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The future of federal energy funding

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Federal funding presents major opportunities for utilities, but navigating the complex landscape of incentives, grants, and shifting political realities can be daunting. How should utilities position themselves to secure funding, optimize strategic investments, and prepare for potential policy changes as power shifts in Washington?

In this episode of Power Perspectives, that question is tackled by Stephen Haubrich, Management Consultant at ScottMadden. With deep expertise in regulatory strategy and utility financing, Stephen shares best practices for utility decision-makers, discusses the impact of federal programs like the Inflation Reduction Act (IRA), and explores how utilities can remain flexible in an evolving political environment.

Tune in to get expert advice on topics in the range of:

  • The current federal funding landscape for utilities and successful case studies
  • Best practices for utilities to position themselves for funding opportunities
  • Balancing short-term wins with long-term strategy in federal funding
  • The impact of political shifts on programs like the IRA and what utilities should do next
  • How utilities can stay agile amid regulatory uncertainty

Whether you're a utility leader, policymaker, or industry stakeholder, you'll want to join podcast host Matt Chester in this conversation with Stephen as he provides valuable insights on how to maximize federal funding benefits while mitigating risks.

This episode is brought to you by ScottMadden.

NOTE: This conversation was recorded before President Trump's inauguration. 

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Thanks to the sponsor of this episode of the Power Perspectives: ScottMadden

Key Links:

ScottMadden on Energy Central: energycentral.com/o/scottmadden

Stephen Haubrich's profile on Energy Central: energycentral.com/member/profile/stephen-haubrich

Ask a Question to Our Future Guests: Do you have a burning question for the utility executives and energy industry thought leaders that we feature each week on Power Perspectives? Leave us a message here for your chance to be featured in an upcoming episode: www.speakpipe.com/EnergyCentralPodcast

 

TRANSCRIPT

Matt Chester:

Utilities today are facing a complex landscape of federal funding opportunities, but alongside these opportunities come questions. How should utilities be navigating this funding maze amidst political shifts? How do they prepare for the future, especially with the potential impacts of a new administration on existing policies like the Inflation Reduction Act? Today, we're diving into these pressing issues with Stephen Haubrich, a management consultant at ScottMadden, and an expert when it comes to navigating these federal funding topics.

With years of experience helping utilities strategize in response to shifting regulations and market dynamics, Stephen is here to provide a data-driven perspective on what utilities should be doing now and in the near future to maximize federal funding benefits and minimize their risks. I'm Matt Chester, your host and Energy Central Podcast producer, and community manager, and I'm coming to you live from Orlando, Florida. And before diving in, I do want to thank ScottMadden, our sponsor of today's episode. But now, let's bring Stephen into the podcast booth. Stephen Haubrich, welcome to the Energy Central Power Perspectives Podcast.

 

Stephen Haubrich:

Good morning, Matt. It's a pleasure to speak with you this morning. Thanks for having me on the podcast.

 

Matt Chester:

Of course. We're happy that you're here with us. And before we dive into that meaty topic we set up just before, I want to give you a chance to introduce yourself to our audience a little bit more. Tell us more exactly about what your role is at ScottMadden and what you do when it comes to assisting utilities in this world of chasing or capitalizing on federal funding opportunities.

 

Stephen Haubrich:

Sure, Matt. Thank you. So I'm a partner with ScottMadden. I've been with the firm for about 15 years, and our firm has been focused on the energy industry for about 40 years. As part of that, we provide expert guidance in federal funding opportunities. One of the things that I think is really helpful in terms of our ability to support clients is our intersection of understanding the utility business and the federal funding process, and that has helped us to secure about $1.8 billion in federal funding awards in 2024 alone, so we've had a lot of success with our clients in this last year. Now, as you mentioned, personally, I've been working in federal funding for quite a few years, and my role is helping entities that are interested in federal funding.

A lot of times that's utilities, but it also can be universities or anyone else who's applicable for these opportunities to prepare for and successfully navigate this end-to-end federal funding process. And so forgive me if I go a little bit long here, but this is one distinction I want to make at the outset. A lot of times when folks think about federal funding, they think about the application process and receiving an award. And what we really think about at ScottMadden and how I see this is it's really more of an end-to-end process, and that process starts with having a federal funding strategy.

