As Last Measure, Biden Administration Unveils $23B in Utility Loan Commitments to Modernize Grid, Boost Clean Energy

Investment Analysis Clubs Macro Economic Trends and Risks
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As a significant final move before the incoming Trump administration takes office, the Biden administration has announced conditional loan commitments totaling $22.92 billion to support projects by eight utility companies across the U.S. The investments will seek to modernize infrastructure, expand clean energy generation, and improve grid reliability, impacting millions of customers, the Department of Energy (DOE) said on Jan. 16.

The financing is provided through the Loan Programs Office’s (LPO’s) Title 17 Energy Infrastructure Reinvestment (EIR) program created by the 2022-enacted Inflation Reduction Act (IRA). The conditional commitments span projects by Pacific Power, DTE Energy, Interstate Power and Light, Wisconsin Power and Light, Consumers Energy, Jersey Central Power & Light, and American Electric Power’s transmission division. The utilities operate in California, Idaho, Oregon, Utah, Michigan, Iowa, Wisconsin, New Jersey, Indiana, Ohio, Oklahoma, and West Virginia, serving a combined customer base of about 15 million.

DTE Electric Co. will receive $7.17 billion to finance renewable energy generation and battery storage installations in Michigan, including the Trenton Channel Battery Energy Storage System as an anchor project. These investments will help the utility provide safe, reliable, and cleaner energy to its customers, the DOE said. Projects are expected to come online by the end of the decade.

Separately, DTE Gas Co. will receive $1.64 billion to modernize natural gas infrastructure by replacing legacy pipelines and moving meters outdoors. The effort builds on the utility’s Gas Main Replacement Program, improving safety and reducing methane emissions. Upgrades will be coordinated with local cities to minimize disruptions, with completion expected within the next few years.

Consumers Energy has been conditionally approved for $5.23 billion to upgrade its energy infrastructure, including investments in solar, wind, battery storage, virtual power plants, and the replacement of 1,700 miles of aging natural gas pipelines in Michigan. The Enhanced Infrastructure Replacement Program, ongoing since 2012, will reduce methane leaks and improve safety. Several of these projects are expected to be completed by 2031, aligning with the utility’s net-zero greenhouse gas emissions goal by 2050.

PacifiCorp, serving six Western states, will receive $3.52 billion for Project WIRE, which includes constructing 700 miles of high-voltage transmission lines across Idaho, Oregon, and Utah. Upgrades are expected to enhance grid flexibility, reduce curtailments of wind power, and support future renewable energy projects. Project WIRE is expected to be online by the mid-2030s and will create 3,500 union-represented jobs.

Alliant Energy subsidiaries, Interstate Power and Light (IPL) and Wisconsin Power and Light (WPL), will share $3 billion ($1.43 billion for IPL and $1.62 billion for WPL) to develop 2,000 MW of clean energy generation and battery storage in Iowa and Wisconsin. “The company retired a major coal-fired facility in Iowa in 2023 and plans to cease burning coal at its coal-fired facility in Wisconsin before 2030,” the DOE noted. Projects supported by conditional commitments will replace retired coal plants and align with Alliant’s goal to reduce greenhouse gas emissions by 50% by 2030 and eliminate coal use by 2040, it said. Construction is expected to begin in phases over the next decade.

AEP Transmission Co. will receive $1.6 billion to upgrade nearly 5,000 miles of transmission lines across Indiana, Michigan, Ohio, Oklahoma, and West Virginia. These upgrades will increase transmission capacity by 70%, reduce line losses, and support the integration of new renewable energy projects. Initial projects in Ohio and Oklahoma, covering 100 miles of transmission, are expected to begin soon and contribute to emissions reductions.

Jersey Central Power & Light will receive $716 million for the New Jersey Clean Energy Corridor, a project that seeks to upgrade 40 miles of transmission and substation infrastructure. The project will enable the integration of 4,890 MW of clean energy into the grid. It is expected to generate $150 million in ratepayer savings and support New Jersey’s 100% clean energy target by 2035. Construction is expected to be completed within the next few years.

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So, the government subsidizes system maintenance and renovation that the companies should be doing in their normal course of business.

