufacturing facilities of all kinds save energy.
Stone: Tell me a little bit more about that. Why the focus on the manufacturing aspect?
Shen: Yeah, that’s a new area of focus for AEE. It’s coming from a couple of different places. I would say, one, is just a recognition that it’s great that we’re deploying all of these technologies here in the United States, and that’s certainly something we’re very supportive of. But to really advance our goals and to ensure that we’re continuing to maintain energy security as we transition, we want to be making more of those technologies here as well.
Stone: Well, also what comes to mind is this whole issue about the permanence and the quality of clean energy jobs. We had a discussion recently on this podcast about manufacturing being a critical enabler of longer term, well-paying jobs. Is that right?
Shen: Yes. And that is really the other reason that that’s a big focus for us, is because of that jobs angle and because the rebuilding in American manufacturing is a way to, as you say, bring back quality jobs that are long term.
Stone: Now, so this was a bipartisan legislation; bipartisan bill. Is there anything that surprised you about the final bill, anything that you would not have expected to get in there that did or something that you really aiming for generally that was left out?
Shen: Yeah, that’s a great question. I do think that overall, the bill was not particularly surprising. It focuses on a lot of areas of need in terms of our infrastructure investments that traditionally do get bipartisan support, transportation, broadband, drinking water. And even if you look at a lot of the energy and climate pieces, a lot of those are the things that tend to get more bipartisan support, such as energy efficiency. I think we were very pleasantly surprised to see the investments in electric vehicles and electrified transportation. That’s certainly something that as we do our advocacy in the states, we do see there being a lot of interest in both sides of the island, but still pleasantly surprised to see that investment at the federal level. And then the other thing is the amount of investment, I think, in climate resilience, I guess — again, not particularly surprising, but still a very important component of the investments that we do need to be making.
Stone: Now, some of that funding has to be earmarked by the six month mark, which is actually just passed. We’re in the end of May here. How discretionary is the funding at this point and how much room is there for AEE to advocate at this point for the funding to be spent in ways that you think is most advantageous, number one, and two, to really watch where that money goes in real time?
Shen: Yeah. So the six month mark really marked kind of a milestone for a lot of the federal agencies in setting up these programs. That doesn’t necessarily mean that they have regulations fully written. It doesn’t necessarily mean that money is flowing out the door. So I think right now, actually, we’re in a period of time where there is a lot of opportunity to influence those federal agencies. They’ve got requests for information coming out. They’ve got various coming deadlines and solicitations. But they’re looking for input right now on how a lot of these programs are going to be structured. And then once the money does flow to states and not all of it goes to states, but a good chunk of it does, I think they’re still going to have a fair amount of discretion with how they spend the money. They, of course, are accountable to the federal government for how they spend it and what they do with it. There are statutory requirements in the bill and then there will be regulatory requirements in the agencies. But my understanding is that there’s a pretty good recognition that each state is different. Each state is going to have different approaches to achieving the goals of a given program, and so that there will be some flexibility in what they choose to do with it. There are also recipients of the funding that are non-governmental utilities, for example, who are going to have those investments overseen by the public utility commissions in their states. And some of the funding, of course, also goes straight to private sector actors who will be able to apply for the funding. It’s competitive, they’ll make their best case and then we’ll see.
Stone: I believe the funding is primarily in the form of grants. Is that right?
Shen: A lot of it is grants. There are a couple of loan programs. There is — this is actually one of my favorite parts of the bill — the energy efficiency revolving loan capitalization grant program, which is grants to states but it’s to set up and capitalize revolving loan programs that the states can then use to conduct energy efficiency audits and otherwise make investments in energy efficiency. There’s also a couple of new authorities for the DOE loan program, as well as the Advanced Technology Vehicle Manufacturing Program. Those are both loan programs. They’re not new, but they’re given some new authorities and new guidance in the bill. But, yes, most of the rest of the funding is grant funding, either formula grants to states and tribal governments or competitive grants.
Stone: Just a little bit of historical context here. So the last time we saw funding on this level was in 2009 with the rescue package, the economic rescue package under the Obama administration. How is the funding structured similarly or differently today from what we saw at that point?
