Capitalizing Climate | Deconstructing the Infrastructure Bill

Monica Varman
G2 Insights
Published in
7 min readDec 7, 2021

In this second installment of our series, “Capitalizing Climate,” we break down the Infrastructure Investment and Jobs Act and its implications for climate-tech.

America’s infrastructure is aging, which affects the nation’s competitiveness in the global economy, resilience to climate change, and ability to adapt to the energy transition. 1 in 5 miles of America’s highways and major roads are in poor condition, and >100 bridges collapse on average each year. 40% of buses and 25% of rail assets are in marginal or poor condition, putting the safety of transit passengers at risk. Even in 2021, up to 40M Americans lack access to broadband.

On November 15 President Biden signed the Infrastructure Investment and Jobs Act (IIJA) into law, a $1.2 trillion bipartisan investment plan for the United States’ infrastructure, innovation, and industrial policy.

Highlights of the IIJA

  • Of the headline amount of $1.2T, there is $550B in new spending (“above baseline”) across transportation, water, electricity, broadband, and natural infrastructure
  • The IIJA outlines $170B in spending for clean energy investments, nearly double the $90B in the American Recovery and Reinvestment Act in 2008
  • Program areas that will receive significant funding boosts under the IIJA:
  • (1) carbon management $18B in funding earmarked for engineered ($12B) and natural ($6B) carbon capture, use, storage, and transportation (CCUS). Before FY20 the US government had only ever spent $11.5M on carbon removal — this is a step-change in CCUS funding
  • (2) battery supply chains $10B for raw material exploration and processing, component manufacturing, and battery recycling
  • (3) EV infrastructure$20B across buses ($10B for transit and school buses), charging infrastructure, and other transit
  • In addition to quantified allocations to existing or new program areas, the IIJA has a number of qualitative provisions that will be significant for key sectors, e.g. de-bottlenecking transmission capacity for 680GW of proposed zero-carbon capacity in the interconnection queue by expanding the Federal Energy Regulatory Commission’s (FERC) authority in transmission corridors

What the IIJA is not

  • The IIJA is largely focused on bipartisan priorities around innovation and industrial policy to achieve longer term climate goals, rather than step-changes in near-term spending on clean energy technology deployment
  • This is not a stimulus effort, it’s a programmatic expansion. Therefore, it will take time for money to move through the federal agencies to states and local governments, who are implementing projects

The Build Back Better bill, which is part of the reconciliation package the Senate will vote on (likely in the new year), contains $555B of additional climate-focused spending across EVs, renewables, and industrial sectors. Several important provisions remain to be passed in that bill, including

  • Clean Energy Performance Program to accelerate the transition to clean electricity
  • Extension and expansion of key tax credits such as the Investment Tax Credit (ITC) for solar, stand-alone storage, and transmission assets, the Production Tax Credit (PTC) for wind and hydrogen, and 45Q for carbon. The ITC for stand-alone storage would be a significant boost for deployment, since the ITC is only available today when storage is combined with solar. The proposed PTC for hydrogen ($3/kg) is substantial enough to make blue hydrogen and some green hydrogen at parity with grey hydrogen!
  • “Direct pay” for tax credits, which would expand the investor pool for those incentives as you would no longer need a substantial taxable income to benefit. This could open up opportunities for fintech providers targeted at retail investors looking to invest in these projects
  • Incentives for soil sequestration and regenerative agriculture
  • Establishment of a national green bank to mobilize public and private financing in infrastructure projects

Deconstructing the $550B of new spend

Breakdown of spending and potential climate-tech opportunities

Roads, Bridges, and Major Projects ($110B, 20%)

Highlights

$110B to fix aging roads and bridges, including repair, replacement, and rehabilitation. Largely allocated ($72B) into block grants for states to invest in state and local infrastructure. In addition, there a few distinct programs including:

  • $16B for highway safety improvement
  • $13B for congestion mitigation and air quality improvement
  • $7B for resilience
  • $6B for carbon reduction

Opportunities in climate-tech

  • Electrification: charging infrastructure (HW and SW), zero / low emission construction vehicles, energy efficient lighting, and e-bikes
  • Sustainable construction materials (e.g., carbon-neutral concrete, recycled metals)
  • Civil construction technology: B2B commerce and digitization platforms for construction
  • Data platforms and computer vision for traffic analytics

Power infrastructure and grid automation ($72B, 13%)

Highlights

  • $20B for advanced generation technologies (hydrogen, nuclear, advanced solar / storage)
  • $17B for transmission and distribution investments to increase grid resilience, reliability, and flexibility
  • $12B for engineered carbon removal, transportation, storage, and use. $3.5B of this is to establish 4 regional DAC “hubs,” each with capacity to capture >1M MTCO2 per year, orders of magnitude larger than the 10k tons currently being removed and stored around the world. An additional $3.5B will be for large-scale pilot and demo projects for carbon removal, $2B for transportation infrastructure and storage permitting, $2.6B for DOE programs on carbon storage validation and testing, and $300M is for procurement of products derived from capture carbon
  • $10B for battery supply chains, include mineral exploration and processing, component manufacturing, and battery recycling. $7B of this is for demonstration plants for battery component manufacturing and recycling. In addition, the bill extends the 48c tax credit, making $8B available as a 30% ITC for clean energy manufacturers
  • $5B for behind the meter resources (energy efficiency, DERs), including $3.5B for weatherization of low-income households

