Portions of the Inflation Reduction Act (IRA) will likely be rolled back and the Federal Energy Regulatory Commission (FERC) chair will probably be changed and federal funding for clean energy may be lowered under the Trump administration—possibly undermining distributed energy resource (DER) and microgrid development. However, states, consumers and corporations are expected to drive progress.
That was the message from members of an expert panel that spoke during a Dec. 18 teleconference, Continuing Clean Energy Progress Under the Trump Administration, from the World Resources Institute.
All forms of electrons needed to meet electricity demand
The panelists said that the U.S. will need electrons from all possible energy sources—along with expanded transmission to move the electrons— to meet growing demand from data centers and electrification. For the short term, that will include natural gas plants and other fossil fuels.
Load growth had been growing at less than 1%, but it’s increasing by up to 5% in some areas, said Richard Glick, Principal, GQSenergy and former Chairman at the FERC.
“We’re not adding enough generation quickly because of the interconnection process,” he said.
In August, the Southwest Power Pool, overwhelmed by the rising wave of decentralized energy projects such as solar plus storage microgrids, requested relief from FERC. The power pool asked for FERC’s permission to delay its 2024 interconnection queue cluster study progression and to stop accepting new distributed energy project requests until the power pool can get its process under control.
The FERC request highlights a key challenge for the nation’s grid system operators such as Southwest Power Pool Mid-Continent ISO, California ISO, PJM and others. The pace of new distributed energy project applications apparently is more than the systems can handle and leading to interconnection delays of up to five years or more.
Some optimism about clean energy
In spite of interconnection woes and reduced federal funding, some panelists said they see good news for clean energy on the horizon.
“I’m optimistic for the future,” said JC Sandberg, chief advocacy officer, American Clean Power Association. Clean energy sources are an important part of the generation mix and that won’t change, he added.
The last time former President Donald Trump was in office, strong state policies supporting clean energy, high consumer demand and commitments from corporations kept clean energy development moving, Glick said.
David Terry, president, National Association of State Energy Officials, also expressed positivity about the future. “I’m very optimistic. We’re seeing tremendous economic growth and innovation. Markets are guided by state policy and regulatory policy. There’s incredible corporate demand for clean power and not nearly as much disarray at the state level as we’ll see at the federal level,” he said. He expects more multi-state collaboration, he added.
An early phase out of IRA tax credits?
On the negative side, it’s likely the new administration will phase out the IRA’s tax credits for clean energy more quickly than initially planned, said Keith Martin, partner and co-head of U.S. projects for the law firm Norton Rose Fulbright.
Both the value of the tax credits and the duration of the credits might be lowered, Sandberg said. “All kinds of things could happen. It will all be hotly debated and contested,” he said.
While many fear that portions of the IRA will be repealed, it has attracted the backing of some Republicans in Congress, suggesting that all or part of it may remain in place.
In August, 18 House Republicans sent a letter to House Speaker Mike Johnson asking him to focus on business and market certainty as he considers efforts to change or gut the IRA.
In addition to the IRA, financing from the Environmental Protection Agency and Solar For All funding might be trimmed under the new administration, Terry said.
FERC chair may be replaced
In addition to changes to the IRA, it’s likely the new administration will change the makeup of FERC, Glick said. FERC now has three Democratic and two Republican commissioners, including a Democratic chair. “The president can replace the chair but not fire commissioners,” Glick said. It’s likely that Trump will replace the chair with a Republican, he said.
That’s important because the chair decides which issues can come up for a vote.
Speeding interconnection a priority for the clean energy industry
A new chair may also impact how FERC implements decisions such as FERC Order 2023, which is expected to reduce backlogs for developers that want to connect to the transmission system. It aims to improve interconnection certainty for project developers and provide for transmission access for new technologies, according to a FERC explainer.
FERC Order 2023 creates a first-ready, first-served study process. It also establishes higher financial requirements for interconnecting customers and transmission providers. And it requires transmission providers to implement a “cluster study” instead of the first-come, first-served study process that has been in place for many years and has slowed DER developers’ interconnection efforts.
Some DER and microgrid developers have applauded the first-ready, first-served study process, but said that FERC didn’t go far enough in providing transparency about the costs imposed by transmission providers for upgrading their systems to accommodate new DERs. Those costs are too high, and may not reflect the true costs, they have said.
Another attempt to address interconnection challenges is a proposal from PJM, the Reliability Resource Initiative. It would allow projects that provide reliability to move more quickly through the interconnection process, Glick said.
The impact of resilience funding on small utilities
In addition to efforts to speed interconnection, issues that are now moving clean energy forward include resilience funding from the federal Department of Energy (DOE), said Terry. The 5-year, $2.5 billion DOE Grid Resilience Utility and Industry Grants have gone mostly to small utilities and states. “That’s hugely positive,” Terry said. The Grid Resilience and Innovative Partnerships Program (GRIP) has also been helpful, he said. That program aims to accelerate reliability projects to provide reliable, clean and affordable electricity to all American communities.
Overall, project development has accelerated recently as developers have rushed to finish projects before Trump takes office and possibly changes tax policy, Martin said.
While projects move forward, so does the electricity demand from data centers and electrification efforts. It’s important to keep an eye on the cost of adding resources to meet that demand, Sandberg said.
How will meeting electricity demand impact rates?
“The data center explosion and demand has changed the power landscape in the U.S.,” he said. “It remains to be seen how it will flow down to ratepayers.” It’s quicker to build renewable energy projects than fossil projects but transmission is a challenge for renewable energy, he added.
Also uncertain is exactly how the new administration will decide to address clean energy.
“It will take a while to figure out how the new people in leadership will behave and what their priorities will be,” Sandberg said.