You want to have a strategy that's tied to your company's objectives and your corporate strategy, and then you want to have a process for identifying the set of potential opportunities out there that might support your federal funding strategy, being able to then evaluate those, figure out which ones work best for you and for your strategy, then developing the application like we just talked about. Importantly, then, is being prepared to navigate the negotiations process which follows before you have a signed agreement. And then you need to prepare for the compliance and reporting requirements that are going to follow, and manage your funding disbursement requests and project closeouts. It's a lengthy process and it can be many years depending upon the type of work, but there's a lot more to it than just application and award. And so just to summarize then where I see my role is in helping our clients to navigate that entire process successfully.

 

Matt Chester:

Right. No, that's really helpful context and background. And now let's make it a little bit more tangible. Can you talk to us about some of the major mechanisms that you've seen such financing come from the government to go to the utility sector?

 

Stephen Haubrich:

Sure. I think there's a lot there we could talk about. I think about three areas when you ask that question. One is the types of programs that are available, a second is the types of projects that can be funded and that we've seen funded through this, and then the third would be the funding types themselves: grants, loans, et cetera. So maybe to unpack that first one a little bit... and I'll speak mostly to our experience and some of my personal experience with these types of awards. Some of the programs are in the IRA, so the Inflation Reduction Act, the New Era Program, the ITC, which is an investment tax credit for renewables, the Production Tax Credit or PTC... we have worked with 45U, which is a nuclear production tax credit. On the IIJA side, so that's the Infrastructure Investment and Jobs Act, we've also supported RIP, which is one of the larger programs in that act.

Also, we have experience working with FEMA and we have worked with some of their 428 programs, which is disaster recovery, as well as their 406 and 404 programs, which are designed for hazard mitigation or hardening those investments further from future damage. So that's the landscape of some of the programs that we're either involved in currently in that end-to-end process or have recently received awards for. With that in mind, let's think a little bit about some of the specific types of projects or investments that we're seeing and have received awards for for our clients, and that would be new utility scale solar construction. Thinking about power purchase agreements or PPAs, hydro, wind, and solar PPAs are included in some of these recent awards that we've been involved in. Construction of microgrids, transmission line and substation investments to improve energy efficiency or to better integrate renewables, IRA tax credits for existing facilities and new facilities to be constructed, so the ITC, PTC, and 45U that I mentioned earlier.

Through FEMA funding, some of the investments in the project types that we are currently supporting in this area impact generation, transmission, and distribution, so thinking about generation, natural gas plants, hydro facilities, transmission line rebuilds, and transmission substation rebuilds, even elevations to try to get them higher above potential flooding, relocations to entirely different areas to, again, avoid flood-prone areas. On the distribution side, rebuilds of overhead networks, undergrounding of distribution to protect it from future damage... so a lot in these various areas, as you can see, a broad range of different types of projects that are being funded through those programs that I just mentioned. And lastly, I would just mention in response to your question, the different types of federal funding available, the one that comes to mind for most people is grants, right?

We talk about grants, grants management, but there's more to it than just grants. One of the big mechanisms that you see federal funding come through in is loans, and those can be forgivable loans, so they start out as a loan, but they end up looking more like a grant. You have low interest loans at many different potential interest rates, and then even zero-interest loans. And then again, with your incentives, you can have an investment incentive that really gives you a large reduction in your investment cost upfront, or production incentives where you receive some type of tax credit for each megawatt that you produce over a long period of time.

And then one other important thing to mention is this new direct pay or it's also called elective pay that has, in the IRA, opened up the accessibility of these tax credits to entities that are tax-exempt. And so what happens is because they don't pay taxes, in the past, they wouldn't have been eligible for these tax incentives, but through direct pay or elective pay, they are now eligible to receive a direct payment for what would've been the amount of that tax rebate or incentive. And in further, entities are allowed to sell those tax credits through direct pay, so it really broadens the spectrum of who's eligible for these types of incentives. I know I covered a lot there, but there's a lot to that question.

