President Biden's Bold Plan to Build a Clean Electric Grid
President Biden has laid out a bold vision for mobilizing our workforce and rebuilding our infrastructure to create a stronger and more resilient economy. That includes modernizing our electric transmission system and driving faster growth in clean sources of electricity. Both are necessary to meet his critical goal of “decarbonizing” the power sector by 2035. These investments will simultaneously tackle climate pollution, lower energy bills for households and businesses, improve public health through better air quality, and create good jobs throughout the country. They will also create a smarter and more resilient grid that is better able to withstand increasingly common extreme weather events like the one that crippled Texas in February.
We want to highlight three pieces of the American Jobs Plan (AJP) that will help achieve what President Biden referred to as “a modern, resilient, and fully clean grid”:
Investing in More Resilient Electric Transmission
Upgrading and expanding our nation’s transmission system is one of the most important actions we can take to improve resiliency and affordably eliminate carbon pollution from our power system. The current transmission grid is outdated and inefficient. Bottlenecks and other shortcomings are impeding our transition to clean energy. Insufficient transmission capacity is preventing many emissions-free power projects from connecting to the grid, and weak interconnections between regional power grids (Eastern, Western, and Texas) are limiting access to thousands of megawatts of existing low-cost, renewable power resources. Expanded interregional transmission dramatically lowers the cost of achieving 100 percent clean electricity by reducing the amount of wind, solar, storage, and other generation capacity that must be built. Modern long-distance, high-voltage transmission lines move low-cost renewable energy from where it's generated to where it’s needed and enables balancing of the variability of wind and solar power on a national scale, which leads to a more reliable grid and lower costs for consumers.
The Biden plan includes several policies that are critical to overcoming some of the roadblocks to transforming the transmission grid. The plan creates an investment tax credit (ITC) to incentivize the buildout of high-voltage transmission lines and mobilize private capital. It also establishes a new Grid Deployment Authority to facilitate permitting and financing of needed electricity transmission lines.
Transmission capacity must double or triple to reach President Biden’s decarbonization goal. Utilities can recover the cost of local transmission projects through utility rates charged to customers, however, those are typically small-scale projects. But for large-scale, interregional, high-voltage transmission, there is no working means of funding or cost recovery. Further, many of the benefits of large-scale transmission are spread broadly across the public and cannot be recovered by private investors, so the economics are not strong enough to drive private investment. The federal ITC for transmission will reduce development costs and help attract private capital for the construction of new lines.
Difficulties with permitting and siting have presented further challenges to transmission expansion. Planning processes undertaken by the Department of Energy, the Federal Energy Regulatory Commission, regional grid operators, and utilities have been lackluster, and as a result, no major transmission lines between regions have been approved in nearly a decade. A number of studies have shown that upgrading and expanding the grid will create hundreds of thousands of jobs, in addition to creating demand for American-made building materials and parts. Establishing the Grid Deployment Authority, an entity with a singular focus on transmission expansion, and providing it with the authority to use creative tools to facilitate environmentally responsible permitting and financing of projects, will provide needed impetus for high-voltage, interregional transmission buildout.
The president’s plan recognizes the importance of grid modernization. It will be important to ensure Congress builds upon the plan with further investments in the transmission and distribution system that prioritize resilience, pollution reduction, and job creation benefits for low-income and disadvantaged communities.
Providing Incentives to Drive the Buildout of Clean Electricity
The Biden plan is also focused on driving the large-scale deployment of clean electricity. The president proposes a set of tax incentives to help remake our energy sector. Specifically, it would extend for ten years the ITC primarily utilized by solar energy, fuel cell, and geothermal producers, and the Production Tax Credit (PTC) primarily utilized by wind energy producers.
The plan would also make all energy storage technologies and transmission projects eligible for the ITC, which could solve two persistent issues: how to store renewable energy for use when the sun is not shining or the wind is not blowing, and how to transport renewable power from rural areas where it is generated to population centers where the bulk of electricity is consumed.
These extensions and expansions would reportedly be extended at full value for five years, before beginning a five-year ramp-down in value. Importantly, producers would be able to elect to use “direct pay” for each credit for the full ten years that would help avoid a complicated tax equity market and provide far faster return on investment, which again can greatly aid deployment of renewable energy technologies.
These tax incentives are part of a broader suite of incentives proposed in the AJP, including those that would drive demand for electric vehicles and energy efficient appliances and homes, as well as those that would ensure that clean energy and vehicle technologies are produced by American workers.
Congress should build on the president's plan with targeted investments in renewable energy and energy storage projects that reduce pollution in places with high levels of historical pollution and prioritize resilience and economic benefits for disadvantaged communities.
Establishing a Clean Electricity Standard (CES)
In addition to the aforementioned tax credits for clean electricity, the AJP also reaffirmed President Biden’s campaign pledge to adopt a federal Clean Electricity Standard (CES) that will grow the supply of clean energy. Although Wednesday’s announcement did not elaborate further, a CES does what its name implies—it requires that more of our electricity comes from clean energy with each succeeding year. As we have noted, a CES is both popular and an effective policy for decarbonizing the power sector. By expanding the supply of clean energy on our grid, a CES will cut the soot and smog threatening our health and the carbon pollution driving the climate crisis. Several CES proposals were introduced in Congress last year. Our analysis of two of those proposals showed that they would avoid between 3,000 and 7,000 premature deaths each year.
Congress Must Now Turn This Reimagined Future into Reality
President Biden’s focus on a clean power sector is increasingly important to our broader climate efforts. Beneficial electrification—powering our cars with electricity, heating our homes with electric heat pumps, and electrifying industrial processes all from increasingly carbon-free electricity—is key to decarbonizing our economy, and it depends on continuing to expand the supply of clean electricity as well as the transmission system that provides access to that supply. In the AJP, the president laid out important policies to make sure that happens. Importantly, he also called for those policies to be paired with strong labor standards. NRDC believes that such standards should protect or expand high-quality jobs (e.g., family-sustaining wages, benefits, paid time off, a safe and healthy work environment) and make jobs accessible to all, especially to Black, Indigenous, and people of color (BIPOC); communities transitioning away from environmentally harmful industries; and people often underserved in rural communities.
President Biden’s vision to clean up our power sector – in a manner that invests in workers, families, and communities—is one that we wholly support, and we call upon Congress to turn it into a reality.
Our NRDC colleagues Ben Longstreth and Arjun Krishnaswami also provided valuable input to this blog.