Joseph Krist
Publisher
This year is providing one of the most uncertain budget seasons that we can remember. Many of the states are going through fairly contentious budget negotiations and votes. One thing common to them all is the uncertainty around the pending federal budget being negotiated in Congress right now. No one can say with any certainty what that budget will look like or what the impact of changes resulting from that budget will be. We do know that many of the potential cuts would lead to higher expenses for state governments. Policy changes in the areas of transportation, energy and public health will put immediate increased pressure on both state budgets and economies. State fiscal years will be underway when a final deal is reached in Congress. We can expect to see the fallout from that budget fairly quickly.
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ILLINOIS BUDGET
Illinois passed a $55 billion budget just before the midnight deadline over the weekend. The budget includes new or increased taxes on sports betting and tobacco products. Lawmakers did not pass plans to address a fiscal cliff facing the state’s public transit system or funding for a new Bears stadium. The taxes increased include a 25-cent tax per wager for sports betting licensees’ first 20,000 wagers and 50 cents per wager after that; an increase in tobacco products from 36% to 45%; subjecting businesses that move profits to other countries to the state’s corporate income tax.
The fallout from the failure to address Chicago’s public transportation funding needs has become quickly apparent. The games have begun in terms of efforts to generate public support. CTA, Metra and Pace officials said they would soon begin planning cuts in their 2026 budgets. Four of eight CTA rail lines would see service suspended on all or portions of the lines. And more than 50 stations would close or see service significantly scaled back.
Lawmakers could return to Springfield for a special session over the summer to consider a pending bill, which already passed the state Senate, or to negotiate a new proposal. They also have the option of taking it up during the fall veto session.
The failure to act during the just ended budget session has created a higher hurdle for lawmakers’ approval. With the spring session over, bills now require 60% approval instead of a simple majority.
CARBON MITIGATION FUNDING CUT
The Department of Energy is canceling over $3.7 billion in funding for projects that would cut carbon emissions and toxic air pollution from power plants and industrial sites. The impact is geographically diverse. Red state/Blue state status does not appear to be a factor. The impact is not just on smaller entities. Some of the largest participants are among the nation’s leading companies.
Kraft Heinz will lose its $170 million award to install clean heat technologies at 10 of its food production facilities. Beverage giant Diageo North America will no longer receive the $75 million it was promised to help install thermal energy storage systems from startup Rondo Energy at production facilities in Kentucky and Illinois. A $75 million grant to back American Cast Iron Pipe Co.’s “Next Gen Melt Project,” which would have lowered emissions from iron and steelmaking at its site in Birmingham, Alabama is being taken back. It also includes $75 million for United States Pipe and Foundry Co. to replace a coal-fired furnace with electric arc furnaces.
The Trump administration is getting rid of funding for several efforts to decarbonize the production of cement, one of the most carbon-intensive industries in the world. The cancelled funding includes $189 million for Brimstone and $87 million for Sublime Systems, two startups pioneering new low-carbon cement production methods. Global cement giant Heidelberg Materials will lose its $500 million award to capture carbon emissions at a massive existing cement plant in Indiana. And the National Cement Company of California won’t receive its $500 million grant to take a multi-technology approach to cutting emissions from its plant in Lebec, California.
Funding for carbon capture and storage projects at power plants will be scrapped, too. Calpine will not receive a pair of $270 million awards to retrofit power plants in Texas and California.
WHERE’S THE OIL BOOM?
U.S. energy firms this week cut the number of oil and natural gas rigs operating for a fifth week in a row to the lowest since November 2021. It was the first time since September 2023 that the number of rigs declined for five straight weeks. The oil and gas rig count declined by about 5% in 2024 and 20% in 2023. After five years of steadily increasing capital investment, independent exploration and production (E&P) companies said they planned to cut capital expenditures by around 3% in 2025 from levels seen in 2024.
PUERTO RICO GRID FINANCE
The US Department of Energy announced that it was redirecting $336 million of federal money originally granted by the Biden administration for the development of renewable generation and microgrids. The funding will instead be directed to be used to reinforce Puerto Rico’s legacy grid and traditional centralized generation infrastructure. The same infrastructure crushed by Hurricane Maria in 2017, the same infrastructure that continues to fail. The same infrastructure that has produced three island wide blackouts in ten months.
That is what makes support from the Puerto Rico government for reinforcement of a failed system at the expense of projects that work so disappointing. It is clear that they are afraid of offending the federal government but that requires supporting decisions which reflect politics and ideology rather than actual events on the ground. At the end of March, LUMA reported over 1.14 gigawatts of grid-connected distributed solar capacity, with an additional 2.34 gigawatt-hours of distributed batteries connected to the grid. Solar power produces over 2 terawatt-hours of electricity each year, which accounts for more than 12.5 percent of Puerto Rico’s total residential electricity consumption annually.
Can it work? Adjuntas is a small municipality with a population of about 18,000. The town operates five microgrids which provide 228 kilowatts of photovoltaic capacity and an additional 1.2 megawatt-hours of storage, which serve residences and fifteen commercial businesses. The town participates in a research study with the US Department of Energy to see if microgrids can be interconnected to create a functioning system over a wide area.
The town was in the midst of testing when the April 16 blackout occurred. The process of connecting multiple microgrids known as grid orchestration created a system which was able to “keep the lights on” in the entire town without being connected to the legacy grid during that event. One might think that the experience showed the merit of the idea. Instead, DOE and its ideological leader went the opposite way and removed funding for such projects.
Throughout the entire Puerto Rico financial disaster, the gap between what people want and what the government advocates for grows ever wider. The current entity running the power system LUMA has little public support as it seems to view its reason for being to be that of “restoring” a system that did not work very well in its best era. The new government seems less inclined to go against anything the Trump administration wants. In the meantime, local non-profits are generating proposals and projects that reflect local needs and conditions. But DOE pulls the funding.
All this occurs while the PREPA bankruptcy continues to drag on.
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