US Department of Energy to deploy $1.2bn for transmission buildout

North America’s DOE is soliciting proposals through round two of the Transmission Facilitiation Program, anticipating deployment of up to $1.2 billion to accelerate transmission buildout.

The Department has issued a Request for Proposals (RFP) for the second round of the Transmission Facilitation Program, a revolving fund supported by the Bipartisan Infrastructure Law to help overcome financial hurdles facing large-scale new and upgraded transmission lines.

Through the RFP, $1.2 billion in federal support is expected to accelerate transmission buildout through capacity contracts, an approach aiming to increase the confidence of investors and potential customers while reducing risk for projects.

Additionally, these federal investments are expected to unlock billions of dollars of state and private sector capital to build transformative projects that modernise and increase the reliability of the power grid.

“There’s no way around it: to realize the full benefit of the nation’s goal of 100% clean electricity by 2035, we need to more than double our grid capacity,” said US Secretary of Energy Jennifer M. Granholm.

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Transmission buildout and capacity contracts

Administered by the Grid Deployment Office, the Transmission Facilitation Program authorizes the country’s DOE to borrow up to $2.5 billion to assist in the construction of transmission lines that otherwise would not be built and encourage increased capacity of planned lines.

To drive home this construction, the DOE’s RFP will use a mechanism known as capacity contracts, which will commit the Department to purchase up to 50% of the maximum capacity of a transmission line.

Transmission infrastructure financing relies on demonstrating to potential investors that the line has committed customers. But customers often can’t commit until they are sure a project will be developed and available when needed.

This would be where the DOE’s capacity contract comes in, establishing the agency as an ‘anchor customer’ who can provide certainty for potential financers and other customers.

By offering capacity contracts to late-stage and ‘shovel ready’ projects, the DOE is hoping that investor and potential customer confidence will increase risk of project developers under-building or under-sizing transmission capacity contracts will decrease.

The DOE will sell its capacity rights in these projects to other customers to recover its costs.

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Solicitation round two

The RFP builds on the first solicitation issued by the DOE in 2022; on October 20, 2023, the department announced it entered into the first round of capacity contract negotiations for up to a total of $1.3 billion.

The negotiations resulted in the buildout for three transmission lines crossing six states that will add 3.5GW of additional grid capacity throughout the United States, equivalent to powering approximately 3 million homes.

The selected projects include the Cross-Tie 500kV Transmission Line (Nevada, Utah), Southline Transmission Project (Arizona, New Mexico), and Twin States Clean Energy Link (New Hampshire, Vermont).

DOE’s National Transmission Needs Study, released October 2023, estimates that by 2035 the United States must more than double existing regional transmission capacity and expand existing interregional transmission capacity by more than fivefold.

The submission deadline for Part 1 of the application is March 11, 2024.

Soon, DOE’s Grid Deployment Office expects to release a separate RFP focused on public-private partnerships to build transmission infrastructure that connects isolated microgrids to the grid in Alaska, Hawaii, and US territories.