The Energy Department said on Thursday that it planned to offer $22.9 billion in loan guarantees to help eight electric utilities around the country modernize their power grids, add large amounts of renewable energy — and pass along any resulting savings to customers.
The deals amount to one of the biggest commitments ever made by the department’s Loan Programs Office, which under President Biden has already doled out tens of billions of dollars for battery factories and other low-carbon energy projects.
As part of the 2022 Inflation Reduction Act, Democrats in Congress handed the office $250 billion in loan authority to repurpose or replace existing energy infrastructure in order to lower air pollution and reduce planet-warming emissions. So far, the office has used that authority to back efforts to restart a shuttered nuclear reactor in Michigan and to help California’s largest utility upgrade its electric grid.
The new loan guarantees, which still have to be finalized, are even more far-reaching. They are meant to help utilities that serve more than 14.7 million people across 12 states upgrade aging transmission lines or build new ones. Doing so, the office said, would help power companies tap into more wind, solar and hydroelectric power 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 batteries and to replace existing gas pipelines in order to reduce leaks of methane, a potent 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 aim of using more renewable energy and cutting 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 power and batteries to the grid. The utility is planning to close a large coal-fired power plant by 2030.
Other recipients include Consumers Energy in Michigan; Jersey Central Power & Light in New Jersey; and AEP, which serves Indiana, Michigan, Ohio, Oklahoma and West Virginia.
While these utilities can all borrow funds from private markets, it is cheaper to borrow money with federal backing. Under the program, utilities are required to pass along any savings from lower-cost financing to customers.
In August, Jigar Shah, the head of the Loan Programs Office, said that a growing number of utilities were interested in the program as a way to help keep a lid on rising electricity rates, which have grown faster than inflation since 2021.
“We’re seeing utilities look to our low-cost financing as an opportunity to invest in new technologies,” Mr. Shah said. “They’re making investments in upgrading and expanding their infrastructure at lower cost to ratepayers.”
The move comes as America’s electric grids face serious strains. Demand for electricity, which was flat for nearly two decades, is suddenly surging, as new factories open and tech companies build massive data centers for artificial intelligence. Many utilities are planning to meet this demand, at least in part, by delaying retirements of coal plants or by burning more natural gas, which could cause planet-warming emissions to rise. Some consumer watchdogs also fear that electric bills could spike.
Mr. Shah has urged utilities to find lower-cost solutions, for instance by helping customers use less electricity during peak hours or by using advanced conductors to push more renewable energy through existing transmission lines.
“We need to implement a new playbook, moving away from the traditional, very expensive solutions toward 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 been struggling with soaring electric rates and wildfire-related costs in recent years, has said that customer bills will stabilize next year. One reason for that, PG&E said, was that it was expecting to receive a $15 billion loan guarantee from the loan office to help invest in hydroelectric power generation, batteries and power lines.
Thursday’s move comes at a time when the future of the loan office is uncertain. In recent months, officials have been racing to get money out the door before President-elect Donald J. Trump returns to the White House.
While Mr. Trump hasn’t outlined his plans for the Energy Department, some Republicans in Congress are already scrutinizing the loan office, as they hunt for ways to slash federal spending. In December, three House Republicans sent a letter to Mr. Shah demanding that the office “cease its campaign to quickly distribute federal funding before the incoming administration takes office.”
The loan guarantees announced on Thursday are unlikely to be finalized before Mr. Trump takes office next week. But Energy Department officials said that the conditional commitments are legally binding, provided that the borrowers can meet certain benchmarks, and can’t easily be canceled.
The loan office will still have plenty of unused loan authority under the Trump administration: As of December, there were 212 applications worth $324 billion still under review.
The post Energy Dept. Backs $22 Billion in Loans to Reshape U.S. Power Grids appeared first on New York Times.