Steve

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Politics is the business of spending other peoples’ money.

The Captain

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The promise of “supply side economics” was always, first, transfer of wealth to those who already have the most.

Steve

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Poor people know how to manage poverty. Rich people know how to manage wealth.

The Captain

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The Inflation Reduction Act was passed to do just this sort of investment. The republicans were left with egg on their faces for not supporting this Act. On August 12, 2022, the bill was passed by the House on a 220–207 vote, with all Democrats voting in favor and all Republicans voting against it.

So why would anyone vote against improving our nation’s electrical infrastructure?

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How is this substantially different that the hundreds if not thousands of other projects for which the government subsidies various businesses and industries to do something? Whether it be an expansion of the supercharger network or bringing 5G to rural communities, or federal spending on airlines - this is hardly new or scandalous.

Besides, your state appears to be benefiting the most:

Michigan is No. 1 in the nation for winning IRA-funded projects, resulting in more than $27.84 billion in new investment and, supporting over 26,000 good-paying jobs with more projected.

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How is it the government’s job to tax (or borrow in the name of) the people, to subsidize private, for profit, business? The “JCs” have learned that, in spite of the multiple waves of tax cuts handed them to “create jobs”, they can still sit on their hands, and cry for more government handouts.

Steve…yes, I noticed that DTE and CMS were beneficiaries…so?

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Sooo, basically you’ve been mad since Merchantile Era?

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I’m not that old.

Mercantilism was the dominant economic system from the 16th century to the 18th century.

But I have certainly been cranky since the embrace of “supply side economics”, where the government is used to transfer all wealth to the already wealthy.

Steve

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Just for the record, it was government that put up the money to build the Transcontinental railroad, which changed the country overnight and made it a continental juggernaut. Pretty sure that was well before the introduction of “supply side” anything.

It was also government that put up the money to build the Erie Canal, which had the beneficial effects of dropping prices of Midwest farm products 90% on the East Coast, while allowing easy transport of people to populate the Midwest.

It was also government money that built NASA, which led to an explosion of investment in microchips, satellites, metallurgy, and other fields.

I have read about the “good roads” movement, where citizens tried to convince other holdouts of the benefits of paved roads. It took almost 40 years to bring public opinion around, but we’d be pretty lost without them, wouldn’t we?

And say, that rural electrification thing seems to have been a pretty good idea, no?

Hoover Dam. The TVA. The Grand Coulee. No love there? How about for the Panama Canal? Private industry tried that one and failed, government made it happen.

Sometimes the spending of “other people’s money” pays you back 10-fold in improvement in your own life, in jobs, in building a resilient economy. Sometimes it doesn’t, but that shouldn’t be a surprise, nothing is perfect. Overall I’d say we’ve done pretty well. The less of these large, even heroic projects we do, the worse we seem to be.

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DARPANET was pretty good too. Anyone remember DARPANET?

It’s not the spending of “other people’s money.” It’s accumulating capital to undertake larger projects. Governments do it with taxation. Private enterprise does it with joint stock companies. That’s the method. Outcomes can be good or bad.

BTW, government money is your money, my money, everyones money. The government is just the manager.

The Captain

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Really? One poor person becomes wealthy. The next seems like a spoiled son. Arrogant, misguided, selfish, lacking any character, no achievements, failures, lies, stupidity on a larger scale.

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Yes, this discussion has been on this board many times, when government decides something is a “public good”, but the endeavor is so risky, or so expensive, that “private enterprise” shies away.

I am taking about the routine CAPEX that a company should invest, as a routine part of it’s operation. Now, seems everything is held up, until the government koffs up money. In the 80s, the government subsidized expansion to “create jobs”. Then the bar was lowered to subsidize routine replacement of worn or uneconomic equipment, to “save jobs”.

Steve

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We certainly do see companies like Microsoft, Apple, Google, Amazon, and Meta investing their earnings in growth opportunities. Its the low margin companies like steel that has trouble coming up with funds.

Govt incentives do reduce risk and encourage new ventures.

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And, sometimes, it’s simply welfare for the well connected.

Steve