Shen: I think a lot of it’s fairly similar. Most of the grant funding has a similar matching requirement anywhere from 20 to 50%. One big difference is that, of course, this is a bigger investment than ARRA. It’s just more money overall, and it’s more money for energy and climate specifically. I think the other big thing that is really quite different, and that I think in general people are excited to see is different, is there’s less emphasis on the projects being shovel ready so that this is being viewed more as a long term investment in our infrastructure, less as an immediate economic stimulus opportunity. And I think there’s a sense for most of the people I talked to that everyone wants to learn the lessons from ARRA and not require states to spend the money really quickly and potentially spend it less thoughtfully, but really to think about how they’re going to structure these investments over the five year funding cycle of the bill and be thoughtful about how they do that.
Stone: So earlier you stated that the funding kind of falls into four broad buckets. Are there specific programs that AEE is most interested in really watching at this point?
Shen: Yeah. That’s a great question. The first thing is we advocate at the state level in about a dozen states around the country. And so, of course, our priorities in each state do look a little bit different. And the priorities of the government and that state, of course, are also different. But there are some key themes that I think we’re seeing as being of interest both to us and to those states across the board. The first is EV infrastructure. This bill makes dedicated formula funding available to every state to install more EV charging infrastructure. That’s a pretty big deal. And it’s inspiring a lot of states who maybe haven’t thought too hard about this to think more about it. So that’s something that we’re definitely very engaged in and watching closely and engaging with states on. A second thing that we’re really interested in is school busses, electrifying school busses. A lot of states have already placed some priority on this and are prioritizing even more. We saw both Colorado and New York, for example, this year pass pretty significant investments as part of their state budgets in electric school busses.
And I know both those states and I’m sure other states are hoping that those investments will be complemented by additional federal investment. A third piece that we’re tracking really closely is around grid resiliency. I mentioned there’s a couple of programs that DOE is going to oversee that will help states and other entities in those states who are involved with the grid, invest in the grid and to make it more resilient and reliable. One thing in particular that we’re interested in as part of those programs is what’s the role that microgrids are going to play and what’s the role of what we call distributed energy sources. So things like programs that can help control when you’re using energy, not just how much you’re using it, but when you’re using it. Things like rooftop solar, things like electric vehicles even can be grid assets. And we advocate really strongly that all of those things need to be playing a role on the grid just as much as sort of the big generation projects and transmission do.
Stone: There’s a lot of money here, but when it’s spread out over all the different energy focused programs from EV infrastructure to grid development, the funding starts to look thin. How impactful is the funding going to be?
Shen: Yeah, I think that’s a great question, and I think it’s something that we’re really pushing states to think about carefully – that don’t try to do everything, focus on a couple of key priorities. And you mentioned EV charging infrastructure as an example. So the National Electric Vehicle Infrastructure Program, the NEVI program, which is the one that makes that dedicated formula funding available, is part of what is available for EV charging infrastructure. There are also a lot of other programs that have the option of being used for EV charging infrastructure as well. So a state may have other priorities. They want to use some of that other money for, there’s a new program that’s sort of part of the highway funding overall that’s called the Carbon Reduction Program, which is about reducing transportation related emissions. States may not choose to spend that on EV charging infrastructure, but they can if that’s a really high priority for them and they really want to fully build out their EV charging network, that’s additional funding available that they can use to do that. And I think you see examples of that in a couple of different categories, that there’s funding that has somewhat more flexible use and they don’t…. a state could choose to be scattershot with it and just invest a lot in little things. But if they’re thoughtful about it, they can also choose to pull some of those resources together and again, with additional funding that might already be available at the state level to kind of advance something a little bit more substantially than they would be able to otherwise.
Stone: So states have to be prepared to receive and utilize the money that we’re talking about here. To what extent have politics around clean energy and climate in particular influenced state preparedness to receive funds and do the best they can with it?
