U.S. Senators on August 10 passed a $1.2 trillion piece of legislation aimed at modernizing many aspects of our country's infrastructure that has notable implications for the energy industry.
The bill calls for a historic investment in the creation of new roads and bridges, increasing access to broadband internet, upgrading of the energy grid, and much more.
Certain aspects of the bill specifically address the future role of renewable energy sources in the U.S. as President Joe Biden continues his push to reduce emissions and curb climate change. The infrastructure bill is the first of potentially a couple of new pieces of legislation that will impact renewables and the future of the energy industry in the coming months.
With the bipartisan infrastructure bill expected to be signed into law in the coming weeks or months, depending on the timing of House action, Democrats on Capitol Hill will immediately turn their attention toward an even larger $3.5 trillion budget bill, which they hope to push through Congress in the coming weeks. This bill will likely contain several key provisions that have the potential to shake up the energy industry.
As the conversation around renewables continues to heat up in Washington, D.C., energy companies must take note of the proposals being considered and plan for their potential impact on the industry. As experts in federal energy policy and regulations, we are keeping a close eye on a few proposals, some of which are included in the infrastructure plan, and others that are likely to pop back up in the Democrat-led budget bill and beyond.
Key energy provisions in the bipartisan infrastructure plan
The infrastructure plan passed by the Senate includes a provision to invest $73 billion in the energy grid, the largest investment in the grid in our nation's history. A portion of these funds will be used to increase the grid's resiliency in light of recent natural disasters like the weeks-long power outage in parts of Texas earlier this year. The investment will also be used to modernize the grid and improve its capacity for both solar and onshore and offshore wind energy sources. In addition to the $73 billion investment in the energy grid, the infrastructure plan also calls for a $46 billion investment in clean energy manufacturing, which will help the burgeoning wind and solar energy industries continue to grow.
The bill also provides the Federal Energy Regulatory Commission (FERC) with sole siting authority for electricity transmission lines in certain Department of Energy (DOE) designated corridors. FERC already retains siting rights for gas lines but will now be able to override states' transmissions siting decisions. By extending FERC's authority, congress hopes to speed up the siting process and allow for more transmission lines to be built that will enable the grid to handle additional capacity from wind and solar energy sources.
Additional clean energy provisions to watch in the Democrat-led budget bill
There is a high likelihood the $3.5 trillion budget bill will address clean energy tax credits, whether it be by extending existing credits, creating new ones, or reforming the existing structure. Some expect this bill to push for a simplification of the current tax structure by whittling down the dozens of current clean tax credits into three broad-based tax credits. It remains to be seen exactly how tax credits will be addressed, but this is a development worth watching in the coming weeks that has implications for both renewable and traditional energy companies.
Another provision that has been widely discussed is the creation of a federal clean energy standard, which would force energy companies to increase the amount of power they derive from climate-friendly sources. This standard was not included in the bipartisan infrastructure bill because of limited support from Republicans, but there is a chance it will make it into the Democrat-sponsored budget bill. There are a few hurdles that stand in its way, including limited support from moderate Democrats as well as arcane Senate rules that require provisions included in budget bills to directly impact the budget or have a revenue effect. Because of this, it will be more difficult for Democrats to make the federal clean energy standard a reality in the near future. The more likely outcome is the creation of a Clean Electricity Payment Program to encourage utilities to produce more carbon free power.
Renewable energy will remain a consistent theme
President Biden has indicated a commitment to addressing climate change as well as increasing the U.S.'s usage of wind, solar, and hydropower energy sources during his Presidency. Starting with the infrastructure bill, these themes will undoubtedly resurface in the future budget bill and potentially more pieces of legislation in the years to come. Energy companies of all kinds must ensure they stay abreast of these developments and do their best to plan for their implications for the industry. At Buchanan, we keep our finger on the pulse of happenings in Washington, D.C. and will be there to decipher these changes and their potential impacts on the industry at every step.
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