The Infrastructure Investment and Jobs Act (IIJA), often referred to as the Bipartisan Infrastructure Bill, will invest billions of dollars in energy infrastructure. These investments will touch every part of our energy system, from electric vehicle charging to buildings to the electric grid, to name just a few. These investments have the potential to modernize our energy infrastructure and help us meet our climate goals. At the same time, we also know that this funding isn’t enough to meet all our climate goals and improve all our energy infrastructure. Therefore, we must leverage these investments, and initiate activities that will transform the economy so that we get closer to achieving our goals.
Recently, ILLUME hosted a huddle with people from state agencies and utilities to discuss opportunities to maximize the funds that they will get from IIJA. What follows are some of the highlights from our conversation.
Members of state agencies expressed the need for federal funds to support their climate goals. While certain provisions of the bill target specific purposes, other provisions like the State Energy Program and the Energy Efficiency and Conservation Block Grant Program (EECBG) have more flexibility. This flexibility allows for innovation and new market transforming ideas which are needed given the scale of the challenges before us.
IIJA appropriated $500 million for HVAC and energy improvements in schools, but this is just a drop in the bucket compared to what is needed. According to the 2016 State of Our Schools Report, state and local governments underfund K-12 facilities by $46 billion annually. A recent Government Accountability Office study found that in about one quarter of all school districts, at least half of their schools needed upgrades or replacements to major building systems, such as heating, ventilation, and air conditioning (HVAC) systems, plumbing, wiring, or windows. The study also found that 41% of districts need to update or replace HVAC systems in at least half of their schools. Energy Savings Performance Contracts (ESPCs) have been an invaluable tool, but new tools and partnerships are necessary, which brings us to the next point…
For those of us that were at a recent meeting of the National Association of State Energy Officials (NASEO), one point was repeated throughout the multi-day conference – the need for partnerships. To achieve what the states want to achieve, we will need to be innovative, and that means we need to look to innovative partnerships and new ways of doing things.
Examples of innovative partnerships between state energy offices and utilities came up. In one state, they found that a large percentage of households couldn’t participate in the utility whole house energy efficiency program due to health and safety barriers like asbestos and mold. In response, the state took federal funds, in this case from the American Rescue Plan Act, to create a program that would address these barriers so the home could then be referred to the utility program. In another instance, federal funds were allocated to provide a full suite of energy solutions to affordable housing. Some federal funds have a broad range of allowable uses which compliments the utility energy efficiency funds that must pass a cost effectiveness test, allowing the home to receive a deeper retrofit or other services that might not be covered in the utility program.
Another example of a partnership is in community solar. In one midwestern state, staff at the public utility commission worked with four local partners to create a community solar program in two separate communities. This program matches utility low-income customers with community solar gardens, leading to direct bill credits for participating customers.
In other areas, there are fewer examples and new partnerships will be necessary. One utility identified the need for a significant amount of new transmission to support zero carbon generation resources and it looks for opportunities to use federal funds to mitigate any rate impacts building new transmission would have on customers.
In a similar vein, there may be an opportunity for Electric Vehicle (EV) charging companies to work with utilities to site DC fast charging in underutilized areas on the grid that would not trigger significant distribution system upgrades, while still meeting location requirements.
Layered moreover are the Justice40 requirements that will likely apply to many of the funding streams. Ensuring that 40% of the benefits accrue to disadvantaged communities adds a layer of complexity to how the federal funds will be used and how programs need to be designed.
Creative program designs and partnerships that leverage the strengths of different organizations are necessary if we’re going to meet our climate goals.
Federal infrastructure funding for energy has the potential to be a catalyst to transform our energy system but the outcome isn’t a given. State energy offices and utilities are uniquely positioned to work together and deliver climate and energy programs and investments.