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Alex Kimani

Alex Kimani

Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com. 

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New Debt Limit Deal Commits To Speeding Up Energy Projects

  • Negotiators from the Democratic and Republican party reached an agreement to raise the debt limit on Sunday.
  • Among its key provisions, the new deal will make it easier for both fossil fuel and renewable energy projects to get licenses.
  • The deal will not make any changes to the Inflation Reduction Act’s climate and clean energy provisions.
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U.S. financial markets breathed a collective sigh of relief on Monday after negotiators from Democratic and Republican parties reached an agreement to raise the debt limit on Sunday night, days before the government hit its borrowing limit. If Congress approves the new deal, the federal government will have the liberty to borrow money until 2025.

Among its key provisions, the new deal will make it easier for both fossil fuel and renewable energy projects to get licenses. 

Long advocated for by Democratic Senator Joe Manchin of West Virginia, the new rules will basically streamline the environmental review process, potentially getting projects off the ground faster. 

House Speaker Kevin McCarthy says he has pledged to Biden to continue working with the White House and Democrats “because we need energy--all forms of energy, especially for our grid--to double,” adding that, “We made a commitment that we’re not stopping now. That would also deal with transmission, it would deal with pipelines, and others. I had that conversation with the president yesterday and with the White House.”

Changing Environmental Laws

In the new agreement, several tweaks to a 50-year old bedrock environmental law known as the National Environmental Policy Act (NEPA) have been made, though many changes sought by Republicans were omitted.

However, Republicans did score an important victory here in the form of a one-year limit on environmental assessments and two years on environmental impact statements, though it remains unclear how the deadline would be enforced. Further, there’s a provision to designate a sole lead agency to develop a single environmental review. 

Related: Memorial Day Drivers Get Cheaper Gasoline Prices Thanks To Flagging Crude

Perhaps, more importantly, the deal will not make any changes to the Inflation Reduction Act’s climate and clean energy provisions.

Republicans have touted the changes as “the first significant reform”  since 1982 to the major environmental law, adding that the deal would boost coordination, predictability and certainty for the federal permitting process.

On the other hand, dozens of progressive Democrats and environmental groups were opposed to big changes that would undercut NEPA, arguing such changes would put frontline communities at risk and worsen global environmental injustice.

Grid Upgrades

One of the biggest barriers to the United States realizing its dream of having a 100% renewable grid is the intermittency of renewable power sources. After all, our grids are designed for near-constant power input/output whereas the wind doesn’t always blow and the sun doesn’t always shine. For the transition to renewable energy to be successful, our power grids have to undergo major upgrades and also become a lot smarter. Luckily, the debt agreement includes energy-storage components and a study on high-voltage electric transmission, a Democratic priority considered necessary so as to help tap billions of dollars in clean energy funds under President Joe Biden’s landmark climate law.

The legislation, known as the Building Integrated Grids with Inter-Regional Energy Supply Act, would require regions to be able to transfer at least 30% of their peak demand between each other thus encouraging more large-scale interregional transmission.

What we’re talking about right now is an area where Democrats and Republicans can come together. We need to be building stuff, we need transmission, we need to be able to get some of this renewable energy across the country and onto the grid,”Representative Sharice Davids, a Kansas Democrat, said on Thursday. 

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Last year, the Department of Energy (DOE) launched the Better Grid Initiative that seeks to develop new and upgraded high-capacity electric transmission lines. The initiative will deploy more than $20 billion in federal financing tools, including a $3 billion expansion of the Smart Grid Investment Grant Program; a new $2.5 billion Transmission Facilitation Program and more than $10 billion in grants for states, tribes, and utilities to enhance grid resilience and prevent power outages. The program will also tap into existing tools, including the more than $3 billion Western Area Power Administration Transmission Infrastructure Program, and a number of loan guarantee programs through the Loan Programs Office.

The DOE’s summary of the Initiative states that it will “identify critical national transmission needs and support the buildout of long-distance, high-voltage transmission facilities that meet those needs through collaborative transmission planning, innovative financing mechanisms, coordinated permitting, and continued transmission-related research and development”.

By Alex Kimani for Oilprice.com

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