Opportunities in climate-tech

  • CCUS: Direct Air Capture (DAC) and engineered carbon removal technologies, products derived from captured carbon
  • Battery supply chains: mineral exploration and discovery platforms, next-gen component technologies and manufacturers, recycling companies
  • Grid flexibility and resilience: DER aggregation, long duration energy storage, grid rebalancing (e.g., dynamic line rating), predictive analytics / AI
  • Advanced generation: blue and green hydrogen manufacturers and end-uses, small modular nuclear, advanced nuclear

Passenger and Freight Rail ($66B, 12%)

Highlights

  • $58B for dedicated rail corridors (e.g., Amtrak Northeast corridor)
  • $8B for consolidated rail infrastructure and safety improvements

Opportunities in climate-tech

  • Zero emissions and autonomous rail systems
  • Safety and inspection, e.g. using vision / AI for fault detection

Resilience and remediation ($68B, 12%)

Highlights

  • $21B for remediation, including abandoned mine reclamation, orphan well remediation, Superfund site cleanup, and Brownfields cleanup
  • $17B for drought mitigation, including upgrades or replacement of water treatment infrastructure, watershed rehabilitation and risk management, and ecosystem restoration
  • $14B for wildfire management, including rehabilitation and restoration of trails and roads, hazardous fuels reduction, watershed protection, controlled burns, firefighting budgets, mechanical thinning, and a reforestation fund aimed at planting 1.2B trees over the next decade
  • $14B for flood mitigation through projects to harden infrastructure against storms and floods, natural ecosystem enhancement, and FEMA programs for flood-affected communities
  • $1.3B for cyber-risk management and response
  • <$1B for waste management, e.g. battery collection and recycling, post-consumer materials management, and marine debris cleanup

Opportunities in climate-tech

  • Disaster response and management technologies, e.g. firefighting operations management, fire suppression materials
  • Plastics reduction through material substitution and/or increasing recycled content
  • Data collection and monitoring, e.g., satellite data collection, ocean exploration technologies
  • Cybersecurity (IT and OT security)

Broadband ($65B, 12%)

Highlights

  • $46M for broadband deployment funding for states, including in rural and tribal areas
  • Remainder for inclusion and equity (e.g., subsidies for low income households)

Water ($55B, 10%)

Highlights

  • $30B for upgrades to drinking water infrastructure
  • $20B for projects designed to identify and replace water service lines with lead, PFAS, and other emerging contaminants

Public transit and EV infrastructure ($54B, 10%)

Highlights

  • $34B for repair, replacement, and/or enhancement of existing infrastructure, broken down as $19B (43% increase over baseline spending) for general investments. $8B for expanded commuter and light rail, bus, and ferry service, $5B for repair of buses and rail transit assets, and $2B for paratransit
  • $10B for zero and low emission transit buses ($5B) and school buses ($5B)
  • $8B for EV charging and hydrogen / propane / natural gas fueling infrastructure
  • $3B for projects to strengthen smart mobility
  • $3B for passenger ferries, including $250M for an electric or low-emitting ferry pilot program

Opportunities in climate-tech

  • Electrification of transit, including buses, charging infrastructure (HW and SW), and ferry boats
  • Traffic and fleet management technologies, e.g. routing SW, predictive maintenance

Airports, ports, and waterways ($42B, 8%)

Highlights

  • $25B for airport ($20B) and ATC ($5B) improvement projects
  • $10B for waterways
  • $7.5B for port modernization, ferry terminal construction, border security. $80M earmarked for reduction in truck emissions at ports

Opportunities in climate-tech

  • Electrification of port infrastructure and logistics
  • Optimization and electrification of port operations (e.g., drayage, autonomy in truck yards, routing optimization)

Road safety ($11B, 2%)

Highlights

  • $5B for “Safe Streets for All,” to reduce crashes and fatalities for cyclists and pedestrians
  • $4B for commercial vehicle safety, traffic safety information systems, impaired / distracted driving countermeasures
  • $1B for pipeline modernization

Opportunities in climate-tech

  • AI for driver safety and autonomy, including ADAS systems that use LiDAR, cameras, radar; L4/5 truck autonomy
  • AI and robotics for asset inspection
  • E-bikes and scooters

At G2 Venture Partners we are excited about the potential of these programs to boost the rapidly growing climate-tech ecosystem. Reach out to us if you’re building in this space!

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Published in G2 Insights

G2 Venture Partners is a venture and growth capital firm investing in transformative technology companies at their inflection points to build a sustainable future. | www.g2venturepartners.com

Written by Monica Varman

VC investor at G2VP. We invest in emerging technologies to improve sustainability in traditional industries. Previously at McKinsey, Tesla, HBS.

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