 

Matt Chester:

Yeah, there is a lot. And you said it yourself that it's a very broad area, so I can imagine it's easy for utilities, especially if they're unfamiliar with these practices, to get overwhelmed by the complexity of funding programs. So for those utilities who are maybe new or just, again, trying to navigate the changing waters, what are some best practices for the decision makers just to make sure they're well-positioned to get access to those funds and those opportunities?

 

Stephen Haubrich:

Yeah, that's a great question and one that we've helped quite a few clients with. I think the starting point for me is to think about these federal opportunities from this end-to-end perspective, because what can seem overwhelming is if you don't understand the requirements, you don't understand the process, or if you only understand a small portion of it. Seeing it as this end-to-end process, which starts with strategy and goes all the way through the application, the war, and the execution all the way to the final closeout and funds disbursement is going to be helpful. You want to start with the federal funding strategy, like I mentioned, and there, the big thing you want to do is connect that, as we talked about earlier, to your corporate strategies and your corporate objectives. And by doing that, you're going to make sure that the funding, your federal funding that you're going after, is tied to and supporting your corporate objectives.

That's number one. And then we really advise utilities to have, or applicants to have, a identification and evaluation process. You want to have some methodology for determining what-all is out there that might meet your strategy, and importantly, before you go too far down the road of pursuing it, is the juice worth the squeeze? How beneficial is this program when we look at the benefits relative to the cost? And along those lines, something that I don't think everyone thinks about upfront is whether or not they can actually afford to pursue some of these opportunities, because Matt, these funding opportunities are not always 100%, and matter of fact, a lot of times they're not 100% of the cost. So if you're pursuing something that is $100 million dollars, do you have the $20 million, $40 million, whatever it might be? Or if it's a $1 billion dollar project, do you have a couple hundred million dollars that may be required for your part of the financing or for the investment itself?

And so that's an important question to make sure you're thoughtful about upfront, and it takes some of the stress out as you think about more of these aspects early on and you put that into an evaluation process that helps you understand that what you're pursuing is something that's actually worthwhile and executable. A few more things to think about is we advise our clients to have someone who's on point for federal funding at their company. It could be part-time, it could be full-time, it could be multiple folks depending upon how many opportunities you're pursuing, the size and scope of those opportunities, but at least have someone who's on point. Also, work with federal funding experts, so whoever that is that you trust and you know has the experience and the expertise to help you navigate the process. But it would be important to work with folks who understand the process.

Importantly, we think engaging legal counsel... we work a lot with law firms who support federal funding, in particular understanding nuances of the requirements that go along with these federal funding opportunities. In some cases, the requirements are very clear-cut and there's no real need, but in some cases they could be relatively new or new to that applicant, and so they need to understand them and what it means for them. Legal counsel is very helpful in those areas. Get comfortable with ambiguity. That's one that is really unavoidable. These programs, it's not always crystal clear what the requirements are. Sometimes, there's some interpretation involved and it's sometimes difficult to get responses in a timely manner. Sometimes, it's just a result of the funding agencies being very busy, and so you do have to get used to ambiguity, but if you're working with someone who understands the process, they can help you navigate that and give you some clarity about what's coming next.

I would say just a couple more things. Think about preparing early for compliance and reporting. As you are getting into the applications and you're really starting to understand what those full requirements are, especially as you get into the negotiations phase, start right away thinking about how you're going to set yourself up to comply with those over the long term. And that may mean that you're looking at your processes and procedures that are impacted by those requirements, perhaps updating your governance, but you want to start thinking about that early. And then, you also may need to think about implications to existing contracts that have already been executed that may be required for that work, so it might not be that these requirements impact all new things you're going to be doing, but you may have to retroactively go back and make some adjustments to existing contracts. Those are some of the key things, I think, that if you think about upfront and you think about that end-to-end process will really help take some of the anxiety out of it.

 

Matt Chester:

Yeah, no, I think those are a lot of great tips. And you're right, it's an anxiety-filled process, so good to get a lot of that information from your experience. And one thing I've learned from being involved with the Energy Central community and all the utility decision makers is it's a unique industry compared with the wider economy. And one of the ways is that they face this constant push and pull between needing short-term wins and payoff, but also keeping on pace with their longer-term strategic goals. How do you really see utilities reconciling those tensions when it comes to this silo of the federal funding process?

