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The Biden administration tackles one of the biggest barriers to the energy transition: the dread interconnection queue.
It may soon be easier — and cheaper — to build a large-scale clean energy project in the United States.
Under a new and little-noticed update to a climate tax credit published last week, the government will now pick up some of the cost of connecting a new wind or solar project to the power grid.
The policy could ease one of the biggest barriers to the rapid transformation of the electricity system to fight climate change. It could save clean energy developers hundreds of millions in fees while potentially speeding the deployment of new renewable and low-carbon energy sources across the country.
The Treasury Department, which published the new rules governing the tax credit, declined to comment and referred me to earlier remarks from administration officials. In a statement last week, Deputy Treasury Secretary Wally Adeyemo said that the agency sought to give companies “clarity and certainty needed to secure financing and advance clean energy projects nationwide.”
The guidance would be particularly helpful for “small scale projects that need to connect to the grid,” he said. But a close reading of the guidance suggests that it may go further and help medium or large scale projects, deploying even more clean electricity to the grid than proponents had once envisioned.
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The new tax credit appears to address a major obstacle to decarbonizing the grid: It’s very expensive to connect new wind, solar, and other resources to the electricity grid.
When a company proposes a new large-scale solar or wind project, it must apply to the local power-grid authority for permission to connect its new project to the grid.
This process — called the “interconnection queue” — can take nearly half a decade to complete in some parts of the country. More than 8,100 proposed projects — overwhelmingly wind and solar facilities — were waiting in the queue nationwide at last count.
Construction on those projects cannot begin until they receive approval. Only about one-fifth of wind and solar projects that enter the interconnection queue ultimately get built, according to a recent study from Lawrence Berkeley National Laboratory.
Even when a developer finally gets to the front of the line, the process is not over. Because America’s electricity law was written decades ago — when utilities added massive coal-fired power plants or hydroelectric dams to the grid — developers must pay the full cost of upgrading the entire local grid to accept electricity from a new project, even if that project generates relatively little electricity. These “network upgrade” costs are presented to developers as a surprise bill when they reach the end of the queue.
As the grid has gotten older and more congested, these costs have soared, Rob Gramlich, the founder and president of Grid Strategies, told me. A large solar project that costs about $180 million might now pay an extra $30 or $40 million in surprise network-upgrade costs, he said.
As these costs have rapidly increased, they have outstripped wind and solar developers’ ability to predictably budget for them. They are also sometimes large enough to kill the economics of a project.
In the Lawrence Berkeley study, researchers found that wind projects withdrawn from the queue had interconnection costs sometimes 10 times higher than projects that ultimately got built. Earlier this year, a renewable executive told The New York Times that interconnection costs have become the “no. 1 project killer.”
Those withdrawals can clog up the queue further, because proposals that cannot realistically pay the network costs slow down the process for everyone behind them.
But that could soon change. Under the new proposed guidance, at least 30% of a project’s interconnection costs could be covered by the investment tax credit, a climate-friendly subsidy in the Inflation Reduction Act.
While the investment tax credit was already known to cover small projects, the guidance suggests that it can now be used much more broadly. That could save some of the largest solar and wind projects more than $10 million.
Although this new tax credit will not address the underlying cause of high interconnection costs, it will “take the sting out of those charges,” Gramlich said, adding that it will “surely lead to many projects moving forward to construction instead of giving up and withdrawing their interconnection request.”
Utilities should like the new tax credit as well, he added, because it will help them build and own more of their own transmission lines. But the interconnection issue will only be totally solved when the Federal Energy Regulatory Commission, which oversees the country’s electricity grids, writes new rules governing the process, he said.
The investment tax credit has long been one of the workhorses of American clean-energy policy. First created during the 1970s oil crisis, the tax credit initially paid businesses a 10% subsidy to switch to equipment that did not burn oil or natural gas.
The policy bumped along for decades, covering a fraction of the cost of a hodgepodge of clean-ish energy technologies. But last year, the Inflation Reduction Act made sweeping changes to the tax credit, allowing a huge array of climate-friendly energy sources to cover 30% of their costs.
The Treasury Department published draft rules governing those changes last week. The fact that the credit can now be used to pay for interconnection costs for large clean energy projects has not been previously reported.
The change rests on two terms used in the Inflation Reduction Act: “energy property” and “energy project.”
