Energy Department offers utilities $22 billion to reshape U.S. power grids

The Department of Energy announced Thursday that it plans to offer $22.9 billion in loan guarantees to help eight electric utilities nationwide modernize their power grids, add large amounts of energy renewable and pass on the resulting savings to customers.

These agreements represent one of the largest commitments ever made by the department's Office of Loan Programs, which, under President Biden's leadership, has already distributed tens of billions of dollars for battery factories and other low-carbon energy projects.

As part of the Inflation Reduction Act of 2022, Congressional Democrats granted the bureau $250 billion in loan authorization to reuse or replace existing energy infrastructure to reduce air pollution and reduce emissions linked to global warming. So far, the office has used that authority to support efforts to restart a shuttered nuclear reactor in Michigan and to help California's largest utility modernize its power grid.

The new loan guarantees, which have yet to be finalized, go even further. They aim to help utilities that serve more than 14.7 million people in 12 states upgrade aging transmission lines or build new ones. This, the bureau said, would help power companies harness more wind, solar and hydropower while improving grid reliability.

In Michigan, DTE Electric and DTE Gas would receive loan guarantees totaling nearly $9 billion to install thousands of megawatts of solar, wind and battery power and to replace existing natural gas pipelines to reduce methane leaks, a powerful greenhouse gas.

In the Pacific Northwest, PacifiCorp would receive a $3.52 billion loan guarantee to help build 700 miles of new transmission lines in Idaho, Oregon and Utah, with the goal of use more renewable energy and reduce emissions.

In Iowa and Wisconsin, Alliant Energy and its subsidiaries would receive a $3 billion loan guarantee to add more than 2,000 megawatts of wind and battery power to the grid. The utility plans to close a large coal-fired power plant by 2030.

Other beneficiaries include Consumers Energy in Michigan; Jersey Central Power & Light in New Jersey; and AEP, which serves Indiana, Michigan, Ohio, Oklahoma and West Virginia.

Although these utilities can all borrow funds in private markets, it is less expensive to borrow money with federal government support. Under this program, utilities are required to pass on any savings made through lower-cost financing to customers.

In August, Jigar Shah, head of the Office of Loan Programs, said a growing number of utilities were interested in the program as a way to help contain rising electricity rates, which have been rising faster than the inflation since 2021.

“We see utilities viewing our low-cost financing as an opportunity to invest in new technologies,” Shah said. They are investing in modernizing and expanding their infrastructure at lower cost to taxpayers.

The move comes as America's power grids face serious challenges. Demand for electricity, stagnant for nearly two decades, is suddenly increasing, as new factories open and technology companies build huge data centers for artificial intelligence. Many utilities plan to meet that demand, at least in part, by delaying the retirement of coal plants or burning more natural gas, which could lead to increased emissions linked to global warming. Some consumer watchdogs also fear rising electricity bills.

Mr. Shah urged utilities to find cheaper solutions, such as helping customers use less electricity during peak hours or using advanced conductors to push more renewable energy through transmission lines. existing transport.

We need to implement a new strategy, moving away from traditional and very expensive solutions towards the most cost-effective, reliable and clean energy solutions, Mr Shah said in August.

As evidence that the loan program could help ratepayers, Energy Department officials point to California. There, Pacific Gas & Electric, which has struggled with soaring electricity rates and wildfire-related costs in recent years, said its customers' bills would stabilize next year. One reason for that, PG&E said, was that it expected to receive a $15 billion loan guarantee from the lending office to help it invest in hydroelectric power generation , batteries and power lines.

Thursday's decision comes at a time when the future of the circulation desk is uncertain. In recent months, officials have been scrambling to get money before President-elect Donald J. Trump returns to the White House.

Although Mr. Trump has not outlined his plans for the Energy Department, some congressional Republicans are already scrutinizing the loan office as they look for ways to cut federal spending. In December, three House Republicans sent a letter to Mr. Shah demanding that the office end its campaign to quickly distribute federal funds before the new administration takes office.

The loan guarantees announced Thursday are unlikely to be finalized before Mr. Trump takes office next week. But Energy Department officials said the conditional covenants are legally binding, provided borrowers can meet certain criteria, and they cannot be easily canceled.

The Loan Office will still have many unused loan authorizations under the Trump administration: As of December, 212 applications worth $324 billion were still under review.

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