 

Stephen Haubrich:

Yeah, that's a good question. And in response to that, I'm going to go back to something I talked about earlier, which is having that upfront federal funding strategy because if you have a federal funding strategy that's tied to your strategic goals and your near-term business objectives, to both of those, then by definition, the types of opportunities that you look at and that you evaluate and that make the cut in your evaluation will be the ones that meet those business objectives, whether they're near-term or whether they're setting you up for your long-term strategic goals. Having that upfront strategy, having a process for evaluating opportunities to make sure that they align with your objectives and your strategic goals, is the key to that answer to that question.

 

Matt Chester:

Okay, great. I want to dive into the elephant in the room, which is how federal fundings like the IRA, things that have created major opportunities, they might be in uncertain waters now as we have a new administration taking office. Can you provide your perspective on how utilities should approach their federal funding strategies in light of shifting political dynamics?

 

Stephen Haubrich:

Yeah, that is the million-dollar question, isn't it? Obviously, our clients are very interested in that. We've been having a lot of conversations in that area. And obviously, I don't have a crystal ball, no one has a crystal ball here, so we're trying to read the tea leaves like everyone else is. But the way that I think about this in framing up the considerations is really thinking about two things. One is, what do we know about the incoming administration's view of the program or the type of investment that you're looking to make? Because that's going to be different for everybody. There are so many programs, there are so many different types of investments, and the incoming administration doesn't have a singular view on every one of those. They have some different views on different types of investments and different programs, so it's number one is, what do we know about their view of that particular program or investment type?

And then importantly, the second thing you want to think about is, what do we know about where that ranks in their priority list? Those two things are important. So the first one, if I think... I might dive more into their view of the program, the new administration will have multiple levers to, say, impact these programs. So if they don't like a program, they'll have multiple options to impact that program. And I think we probably both agree that they'll find one of those levers that works, whether they look to repeal a particular act or program, whether they look to use impoundment, which is a presidential ability to not spend funds that have been authorized by Congress, or whether they look to make certain programs more administratively challenging, whatever lever that is, the more important thing is they'll find one that will work. So if we start with, "What is their view of the program?" we can use that to assess our risk level for pursuing it.

And then the second one, we think about prioritization. What that helps us understand is, how soon do we think they're going to get around to making a change to that particular program? So even if they've expressed that they're not a fan of it, let's say there's a near-term opportunity. If it's not high on their priority list, you may still have an opportunity to pursue that program, be awarded, and have funds obligated before any change is infected to that program. So we think about these two considerations of favorability about the program, and then priority of making some sort of change. If we played stuff through two scenarios, one could be... let's say you're evaluating a particular opportunity and you're really on the fence. Your initial evaluation is you're almost ambivalent about whether you do or don't pursue, because when you look at the benefits and the costs, it's really close. And then you look at the changing political climate and you see that the program is unfavorable to the new administration, it's higher on their priority list. That probably tips your evaluation to, "Don't pursue."

So that's one scenario. Another one could be that you're evaluating a particular funding opportunity. It's a no-brainer. For you, for your entity, it is a slam dunk. The benefits far outweigh the cost. You look at the political changing climate and you recognize that it's not really on the... maybe the administration hasn't really expressed a view on it, or they're actually see as a favorable program, in which case you continue to pursue. So that's where there's no real one answer, and it depends upon the particular program, it depends upon how attractive that opportunity is to you as to whether or not this political shift in environment would lead you to either maybe not go for an opportunity you were considering or still go for it anyway.

 

Matt Chester:

Right. No, and that's really interesting that, like you said, there's no single solution. It depends on the specific program and the priorities. So I'm wondering, given your expertise, can you give any insights about what specific funding programs or incentives should be high on the priority for utilities right now, whether because they might go away sooner or you just see them as being more valuable? And then in that, how do they balance immediate action with that continued need to plan for potential changes down the road under the new administration?

