On Thursday, the Department of Energy announced it had completed a $1.6 billion loan guarantee aimed at upgrading approximately 5,000 miles of transmission lines.
These improvements to the grid are intended to facilitate electricity transmission in Indiana, Michigan, Ohio, Oklahoma, and West Virginia. The initiative, which focuses on lines managed by American Electric Power (AEP), will not create new routes but will enhance the capacity of existing ones.
AEP ranks among the largest utility companies and transmission line operators in the country, with a presence in 11 states. The 5,000 miles set for upgrades account for about 13% of its entire network.
The loan guarantee was put forward by the Biden administration just before President Trump took office. In the past, the Trump administration has pointed to approvals made between Election Day and Inauguration Day as reasons for halting certain projects.
It remains uncertain why this particular grid upgrade was treated differently from other projects that the Trump administration is reviewing for cancellation or has already moved to cancel.
In Minnesota, the Department of Energy is working to withdraw a $467 million grant that would have enabled 28 gigawatts of new generation capacity, primarily from solar and wind sources. Another project in Oregon involved $250 million in grants to link several renewable energy initiatives.
However, the most significant transmission project targeted for cancellation by the Trump administration is a $630 million grant to update California’s grid. Much like the AEP effort, this project aims to maximize the existing grid’s capacity to reduce congestion. The California plan includes testing advanced conductors and dynamic line rating technology, both designed to increase the amount of electricity that can be carried along established routes—a solution often less costly than constructing new lines.
AEP’s project will also involve installing new conductors on the lines. The loan guarantee will help the company obtain loans at a lower interest rate, which is expected to save at least $275 million—savings the company says will be passed on to its customers.
Energy Secretary Chris Wright stated that the loan will “help ensure lower electricity prices throughout the Midwest.” The states included in the project already have some of the lowest power rates in the country.
The loans will be provided by the Loan Programs Office, which the GOP has renamed the Energy Dominance Financing Program. This office was created under the 2005 Energy Policy Act and has traditionally supported clean energy and manufacturing ventures. Its loan default rate is about 3%, significantly lower than that of private lenders.