Riding the Federal Funding Wave

Riding the Federal Funding Wave

August 03, 2009

Darrell Delamaide

The one time when you can really appreciate a well-oiled bureaucratic machine is when it's pumping out money.

The administration's $787 billion economic stimulus package provides some $65 billion in grants and tax credits for an array of energy projects. These funds turn the Department of Energy, other federal agencies and state governments into an ATM machine for the industry -- if they know which buttons to push.

So the industry is swinging into action, forming a number of working groups through the Edison Electric Institute, which represents investor-owned utilities, to cash in on this government largesse.

The stimulus package, designed to mitigate the recession with government spending to replace the collapse in consumer demand, was passed in February, and by mid-April, DOE had put out its first notice of intent to distribute grants totaling some $4.5 billion for smart grid projects.

By the early May deadline, an Edison Electric Institute working group had prepared a comment letter on the department's proposals. The main concern the industry group had was that DOE planned to cap the individual grants at $20 million. This amount was too small, the industry argued, given that some of the bigger smart grid projects involved total investments of $600 million and more. Individual grants should be more on the order of at least $50 million, they said.

But the industry is not complaining about the overall amount of $4.5 billion. "It's certainly enough to make a difference," says EEI's Ed Legge, who worked on the smart grid comment letter. "It can help accelerate the deployment of the technology."

The smart grid grants are a prime example of the administration's stated purpose with the package of killing two birds with one stone -- stimulating the economy with added government spending while incentivizing long-term structural changes that will make the country more competitive.

Renewable energy itself stands to benefit from $6 billion in temporary loan guarantees for rapid deployment of wind, solar, hydro and other renewable projects. Additional alternative energy funding includes $2 billion in grants for advanced battery manufacturing and $400 million for energy-related projects at the Defense Advanced Research Projects Agency.

A total $3.4 billion for fossil energy research projects includes $800 million for the Clean Coal Initiative Round III and another $1.5 billion for carbon-capture-and-storage demonstration and energy-efficiency projects.

Well-Oiled Machine

Further funds are being channeled through the states -- including $6.1 billion for energy-efficiency and conservation grants and $3.1 billion for state energy programs that focus on utility efficiency and renewable programs. Other energy-efficiency programs include $5 billion for weatherization of low-income homes.

For its part, the EEI has produced a 26-page summary of the various titles of the economic stimulus package pertaining to energy. In addition to the working group on smart grids, the industry group has formed several other working groups to coordinate input in other major grant areas.

"These measures will create jobs, promote economic growth and reduce the country's oil imports," writes EEI President Thomas Kuhn in a recent article. "At the same time, they will expedite the transition under way within the electric power industry to a more energy-efficient, lower-carbon future."

But Kuhn adds that further work would be needed to strengthen the nation's transmission system, particularly to deliver the electricity generated by renewable sources. Renewables, especially wind energy, are often located far from population centers. The organization says that the thorniest issue in this regard is siting, especially if the transmission lines have regional implications.

The first funding out of the gate, the smart grid grants, is a microcosm of how stimulus funds will work for other energy projects, and indeed for much of the stimulus package. With its deadlines for planning and funding within the next two years, the smart grid grants encourage companies to finalize or expedite their own plans.

Smart grid technology, for instance, is a key component of the conservation program announced last year by Dominion Virginia Power. The utility plans to spend $600 million on the project and to replace all its existing meters with smart, two-way meters. Consumer savings are expected to top $1 billion over a 15-year period. Florida Power & Light, meanwhile, said the stimulus package encouraged it to begin a $200 million smart grid system that will create up to 1,000 jobs.

A third big project announced in recent months is in the Houston area where CenterPoint Energy will install more than 145,000 smart meters by year-end. Following this pilot project, the company then plans to deploy smart meters to nearly 2.5 million consumers within a 5,000-square-mile service area over the next five years at a cost of $640 million.

And this is just a fraction of the overall stimulus money for energy projects, as other agencies ready their notices of intent for procedures to disburse funds. "I don't know how they keep it all straight," says EEI's Legge.

That, of course, is why you have a well-oiled bureaucratic machine.