Under the climate law, an “energy property” is any kind of energy facility that qualifies for a 30% investment tax credit. A solar array, a wind turbine, and an industrial battery can all be an “energy property.” So, too, can certain types of electrical equipment — such as transformers or wiring — that might be shared across a clean energy installation.
An “energy project,” meanwhile, is defined in the law as one or more energy properties that connect to form a larger facility.
The Inflation Reduction Act made one more big change to the tax credit. Under the law, any “energy property” of less than five megawatts can have 30% of its interconnection costs covered by the investment tax credit.
This change, while celebrated by climate advocates, was previously assumed to cover only the costs of connecting a small renewable project — like a solar array on a warehouse roof — to the grid. For context, 5 megawatts is enough electricity to power perhaps 2,000 homes.
But remember that an “energy project” can be made up of several smaller and interdependent “energy properties.” So what if a solar developer, say, connected many small solar arrays — each an “energy property” — together into a single “energy project”? Would they be able to cover their interconnection costs under the law?
The new guidance says yes. Any “energy project” — even one large enough to power tens of thousands of homes — can qualify to have some of its interconnection costs covered as long as it is made up of smaller “energy properties” that are each no larger than five megawatts.
“If an energy project comprised of multiple energy properties has a combined nameplate capacity in excess of five megawatts, each of the energy properties would nonetheless be eligible to include amounts paid or incurred by the taxpayer for qualified interconnection property if each energy property satisfies the Five-Megawatt Limitation,” the guidance says.
The guidance goes on to say that the cost “to modify and upgrade the transmission system” can be covered by the tax credit even if those investments are made “at or beyond” the project’s connection to the grid.
Although the guidance is written in a technology-neutral way, it may not benefit all clean energy technologies equally. While a large solar or onshore wind farm can be broken into many five-megawatt segments, each offshore wind turbine generates more than five megawatts of electricity.
Each offshore turbine, in essence, may be too large to qualify as a standalone “energy property.” That said, the new guidance includes other changes that are more favorable to the offshore wind industry.
The guidance remains a draft proposal and has not yet been finalized. But due to an unusual attribute of federal tax law, companies can sometimes rely on proposed tax regulations as long as no final rule has yet been published.
Across the United States, more than 1.4 terawatts of proposed wind and solar projects are currently waiting in interconnection queues, according to the Berkeley National Lab study. That is more than enough to achieve President Biden’s goal of cutting power-sector carbon emissions more than 80% by 2030.
Read more about the investment tax credit:
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Defenders of the Inflation Reduction Act have hit on what they hope will be a persuasive argument for why it should stay.
With the fate of the Inflation Reduction Act and its tax credits for building and producing clean energy hanging in the balance, the law’s supporters have increasingly turned to dollars-and-cents arguments in favor of its preservation. Since the election, industry and research groups have put out a handful of reports making the broad argument that in addition to higher greenhouse gas emissions, taking away these tax credits would mean higher electricity bills, as well as the oft-cited increase in greenhouse gas emissions
The American Clean Power Association put out a report in December, authored by the consulting firm ICF, arguing that “energy tax credits will drive $1.9 trillion in growth, creating 13.7 million jobs and delivering 4x return on investment.”
The Solar Energy Industries Association followed that up last month with a letter citing an analysis by Aurora Energy Research, which found that undoing the tax credits for wind, solar, and storage would reduce clean energy deployment by 237 gigawatts through 2040 and cost nearly 100,000 jobs, all while raising bills by hundreds of dollars in Texas and New York. (Other groups, including the conservative environmental group ConservAmerica and the Clean Energy Buyers Association have commissioned similar research and come up with similar results.)
And just this week, Energy Innovation, a clean energy research group that had previously published widely cited research arguing that clean energy deployment was not linked to the run-up in retail electricity prices, published a report that found repealing the Inflation Reduction Act would “increase cumulative household energy costs by $32 billion” over the next decade, among other economic impacts.
The tax credits “make clean energy even more economic than it already is, particularly for developers,” explained Energy Innovation senior director Robbie Orvis. “When you add more of those technologies, you bring down the electricity cost significantly,” he said.
Historically, the price of fossil fuels like natural gas and coal have set the wholesale price for electricity. With renewables, however, the operating costs associated with procuring those fuels go away. The fewer of those you have, “the lower the price drops,” Orvis said. Without the tax credits to support the growth and deployment of renewables, the analysis found that annual energy costs per U.S. household would go up some $48 annually by 2030, and $68 by 2035.