 

Stephen Haubrich:

If you have a strategy and you're trying to use federal funding to achieve or impact your business objectives, you shouldn't think about pursuing a single federal funding opportunity to achieve those business objectives. And so having said that, you want to look at a potential range of different programs that you could, if you won one or more of them, still achieve your business objectives because many of these are highly competitive programs. They are sometimes oversubscribed by four or five, even sometimes 10 times, the amount of funding available. When I say oversubscribed, it means there's five to 10 times more requests for funding through the applications than there are actual funds.

And so if you think about using different federal funding opportunities to achieve your business objectives, a well-designed federal funding program would have multiple different programs, opportunities that you could pursue to achieve those business objectives. So what would happen is, as you think about programs to prioritize or deprioritize, we talked earlier about looking at favorability, how high it is on their priority list, and if you're looking at it from, "We're probably going to have to pursue multiple opportunities to achieve our objectives," it may allow you to remove a few of those potential opportunities and perhaps even add some new ones to backfill or replace those. So thinking about it from a portfolio perspective, I think, is helpful.

 

Matt Chester:

Okay, great. And now let's zoom back out a little bit and look at the big picture. The utility sector, not a stranger to regulatory complexities. So how do you see the broader industry navigating the evolving regulatory landscape in a way that helps them maximize the impact of federal funding opportunities that are there regardless of the political landscape?

 

Stephen Haubrich:

Yeah, it's a good question. When you talk about regulation, I really think about that in two big areas. One is federal and the other is state. Those are your public utility commissions or public service commissions. And so at the federal level, indications from the incoming administration are that they are going to reduce federal regulation. That has been their stated objective, so if you're looking at an opportunity and you're thinking about the potential impacts of federal regulation on that opportunity, it seems reasonable that you would say that we would expect that that federal regulation would be no more than, and possibly even less than, it is today.

However, one thing we want to stress is that that is completely different than your state regulation, and so you really need to think about the impacts of your state regulation on a state-by-state basis. And that's going to vary for each individual, each entity, each applicant based on where they're located, and that's something that they need to monitor within their own state. At least at the federal level, it looks like no more than, possibly less regulation. At the state level, that's going to be a state-by-state decision.

 

Matt Chester:

Okay, great. Yeah, it sounds like some, again, interesting times ahead for our utility decision makers, but that part is nothing new. So Stephen, I want to thank you for sharing all these valuable insight on such an important topic, and I know, again, it's top of mind for many in the utility sector, in our Energy Central community. Before we wrap it up, I do want to move us to our lightning round, and that's where instead of learning about the topic, we're going to get a chance to learn a little bit more about you. So I'm going to throw at you a few questions. You only need to answer a word, a phrase, maybe a sentence. So are you ready?

 

Stephen Haubrich:

I'm ready. Let's do it.

 

Matt Chester:

Okay. What is your favorite guilty pleasure TV show, movie, or other piece of media?

 

Stephen Haubrich:

I would say I don't watch a whole lot of TV, but when I do, it's sports, so I'd say baseball and college football.

 

Matt Chester:

Great. What is your go-to comfort meal?

 

Stephen Haubrich:

As a native Floridian and living near the coast, I'd have to say seafood.

 

Matt Chester:

Nice. What's the most exciting aspect about the work that you get to do every day?

 

Stephen Haubrich:

I would say that it's helping clients with work that really moves the needle on their business objectives. So many of these programs we just talked about are transformative for these companies, so I find that really exciting.

 

Matt Chester:

Awesome. We've been collecting lightning round questions from our past guests to ask future guests, so recently, we had an episode where we chatted with Rob Brook of Neara, and he asked a future guest to answer this one. What is your perspective on localized generation consumption? What's missing, and how do we really bring it to life?

 

Stephen Haubrich:

Yeah, so when you say localized generation consumption, I'm thinking of DERs, distributed energy resources, and the consumption piece really focused on how to maximize the consumption of that power as close as possible to the source. I'm thinking about it that way. I would say probably affordable and effective battery energy storage, so that you can better match up supply and demand from that localized resource over a greater number of hours during the day, even if it's not 24 more than just maybe say when the sun is shining.

