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Here’s why Trump’s funding freeze created so much chaos.
A memo issued to federal agencies from the White House budget office on Monday landed like an atom bomb. The Trump administration ordered a pause on the obligation or disbursement of federal financial assistance. In laymen’s terms, that means an immediate freeze on payouts of federal grants — even those already awarded. The news sent a mushroom cloud of confusion and fear through state and local governments, schools, nonprofits, and companies that have set up programs and financed projects based on that funding.
Experts say the move is illegal and many groups moved quickly to sue. By Tuesday afternoon, a federal judge had temporarily blocked the funding freeze.
A 1974 law called the Impoundment Control Act prohibits the president from holding back congressionally appropriated funds indefinitely without permission from Congress. As Georgetown University law professor David Super explained in a blog post today, the law also prohibits presidents from deferring funds based on policy disagreements. The memo from the Office of Management and Budget makes Trump’s policy intent explicit — it specifically directs agency heads to pause activities that “may be implicated by the executive orders, including, but not limited to … DEI, woke gender ideology, and the green new deal.” It notes that the pause “will provide the Administration time to review agency programs and determine the best uses of the funding for those programs consistent with the law and the President’s priorities.”
Some have interpreted the memo as the first salvo in an attack on the separation of powers. But perhaps the most immediate reason the pause is so cataclysmic is because of the way federal grants work.
When an entity wins federal funds, be it $270 million to expand a copper recycling facility in Kentucky, or $1.2 billion to build a hydrogen hub on the Gulf Coast, or $149 million for the state of Wisconsin to set up home energy efficiency rebate programs, the awardee doesn’t just get the money transferred over to their bank account in a lump sum. Every federal grant program works slightly differently, but the majority of them are essentially pay-as-you-go.
The first thing that happens after an agency awards a grant to a given project is the two parties negotiate a contract, outlining the terms under which the award will be administered. What milestones does the project need to hit? What does the recipient need to report back to the agency? In the context of many Department of Energy programs, this contract is called a cooperative agreement, where federal staff continue to be involved in the project throughout its implementation.
After both parties sign the agreement, the money is considered “obligated,” which means the government has a legal duty to disburse those funds per the terms of the agreement. There might be some initial transfer of funds at this point to kickstart the project, depending on the program and contract. But the recipient may not get any money at all until they submit for reimbursement.
Yep, that’s right. If you win millions of dollars from the government, you still need to submit your receipts to get paid.
This is typically not a one-and-done process. A lot of grant programs fund years-long projects, and recipients regularly invoice the government for reimbursement throughout that time. In the case of the DOE, most programs also have a cost-share requirement, where the agency will reimburse a project developer for whatever portion of the expenses it has agreed to pay. For the Inflation Reduction Act’s Home Energy Rebates, where the funding is distributed to states to implement their own programs, the program is set up to transfer funds to state energy offices in four “tranches” as recipients hit certain benchmarks.
While some projects are fully obligated up front, meaning the grantee is entitled to the full amount, others are obligated in phases. For example, the Department of Energy has selected seven regional hydrogen hubs to receive up to $7 billion. But each of those seven hubs has only been awarded a portion of the funding for “phase 1,” which can be used to pay for “initial planning, design, and community and labor engagement activities.” When they are ready to move into phase 2, they’ll have to negotiate a new award for project development, permitting, and financing. Each advancement is subject to a go/no-go decision by the DOE.
Before Biden left office, his administration said it had obligated 85% of all grants from the Inflation Reduction Act. But as you can see, most of that money is not yet out the door.
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A conversation with VDE Americas CEO Brian Grenko.
This week’s Q&A is about hail. Last week, we explained how and why hail storm damage in Texas may have helped galvanize opposition to renewable energy there. So I decided to reach out to Brian Grenko, CEO of renewables engineering advisory firm VDE Americas, to talk about how developers can make sure their projects are not only resistant to hail but also prevent that sort of pushback.
The following conversation has been lightly edited for clarity.
Hiya Brian. So why’d you get into the hail issue?
Obviously solar panels are made with glass that can allow the sunlight to come through. People have to remember that when you install a project, you’re financing it for 35 to 40 years. While the odds of you getting significant hail in California or Arizona are low, it happens a lot throughout the country. And if you think about some of these large projects, they may be in the middle of nowhere, but they are taking hundreds if not thousands of acres of land in some cases. So the chances of them encountering large hail over that lifespan is pretty significant.
We partnered with one of the country’s foremost experts on hail and developed a really interesting technology that can digest radar data and tell folks if they’re developing a project what the [likelihood] will be if there’s significant hail.
Solar panels can withstand one-inch hail – a golfball size – but once you get over two inches, that’s when hail starts breaking solar panels. So it’s important to understand, first and foremost, if you’re developing a project, you need to know the frequency of those events. Once you know that, you need to start thinking about how to design a system to mitigate that risk.
The government agencies that look over land use, how do they handle this particular issue? Are there regulations in place to deal with hail risk?
The regulatory aspects still to consider are about land use. There are authorities with jurisdiction at the federal, state, and local level. Usually, it starts with the local level and with a use permit – a conditional use permit. The developer goes in front of the township or the city or the county, whoever has jurisdiction of wherever the property is going to go. That’s where it gets political.