Shen: So I do know that one thing we were concerned about at the start of this process was how much is politics going to impact whether or not a state even wants to accept the money? And I will say that we’ve been pleased to see that that’s not a particularly big factor. States across the board, at least the ones that we work in, do want to accept the money and use it. And they’re taking it seriously. And in some cases, they’re appointing infrastructure coordinators and they’re taking steps that show that they’re being thoughtful about this. Politics does still play a role in a couple of ways, though. I think in some cases we see states that have been less forward looking with respect to some of these technologies, are just less prepared to spend it. So, for example, states that haven’t been prioritizing electric vehicles as much just haven’t put in the work to build out of state — that they’ll need to put in to build out a statewide charging network. They’re all in different places in terms of surveying where are chargers currently? Like, where do we want to put new chargers? As well as engaging with stakeholders in the state about that. And then I think the other place that we’re really going to see this play out differently, depending on politics, is for some of that funding that’s more flexible there. There will probably be differences in how states prioritize the funding.
So, again, going back to electric vehicles, it’s an easy example. In addition to the NEVI formula program, there’s funding for alternative fuel corridors so that funding can be used for electric vehicles. It can also be used for hydrogen or propane or compressed natural gas. So anything that’s considered an alternative fuel. I think we’ll see some states say we just want to use all of it for electric vehicles. We’re just going to really lean into electric vehicles. Some are probably going to choose to invest in some of those other fuels. And I think we will see politics playing a role in what states choose to do there. Other than that, there are some of the differences between states that aren’t necessarily political, but where we do really see differentiation – there are states that have different grid resiliency needs. A lot of that is about geography or whether it’s different in different parts of the country. And we also see different utilities around the country having different goals for clean electricity or electric vehicles or energy efficiency that are sometimes but not always related to the politics of the states where they operate. So I don’t want to elide the role that politics plays in some of these additional things, but it’s not just politics; there’s other factors at play as well.
Stone: I was surprised at how quickly some of these decisions have to be made. For example, the Department of Transportation has six months to decide on the corridors, if I understand it correctly, that would be prioritized in the EV charging build out. So that’s all happening very quickly.
Shen: It is happening very quickly. One thing that’s helpful there, and I think one of the reasons we see DOT rolling out some of their funding particularly fast relative to some of the other buckets of money, is those corridors are actually not new. That’s a program that’s already existed, these alternative fuel corridors. So states have designated these corridors already. They have the opportunity to update them. I believe they had to submit the updated versions of those earlier this month. But they at least had to give that some thought prior to this bill passing.
Stone: To what extent is there governance around how this money is spent, and I’ll give you a prime example. I was reading earlier in the newspaper today or the digital newspaper or whatever we call it these days about Texas had a certain amount of money grants for this program for EV charging infrastructure. And literally once it opened up the window for companies to request those grants, all the money was gone within a minute. The bulk of that money went to Shell, the oil company, which is getting into EV charging infrastructure and some other company. And there was some question about whether, again, was this based upon need? Was this based upon best use or was this based upon people having the resources to go out and grab the funds quickly?
Shen: Now, that’s a good question. And I think your question is to what extent are the feds going to come in and oversee that and slap Texas on the wrist or do…
Stone: That’s my question. Yep.
Shen: That is a good question. I don’t know that I really have a good answer to that. I think my general sense from the federal government is they want to see funding get spent. They want to see projects built. They want to see new technologies deployed. Are they going to come in and say you didn’t conduct a fair process? I mean, I’m sure they’ve said you should conduct a fair process. But to what extent is there going to be oversight of that after the fact? I just don’t know. I know that there were a lot of reporting requirements after the fact with the Recovery Act. I don’t know to what extent any of those reporting requirements resulted in any consequences for states.
Stone: To what extent is AEE advocating for equity? And equity has been such a focus so that there’s $10 million in energy efficiency, career skills training money in this program, there’s a prevailing wage requirement. What’s in there? And are you all involved in, again, advocating for any of this?
