Seeking federal funds for clean energy projects? Consider these factors
The Infrastructure Investment and Jobs Act (IIJA), signed into law in 2021, authorized a total of around $75 billion in new federal funding specifically for clean energy and power projects. The Department of Energy (DOE) is responsible for allocating these federal funding dollars, and will largely do so in the form of grants that are designed to work alongside state and private investments in critical infrastructure and/or emerging energy technologies. The types of technologies and potential projects identified in the IIJA, which is also known as the Bipartisan Infrastructure Law (BIL), include:
1) Regional clean hydrogen hubs
2) Battery manufacturing, recycling, and materials processing
3) Electric grid stability, reliability, flexibility, and resiliency
4) Clean direct air capture hubs
5) Carbon capture pilot programs
6) Critical materials
7) Energy efficiency and storage programs
There will be ample opportunities for public (states, local governments, agencies, etc.) and private (manufacturing, construction, and clean energy companies, etc.) entities to obtain government grants, loans, and/or awards through 2026 for these types of projects. (Reference inset for Overview of the IIJA.)
For those entities looking to access IIJA federal funding dollars for clean energy and power projects, we urge you to consider these four key factors when evaluating the requirements, risks, and benefits of these funding opportunities.
Most of the DOE grant funding opportunities under the IIJA will supply less than 50% of the total capital needed for a particular project. The remainder needs to be obtained through other sources. The ability to demonstrate availability of the needed additional capital is critical in the approval of any grant by the DOE. In addition to determining if a project has appropriate capitalization, the DOE will analyze an applicant’s initial plan to determine financial feasibility, potential issues with project development, risk management procedures, permitting and environmental compliance, and community engagement and impact plans. All this will be used to make an initial go/no-go decision. If the DOE issues a positive grant (go) decision, then funding will occur over time as a project moves through the different development and operations lifecycle phases: fully developing, permitting, and financing plans for the project; construction and integration; and ramp-up and operations. Knowledge of what the DOE requires and when they require it is extremely important in keeping the development and construction process moving forward efficiently.
Once a grant has been approved by the DOE, it is important to successfully perform on your contract deliverables. The quality of your communication, reporting, and performance will impact your ability to apply for additional grants in future. The government maintains formal notes of whether you met delivery and/or timing requirements. Make sure to communicate frequently with your U.S. government granting officer and any of their representatives to get regular feedback, to understand and fix issues before they become problems, and to ultimately achieve high ratings for application and usage of the grant funds.
While the actual winning of a federal grant or award may seem like the biggest hurdle, it is only the beginning of a long-term “relationship” with the government. Your company needs to have the proper people, processes, and technologies in place to successfully execute on the deliverables and to be able to demonstrate to the government that you are meeting all the requirements that come with government awards. This entails providing the government with ongoing reporting on areas such as operating performance, financial results, risk management, permitting and environmental compliance, community engagement, and future growth plans. If your organization does not have the right people with the requisite knowledge about grant funding reporting, you could inadvertently trigger a noncompliance that could result in clawbacks, fines, and/or penalties. Confirming that you have the proper processes and information technology in place is critical.
One of the most challenging areas of compliance lies in the capability requirements of business systems such as accounting, tax, estimating, and purchasing. The government expects all your internal systems to provide the information they need and to comply with applicable regulations and reporting requirements that are not prevalent in the private sector. Establishing the proper systems for government contracts and/or grants can require a significant upfront capital investment. In certain cases, it may be more effective and cost efficient to have an experienced third party take on these tasks for you. While applying information technology-based solutions such as compliance dashboards or integrity monitoring systems can help facilitate compliance, the type, complexity, and volume of government awards play a larger role in how an organization should approach the investments they make in the technology and systems.
While understanding these four key factors will help you evaluate a funding opportunity’s requirements, risks, and benefits and start you off on the right foot, balancing the cost of compliance with the many rules that come with federal grants can be a significant challenge. It can be greatly beneficial to work with advisors who have detailed knowledge of how the DOE makes grants and can help you access the available federal funding for clean energy and power projects, then navigate the sometimes-daunting U.S. Government requirements and parameters. The DOE also recently set up an office of State and Community Energy Programs (SCEP) to create new and more accessible pathways to federal funding and technical assistance partnerships for states, tribes, and local communities. SCEP will help communities nationwide significantly accelerate the deployment of clean and reliable energy technologies.
Contact our team with questions or to get started.
Frank Banda, CPA, CFE, PMP, Managing Partner, Government and Public Sector Advisory
Anton Cohen, CPA, Partner, Renewable Energy Industry and Project Finance and Consulting Practice Leader
Richard Meene, Principal, Government Contracting
Arthur Simonson, Managing Director, Project Finance & Consulting, Value360
Chase Clark, Senior Manager, Government Contracting
- $110 billion for roads, bridges, and other major projects
- $65 billion to update the nation’s electricity grid
- $66 billion for passenger rail
- $65 billion for broadband internet
- $55 billion for water infrastructure
- $50 billion for climate and cyber resiliency projects
- $39 billion for public transit
- $25 billion for airports
- $21 billion for environmental remediation projects
- $17 billion for ports and waterways
- $7.5 billion to construct EV charging stations
Source: White House Fact Sheet, November 2021