To answer your question about hail, I don’t know if any of the [authority having jurisdictions] really care about hail. There are folks out there that don’t like solar because it’s an eyesore. I respect that – I don’t agree with that, per se, but I understand and appreciate it. There’s folks with an agenda that just don’t want solar.
So okay, how can developers approach hail risk in a way that makes communities more comfortable?
The bad news is that solar panels use a lot of glass. They take up a lot of land. If you have hail dropping from the sky, that’s a risk.
The good news is that you can design a system to be resilient to that. Even in places like Texas, where you get large hail, preparing can mean the difference between a project that is destroyed and a project that isn’t. We did a case study about a project in the East Texas area called Fighting Jays that had catastrophic damage. We’re very familiar with the area, we work with a lot of clients, and we found three other projects within a five-mile radius that all had minimal damage. That simple decision [to be ready for when storms hit] can make the complete difference.
And more of the week’s big fights around renewable energy.
1. Long Island, New York – We saw the face of the resistance to the war on renewable energy in the Big Apple this week, as protestors rallied in support of offshore wind for a change.
2. Elsewhere on Long Island – The city of Glen Cove is on the verge of being the next New York City-area community with a battery storage ban, discussing this week whether to ban BESS for at least one year amid fire fears.
3. Garrett County, Maryland – Fight readers tell me they’d like to hear a piece of good news for once, so here’s this: A 300-megawatt solar project proposed by REV Solar in rural Maryland appears to be moving forward without a hitch.
4. Stark County, Ohio – The Ohio Public Siting Board rejected Samsung C&T’s Stark Solar project, citing “consistent opposition to the project from each of the local government entities and their impacted constituents.”
5. Ingham County, Michigan – GOP lawmakers in the Michigan State Capitol are advancing legislation to undo the state’s permitting primacy law, which allows developers to evade municipalities that deny projects on unreasonable grounds. It’s unlikely the legislation will become law.
6. Churchill County, Nevada – Commissioners have upheld the special use permit for the Redwood Materials battery storage project we told you about last week.
Long Islanders, meanwhile, are showing up in support of offshore wind, and more in this week’s edition of The Fight.
Local renewables restrictions are on the rise in the Hawkeye State – and it might have something to do with carbon pipelines.
Iowa’s known as a renewables growth area, producing more wind energy than any other state and offering ample acreage for utility-scale solar development. This has happened despite the fact that Iowa, like Ohio, is home to many large agricultural facilities – a trait that has often fomented conflict over specific projects. Iowa has defied this logic in part because the state was very early to renewables, enacting a state portfolio standard in 1983, signed into law by a Republican governor.
But something else is now on the rise: Counties are passing anti-renewables moratoria and ordinances restricting solar and wind energy development. We analyzed Heatmap Pro data on local laws and found a rise in local restrictions starting in 2021, leading to nearly 20 of the state’s 99 counties – about one fifth – having some form of restrictive ordinance on solar, wind or battery storage.
What is sparking this hostility? Some of it might be counties following the partisan trend, as renewable energy has struggled in hyper-conservative spots in the U.S. But it may also have to do with an outsized focus on land use rights and energy development that emerged from the conflict over carbon pipelines, which has intensified opposition to any usage of eminent domain for energy development.
The central node of this tension is the Summit Carbon Solutions CO2 pipeline. As we explained in a previous edition of The Fight, the carbon transportation network would cross five states, and has galvanized rural opposition against it. Last November, I predicted the Summit pipeline would have an easier time under Trump because of his circle’s support for oil and gas, as well as the placement of former North Dakota Governor Doug Burgum as interior secretary, as Burgum was a major Summit supporter.
Admittedly, this prediction has turned out to be incorrect – but it had nothing to do with Trump. Instead, Summit is now stalled because grassroots opposition to the pipeline quickly mobilized to pressure regulators in states the pipeline is proposed to traverse. They’re aiming to deny the company permits and lobbying state legislatures to pass bills banning the use of eminent domain for carbon pipelines. One of those states is South Dakota, where the governor last month signed an eminent domain ban for CO2 pipelines. On Thursday, South Dakota regulators denied key permits for the pipeline for the third time in a row.
Another place where the Summit opposition is working furiously: Iowa, where opposition to the CO2 pipeline network is so intense that it became an issue in the 2020 presidential primary. Regulators in the state have been more willing to greenlight permits for the project, but grassroots activists have pressured many counties into some form of opposition.
The same counties with CO2 pipeline moratoria have enacted bans or land use restrictions on developing various forms of renewables, too. Like Kossuth County, which passed a resolution decrying the use of eminent domain to construct the Summit pipeline – and then three months later enacted a moratorium on utility-scale solar.
I asked Jessica Manzour, a conservation program associate with Sierra Club fighting the Summit pipeline, about this phenomenon earlier this week. She told me that some counties are opposing CO2 pipelines and then suddenly tacking on or pivoting to renewables next. In other cases, counties with a burgeoning opposition to renewables take up the pipeline cause, too. In either case, this general frustration with energy companies developing large plots of land is kicking up dust in places that previously may have had a much lower opposition risk.
“We painted a roadmap with this Summit fight,” said Jess Manzour, a campaigner with Sierra Club involved in organizing opposition to the pipeline at the grassroots level, who said zealous anti-renewables activists and officials are in some cases lumping these items together under a broad umbrella. ”I don’t know if it’s the people pushing for these ordinances, rather than people taking advantage of the situation.”