These arguments come at a time when retail electricity prices in much of the country have grown substantially. Since December 2019, average retail electricity prices have risen from about $0.13 per kilowatt-hour to almost $0.18, according to the Bureau of Labor Statistics. In Massachusetts and California, rates are over $0.30 a kilowatt-hour, according to the Energy Information Administration. As Energy Innovation researchers have pointed out, states with higher renewable penetration sometimes have higher rates, including California, but often do not, as in South Dakota, where 77% of its electricity comes from renewables.
Retail electricity prices are not solely determined by fuel costs Distribution costs for maintaining the whole electrical system are also a factor. In California, for example,it’s these costs that have driven a spike in rates, as utilities have had to harden their grids against wildfires. Across the whole country, utilities have had to ramp up capital investment in grid equipment as it’s aged, driving up distribution costs, a 2024 Energy Innovation report argued.
A similar analysis by Aurora Energy Research (the one cited by SEIA) that just looked at investment and production tax credits for wind, solar, and batteries found that if they were removed, electricity bills would increase hundreds of dollars per year on average, and by as much as $40 per month in New York and $29 per month in Texas.
One reason the bill impact could be so high, Aurora’s Martin Anderson told me, is that states with aggressive goals for decarbonizing the electricity sector would still have to procure clean energy in a world where its deployment would have gotten more expensive. New York is targetinga target for getting 70% of its electricity from renewable sources by 2030, while Minnesota has a goal for its utilities to sell 55% clean electricity by 2035 and could see its average cost increase by $22 a month. Some of these states may have to resort to purchasing renewable energy certificates to make up the difference as new generation projects in the state become less attractive.
Bills in Texas, on the other hand, would likely go up because wind and solar investment would slow down, meaning that Texans’ large-scale energy consumption would be increasingly met with fossil fuels (Texas has a Renewable Portfolio Standard that it has long since surpassed).
This emphasis from industry and advocacy groups on the dollars and cents of clean energy policy is hardly new — when the House of Representatives passed the (doomed) Waxman-Markey cap and trade bill in 2009, then-Speaker of the House Nancy Pelosi told the House, “Remember these four words for what this legislation means: jobs, jobs, jobs, and jobs.”
More recently, when Democratic Senators Martin Heinrich and Tim Kaine hosted a press conference to press their case for preserving the Inflation Reduction Act, the email that landed in reporters’ inboxes read “Heinrich, Kaine Host Press Conference on Trump’s War on Affordable, American-Made Energy.”
“Trump’s war on the Inflation Reduction Act will kill American jobs, raise costs on families, weaken our economic competitiveness, and erode American global energy dominance,” Heinrich told me in an emailed statement. “Trump should end his destructive crusade on affordable energy and start putting the interests of working people first.”
That the impacts and benefits of the IRA are spread between blue and red states speaks to the political calculation of clean energy proponents, hoping that a bill that subsidized solar panels in Texas, battery factories in Georgia, and battery storage in Southern California could bring about a bipartisan alliance to keep it alive. While Congressional Republicans will be scouring the budget for every last dollar to help fund an extension of the 2017 Tax Cuts and Jobs Act, a group of House Republicans have gone on the record in defense of the IRA’s tax credits.
“There's been so much research on the emissions impact of the IRA over the past few years, but there's been comparatively less research on the economic benefits and the household energy benefits,” Orvis said. “And I think that one thing that's become evident in the last year or so is that household energy costs — inflation, fossil fuel prices — those do seem to be more top of mind for Americans.”
Opinion modeling from Heatmap Pro shows that lower utility bills is the number one perceived benefit of renewables in much of the country. The only counties where it isn’t the number one perceived benefit are known for being extremely wealthy, extremely crunchy, or both: Boulder and Denver in Colorado; Multnomah (a.k.a. Portland) in Oregon; Arlington in Virginia; and Chittenden in Vermont.
On environmental justice grants, melting glaciers, and Amazon’s carbon credits
Current conditions: Severe thunderstorms are expected across the Mississippi Valley this weekend • Storm Martinho pushed Portugal’s wind power generation to “historic maximums” • It’s 62 degrees Fahrenheit, cloudy, and very quiet at Heathrow Airport outside London, where a large fire at an electricity substation forced the international travel hub to close.