Shen: Yeah. So equity is a really important focus for the Biden administration in terms of how this funding is being spent. This is also an issue that we see being top of mind for a lot of the states where we work. The administration has this initiative called Justice 40, which aims to ensure that 40% of the overall benefits of certain federal investments flow to disadvantaged and marginalized communities. And those investments include climate and clean energy programs. The White House has also released a climate and economic justice screening tool to help identify what are these disadvantaged, marginalized communities? Where are they? And then federal agencies are directed to think about this and implementing the individual programs. So certainly, I think that’s something that’s going to be infused into all of these program as agencies roll out guidance and get that guidance out to states or to whoever is eligible to apply for the funding. I will say AEE we are not an equity group. We’re not the right voice for that. We don’t want to get in the way of groups for whom that is their key focus. But because this is such an important issue for the administration, again, for many of the states in which we work, and then just generally it is something that we believe is the right thing to be infusing into our work, we do look to amplify what other groups are saying where we can. So we’re not at the forefront of saying equity is really important. You should be thinking about it in these ways. But if there are groups who for whom this is their main focus, who are focused on equity and environmental justice, and they’re saying those things, we will help to uplift that and amplify that where we can.
Stone: Okay. So let’s imagine for a moment that the reconciliation bill becomes a reality. What would it accomplish if the bipartisan package has not or is not focused on? And what way would they — I guess more importantly, in what way would they be complementary?
Shen: So we’ve always viewed, and we’re not alone in this, many have always viewed the Infrastructure Investment and Jobs Act and the policies proposed in what used to be called build back better now where folks are just kind of calling budget reconciliation until we get a new bill title as two pieces of the same overarching plan. And the way I think about it is that each invest a lot of public money in clean energy. But a big piece that’s missing is tax incentives, which is a piece that’s going to pull in a lot of private investment. And so that, I think, is where reconciliation can come in and be very complementary to what’s already in each. For example, those tax incentives that will make it cheaper to build solar and wind projects, those are already the cheapest new generation to build those kinds of clean resources. And with tax credits, we’ll only make those resources cheaper. I also think reconciliation is going to help add on to what the Infrastructure Investment and Jobs Act is already doing to help facilitate more transmission getting built.
There’s a new investment tax credit that’s part of the the soup that’s being stirred, if you will, for transmission in reconciliation, as well as potentially more money that DOE can use to make both grants and loans to facilitate transmission. And as we further electrify our transportation and our buildings, we’re going to need both more clean generation and more transmission to meet that demand. Another big thing that I think is really important in reconciliation and that would complement the resources that are already provided under IIJA, is incentives for more domestic manufacturing of clean energy technologies. We talked a little bit about the importance of that and why that’s a focus. So if we’ve got incentives that will boost demand for wind and solar projects, for example, we should also be focusing on production based incentives for the technologies that will help build those projects. And creating both the supply side support for both things that will lower the price per widget, as well as things that can invest in new manufacturing facilities.
Stone: Yeah. So on the equity component of this, one more point is there is, I believe, $3.5 billion for weatherization, home weatherization, for low income communities. I think it’s targeted in there. Is that right?
Shen: Yes. So that’s 3.5 billion for the weatherization assistance program, which is an existing program that’s been around for a while. But this is certainly a significant increase over what that program would normally get annually, and that’s funding that goes to every state. There’s a formula that dictates how much each state gets based on population and also the weather in that specific state. And it’s specifically for weatherizing homes for folks who are low income. So making their homes more energy efficient, helping them save save money on their energy costs as well as just staying more comfortable. One of the things I’m particularly excited in about this program and some of the guidance that’s come out of DOE more recently is not only just this program is obviously very important from an equity perspective generallya and that’s it’s great to see it get so much, there’s also some new guidance out of DOE that would allow the funding to be used not only for energy efficiency, but also for home electrification, which is something that I think we’re seeing is being increasingly important as more and more states are talking about how do we electrify buildings? How do we get off the gas distribution system? What’s that going to look like and what’s the impact going to be on our most vulnerable constituents and communities?
Stone: So you just mentioned home electrification, and obviously it’s going to require a lot of electricity. And electricity and clean energy is obviously a goal of this whole package. One of the components that needs to be dealt with here is obviously transmission. What’s in here to promote transmission is, I guess, primarily the regional transmission that would really be necessary to make renewables work at scale.
