Are Red States Leaning into IMF-Type Strategies to Strengthen Future Energy Investment?

Earlier this month, Alabama Gov. Kay Ivey signed legislation that establishes the Alabama Energy Infrastructure Bank. Now, it’s unlikely that many leaders in GOP-dominated Alabama would compare their bank to the International Monetary Fund's penchant for climate tech investment, but the policies are similar if not all of the details.

Blue states, usually Democrat-dominated, such as California and New York long have used government buying power to spur new economic development for decarbonization technologies. The red states adopting this strategy are more likely to include fossil fuels, but also incorporate renewabes, as part of the long-term planning. 

Alabama's new law, which originated from Senate Bill 304 in the Alabama State Legislature, is known as the “Powering Growth Act” and aims to issue up to $1 billion in bonds for energy infrastructure projects statewide.

Alabama is only the latest of three red states to recently use political power to proactively work on anticipated future energy challenges. Texas enacted similar legislation with the $10 billion Texas Energy Fund a few years ago. Last month, West Virginia enacted policies to create funding for microgrids and other power resources supporting data centers and industrial development.

In Alabama, the Powering Growth Act’s funding would support both a new Energy Infrastructure Bank and Strategic Energy Infrastructure Development Fund with up to $1 billion in early bond power, as well as an initial $50 million for acquiring long lead-time supplies such as transformers and substation equipment, which often take years to deliver.

“In order to keep Alabama’s economy growing, we’ve got to make sure that we have the power to support it,” Gov. Ivey, a Republican who has held the office for 8 years, said in her statement. “That’s what Powering Growth is all about — making sure our energy infrastructure is robust enough to meet the demands of new industries, new jobs and a stronger future. This plan ensures we’re prepared to compete, not just with neighboring states, but on a national level. By investing now, we’re laying the groundwork for long-term growth – especially in areas that need it most.”

Alabama’s Power Growth Act does not just create funding mechanisms but also includes policies reportedly cutting red tape on permitting and regulatory pathways. The new law also aims to fix supply chain bottlenecks and fund energy development at industrial parks to be ready for new customer move-ins.

“This is a big step forward for Alabama’s energy future,” said Daniel Tait, Executive Director at Energy Alabama, the advocacy group which supported the Powering Growth Act. “SB304 provides a path to modernize our grid, invest in strategic infrastructure, and potentially unlock cleaner, more resilient energy solutions.”

While President Trump has frozen—and unfrozen, in some cases—funding elements of the Biden-era Inflation Reduction and Infrastructure acts, the states increasingly are responding to separate fears of future energy resource inadequacy by driving more robust growth policies around natural gas, renewables and even nuclear energy. Numerous forecasts anticipate that data center capacity will expand by up to 50 GW --the equivalent of 50 nuclear energy reactors or 100 typical gas-fired turbines--within the next five to seven years, creating load challenges for utilities and other power generators.

Last month, West Virginia Gov. Patrick Morrisey, another Republican, signed the bill now known as the Power Generation and Consumption Act. Some have called it the “governor’s microgrid bill” as it seeks to expand on-site power capacity supporting future data center projects.

The Power Generation and Consumption Act creates a certified microgrid program statewide to support new on-site power, utilize coal and natural gas and provide funding for capacity to stabilize the electric grid.

“The Power Generation and Consumption Act will make West Virginia the most attractive state in the country for data centers and help America better compete with China in the technology arms race of the future,” Morrisey said at the time of the April signing session. “Combined with the one-stop shop permitting bill, companies will now be able to quickly build, expand, and increase job creation right here in West Virginia.”

In Texas, the Public Utility Commission is administering the Texas Energy Fund programs which were approved by both legislators and voters two years ago. Once known as Proposition 7, the massive funding legislation also set aside some $1.8 billion for microgrid and distributed energy resources statewide.

Overall, the Texas program allocates $10 billion to ensure the state has ample and flexible power generation supply to avoid disasters such as Electric Reliability Council of Texas suffered during its almost total grid collapse during Winter Storm Uri in February 2021.

The legislation supporting development of the Alabama Energy Infrastructure Bank was sponsored by state Sen. Arthur Orr, a Republican from Decatur. Orr pointed to the future tsunami of energy demand impacting the grid as the impetus to get financing and permitting reform in place now.

“You don’t want to build a levee when the water is already rising,” Orr told the Alabama Daily News. “As energy demand is going to continue to accelerate in the future, we are laying the groundwork now through Powering Growth to ensure we are able to compete and win on economic development projects for decades to come.”

The Powering Growth Act in Alabama also includes language focused on deploying a significant part of the investments in rural areas.