President Trump invoked emergency powers Thursday to expand production of critical minerals and reduce the nation’s reliance on other countries. The executive order relies on the Defense Production Act, which “grants the president powers to ensure the nation’s defense by expanding and expediting the supply of materials and services from the domestic industrial base.”
Former President Biden invoked the act several times during his term, once to accelerate domestic clean energy production, and another time to boost mining and critical minerals for the nation’s large-capacity battery supply chain. Trump’s order calls for identifying “priority projects” for which permits can be expedited, and directs the Department of the Interior to prioritize mineral production and mining as the “primary land uses” of federal lands that are known to contain minerals.
Critical minerals are used in all kinds of clean tech, including solar panels, EV batteries, and wind turbines. Trump’s executive order doesn’t mention these technologies, but says “transportation, infrastructure, defense capabilities, and the next generation of technology rely upon a secure, predictable, and affordable supply of minerals.”
Anonymous current and former staffers at the Environmental Protection Agency have penned an open letter to the American people, slamming the Trump administration’s attacks on climate grants awarded to nonprofits under the Inflation Reduction Act’s Greenhouse Gas Reduction Fund. The letter, published in Environmental Health News, focuses mostly on the grants that were supposed to go toward environmental justice programs, but have since been frozen under the current administration. For example, Climate United was awarded nearly $7 billion to finance clean energy projects in rural, Tribal, and low-income communities.
“It is a waste of taxpayer dollars for the U.S. government to cancel its agreements with grantees and contractors,” the letter states. “It is fraud for the U.S. government to delay payments for services already received. And it is an abuse of power for the Trump administration to block the IRA laws that were mandated by Congress.”
The lives of 2 billion people, or about a quarter of the human population, are threatened by melting glaciers due to climate change. That’s according to UNESCO’s new World Water Development Report, released to correspond with the UN’s first World Day for Glaciers. “As the world warms, glaciers are melting faster than ever, making the water cycle more unpredictable and extreme,” the report says. “And because of glacial retreat, floods, droughts, landslides, and sea-level rise are intensifying, with devastating consequences for people and nature.” Some key stats about the state of the world’s glaciers:
In case you missed it: Amazon has started selling “high-integrity science-based carbon credits” to its suppliers and business customers, as well as companies that have committed to being net-zero by 2040 in line with Amazon’s Climate Pledge, to help them offset their greenhouse gas emissions.
“The voluntary carbon market has been challenged with issues of transparency, credibility, and the availability of high-quality carbon credits, which has led to skepticism about nature and technological carbon removal as an effective tool to combat climate change,” said Kara Hurst, chief sustainability officer at Amazon. “However, the science is clear: We must halt and reverse deforestation and restore millions of miles of forests to slow the worst effects of climate change. We’re using our size and high vetting standards to help promote additional investments in nature, and we are excited to share this new opportunity with companies who are also committed to the difficult work of decarbonizing their operations.”
The Bureau of Land Management is close to approving the environmental review for a transmission line that would connect to BluEarth Renewables’ Lucky Star wind project, Heatmap’s Jael Holzman reports in The Fight. “This is a huge deal,” she says. “For the last two months it has seemed like nothing wind-related could be approved by the Trump administration. But that may be about to change.”
BLM sent local officials an email March 6 with a draft environmental assessment for the transmission line, which is required for the federal government to approve its right-of-way under the National Environmental Policy Act. According to the draft, the entirety of the wind project is sited on private property and “no longer will require access to BLM-administered land.”
The email suggests this draft environmental assessment may soon be available for public comment. BLM’s web page for the transmission line now states an approval granting right-of-way may come as soon as May. BLM last week did something similar with a transmission line that would go to a solar project proposed entirely on private lands. Holzman wonders: “Could private lands become the workaround du jour under Trump?”
Saudi Aramco, the world’s largest oil producer, this week launched a pilot direct air capture unit capable of removing 12 tons of carbon dioxide per year. In 2023 alone, the company’s Scope 1 and Scope 2 emissions totalled 72.6 million metric tons of carbon dioxide equivalent.
If you live in Illinois or Massachusetts, you may yet get your robust electric vehicle infrastructure.
Robust incentive programs to build out electric vehicle charging stations are alive and well — in Illinois, at least. ComEd, a utility provider for the Chicago area, is pushing forward with $100 million worth of rebates to spur the installation of EV chargers in homes, businesses, and public locations around the Windy City. The program follows up a similar $87 million investment a year ago.