 

Matt Chester:

Excellent. I love that. Great. So now you made it through our lightning round, and so given that, we want to give you the platform for the final message of today's episode that you can send to the executives, the decision makers who we know are listening in today. So what are the key questions or challenges utility executives should be thinking about in 2025 when it comes to federal funding and infrastructure investment?

 

Stephen Haubrich:

Yeah, thank you, Matt. So I'd say maybe a few things. One is that political change is on the horizon. We know that. Importantly though, the message I'd like to send is that opportunities will persist. They may change form, some of the existing opportunities may change, new ones likely will come around, but the organizations that are the best positioned to identify opportunities understand what's changing, that have a methodology for evaluating those, pursuing them, and successfully executing on them, those entities will continue to succeed whatever the political or regulatory climate.

I think that's an important message. Change is coming, but there is a way to navigate it. I think... and maybe another thing or two is if you didn't really hear anything else that I said today, I think if I can impress upon folks that... see federal funding as an end-to-end process. It is not just application and award. It goes from strategy all the way through to execution, and I would say that the real objective when you think about federal funding is not the award. That's a very important milestone, don't get me wrong, but the real objective and the way we see it is receiving the full amount of the funds available to you in a timely manner.

And to do that, it's a lot longer process that means complying all the way through the execution period, making sure that you are doing all the things you need to have all the expenses and all the funds allowable, and to prevent delays in that process by not having done things right along the way. Seeing that true objective of receiving the full funds in a timely manner is much more important than just the application and the award. I would say that wherever you are in the federal funding process, it's not too late to start fixing or working on any gaps that you might have identified in your approach or your readiness for long-term success. We have literally entered almost every point along that end-to-end process for our various clients to help them at any point in the process. I think those are the key things I would say, and thank you, Matt, for the opportunity to speak with you today.

 

Matt Chester:

Of course. No, thanks Stephen. We really appreciate your insights and sharing your experience. So you can always reach Stephen through the Energy Central platform where he'll welcome your questions and comments, and we'll want to give a last shout-out. Thanks to the sponsor of today's episode. Thank you to ScottMadden. ScottMadden is a management consulting firm serving clients across the energy utility ecosystem. Areas of focus include transmission and distribution, the grid edge, generation, energy markets, rates and regulations, corporate sustainability, and corporate services. So once again, I'm your host today, Matt Chester, and plug in and stay fully charged into the discussion by hopping into the community at energycentral.com and we'll see you next time at the Energy Central Power Perspectives Podcast.

 

About Energy Central Podcasts

Power Perspectives features conversations with thought leaders in the utility sector. At least twice monthly, we connect with an Energy Central Power Industry Network community member to discuss compelling topics that impact professionals who work in the power industry. Some podcasts may be a continuation of thought-provoking posts or discussions started in the community or with an industry leader that is interested in sharing their expertise and doing a deeper dive into hot topics or issues relevant to the industry.

Power Perspectives is the premiere podcast series from Energy Central, a Power Industry Network of Communities built specifically for professionals in the electric power industry and a place where professionals can share, learn, and connect in a collaborative environment. Supported by leading industry organizations, our mission is to help global power industry professionals work better. Since 1995, we’ve been a trusted news and information source for professionals working in the power industry, and today our managed communities are a place for lively discussions, debates, and analysis to take place. If you’re not yet a member, visit www.EnergyCentral.com to register for free and join over 200,000 of your peers working in the power industry.

Power Perspectives is hosted by Jason Price, Community Ambassador of Energy Central. Jason is a Business Development Executive at West Monroe, working in the East Coast Energy and Utilities Group. Jason is joined in the podcast booth by the producer of the podcast, Matt Chester, who is also the Community Manager of Energy Central and energy analyst/independent consultant in energy policy, markets, and technology.  

If you want to be a guest on a future episode of Power Perspectives, let us know! We’ll be pulling guests from our community members who submit engaging content that gets our community talking, and perhaps that next guest will be you! Likewise, if you see an article submitted by a fellow Energy Central community member that you’d like to see broken down in more detail in a conversation, feel free to send us a note to nominate them.  For more information, contact us at [email protected]. Podcast interviews are free for Expert Members and professionals who work for a utility.  We have package offers available for solution providers and vendors. 

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