Shen: Yeah. So there’s a couple of different things for transmission in the bill. The first is that there’s a section of the Federal Power Act that allows DOE to designate national interest electric transmission quarters. I think it’s generally pretty well agreed that authority that DOE have right now has not worked very well. And so the bill makes some amendments and updates to that, that will hopefully streamline that authority and make it a little bit more effective. The second part, and this is the part that a lot of folks are talking about is a 2.5 billion revolving loan fund that will allow DOE to make loans or grants. Actually, I think they have that authority as well in new transmission as well as enable them to be what folks refer to as an anchor tenant to be the first customer on a transmission line as a way to de-risk the upfront investment. And then the third piece in this related to transmission, is as part of the state energy program, which is a program that gives some pretty broad, flexible funding to states to deal with energy efficiency, energy security in their states is the plan that states have to produce every year as a result of getting this money. They now have to include transmission and distribution planning in that plan. So it’s going to get them all thinking about it a little more carefully and planning for it.
Stone: Okay. A couple other interesting bits of this legislation. One is the $8 billion for hydrogen energy hubs. I think they’re going to be four hubs that are going to be around the country. Wondering how that’s going to work. And also interesting, associated with that is $1 billion to lower the cost of electrolyzers and those are used to create green hydrogen. What are your thoughts on that?
Shen: So the $8 billion for hydrogen, watching the states react to that has been very interesting. We’ve seen a lot of states propose bills related to hydrogen this past legislative session. And I think the motivation for that pretty much across the board has been how can we position ourselves to be the location for one of these hubs? Like, how do we make ourselves look more competitive? We’ve also seen states entering into MOUs. With respect to hydrogen, there’s four states in the intermountain west, and I might script the list, but I think it’s New Mexico, Utah, Colorado and Wyoming, I think are the four states. And they’ve entered into this MOU you to say, “Hey, we’re going to work together on hydrogen.” So there certainly is a lot of interest at the state level in engaging in hydrogen and being a hydrogen hub or being part of a hydrogen hub. The electrolyzer piece of it in particular is interesting because a lot of the hydrogen that’s produced now, the vast majority of the hydrogen that’s produced now now, is produced directly from methane using a process called, I think, Steam Methane Reforming is what it stands for, SMR.
It’s a very emissions intensive process. It’s not particularly environmentally friendly. There’s nothing clean energy about it. And, but that’s a process that doesn’t require electrolyzers. And one of the big things holding green hydrogen back at this point, is the fact the cost of those electrolyzers. Because you need a electrolyzer to make to make green hydrogen, to use electricity generated by solar or wind or some other renewable source of electricity. And run that electricity through water and generate hydrogen that way. That’s green hydrogen. And so if we really want to see hydrogen as a part of the clean energy solution and the clean energy economy of the future, it’s going to need to be green. We can’t continue to make it from methane and have it be part of that clean energy future. So if this funding is really able to lower the cost of an electrolyzer to a point that makes green hydrogen competitive, then that’s great.
Stone: A final question for you. What, in your view, will the legacy of the infrastructure bill be? How much will it have moved the needle toward a cleaner and more resilient energy system?
Shen: This bill definitely does not get us all the way to 100% clean energy and electrified transportation which, as I said at the top, our mission and our goal. It does help move us down the path. If Congress were to pass a reconciliation bill that would take us further, it still would not get us all the way there. And there’s still a lot of open questions, of course, about how this money is going to be spent in states and if that’s going to be effective. But I do think this is a really great opportunity to get states thinking more about electric vehicles, about what the future of the grid is going to look like, and to start making some of those investments. We saw that under the Recovery Act, there are things that people point to now as saying that actually did move the needle, not, again, in getting us sort of all the way to 100% clean, but in accelerating the growth of certain industries or in moving us further down the path towards certain goals that we would have gotten otherwise. And I think we’ll see the same thing with this bill and we’ll be there advocating for states to spend that money well, and then advocating for the states themselves to take the lead on a lot of these issues as well.
Stone: Leah, thanks very much for talking.
Shen: Thank you. It was a pleasure.
Stone: Today’s guest has been Leah Rubin Shen, a policy director with Advanced Energy Economy. Keep up to date with the latest energy research, blogs and events from the Kleinman Center by signing up for our monthly newsletter on our website. You can also keep up with us by following us on Twitter. Our hashtag is @ Kleinman Energy. Thanks for listening to energy policy now and have a great day.