Federal dollars, once the most visible source of financial incentives for EVs and EV infrastructure, are critically endangered. Automakers and EV shoppers fear the Trump administration will attack tax credits for purchasing or leasing EVs. Executive orders have already suspended the $5 billion National Electric Vehicle Infrastructure Formula Program, a.k.a. NEVI, which was set up to funnel money to states to build chargers along heavily trafficked corridors. With federal support frozen, it’s increasingly up to the automakers, utilities, and the states — the ones with EV-friendly regimes, at least — to pick up the slack.
Illinois’ investment has been four years in the making. In 2021, the state established an initiative to have a million EVs on its roads by 2030, and ComEd’s new program is a direct outgrowth. The new $100 million investment includes $53 million in rebates for business and public sector EV fleet purchases, $38 million for upgrades necessary to install public and private Level 2 and Level 3 chargers, stations for non-residential customers, and $9 million to residential customers who buy and install home chargers, with rebates of up to $3,750 per charger.
Massachusetts passed similar, sweeping legislation last November. Its bill was aimed to “accelerate clean energy development, improve energy affordability, create an equitable infrastructure siting process, allow for multistate clean energy procurements, promote non-gas heating, expand access to electric vehicles and create jobs and support workers throughout the energy transition.” Amid that list of hifalutin ambition, the state included something interesting and forward-looking: a pilot program of 100 bidirectional chargers meant to demonstrate the power of vehicle-to-grid, vehicle-to-home, and other two-way charging integrations that could help make the grid of the future more resilient.
Many states, blue ones especially, have had EV charging rebates in places for years. Now, with evaporating federal funding for EVs, they have to take over as the primary benefactor for businesses and residents looking to electrify, as well as a financial level to help states reach their public targets for electrification.
Illinois, for example, saw nearly 29,000 more EVs added to its roads in 2024 than 2023, but that growth rate was actually slower than the previous year, which mirrors the national narrative of EV sales continuing to grow, but more slowly than before. In the time of hostile federal government, the state’s goal of jumping from about 130,000 EVs now to a million in 2030 may be out of reach. But making it more affordable for residents and small businesses to take the leap should send the numbers in the right direction, as will a state-backed attempt to create more public EV chargers.
The private sector is trying to juice charger expansion, too. Federal funding or not, the car companies need a robust nationwide charging network to boost public confidence as they roll out more electric offerings. Ionna — the charging station partnership funded by the likes of Hyundai, BMW, General Motors, Honda, Kia, Mercedes-Benz, Stellantis, and Toyota — is opening new chargers at Sheetz gas stations. It promises to open 1,000 new charging bays this year and 30,000 by 2030.
Hyundai, being the number two EV company in America behind much-maligned Tesla, has plenty at stake with this and similar ventures. No surprise, then, that its spokesperson told Automotive Dive that Ionna doesn’t rely on federal dollars and will press on regardless of what happens in Washington. Regardless of the prevailing winds in D.C., Hyundai/Kia is motivated to support a growing national network to boost the sales of models on the market like the Hyundai Ioniq5 and Kia EV6, as well as the company’s many new EVs in the pipeline. They’re not alone. Mercedes-Benz, for example, is building a small supply of branded high-power charging stations so its EV drivers can refill their batteries in Mercedes luxury.
The fate of the federal NEVI dollars is still up in the air. The clearinghouse on this funding shows a state-by-state patchwork. More than a dozen states have some NEVI-funded chargers operational, but a few have gotten no further than having their plans for fiscal year 2024 approved. Only Rhode Island has fully built out its planned network. It’s possible that monies already allocated will go out, despite the administration’s attempt to kill the program.
In the meantime, Tesla’s Supercharger network is still king of the hill, and with a growing number of its stations now open to EVs from other brands (and a growing number of brands building their new EVs with the Tesla NACS charging port), Superchargers will be the most convenient option for lots of electric drivers on road trips. Unless the alternatives can become far more widespread and reliable, that is.
The increasing state and private focus on building chargers is good for all EV drivers, starting with those who haven’t gone in on an electric car yet and are still worried about range or charger wait times on the road to their destination. It is also, by the way, good news for the growing number of EV folks looking to avoid Elon Musk at all cost.