Energy Department offers $1.6 billion loan guarantee to upgrade transmission lines across Midwest

WASHINGTON (AP) — The Department of Energy said Thursday it has finalized a $1.6 billion loan guarantee to a subsidiary of one of the nation’s largest power companies to upgrade nearly 5,000 miles of transmission lines across five states, mostly in the Midwest, for largely fossil fuel-run energy.

AEP Transmission will upgrade power lines in Indiana, Michigan, Ohio, Oklahoma and West Virginia, primarily to enhance enhance grid reliability and capacity, the Energy Department said. The project by AEP Transmission, a subsidiary of Ohio-based American Electric Power, is meant to help meet surging electricity demand from data centers and artificial intelligence.

AEP primarily produces electricity from coal, natural gas and nuclear power, along with renewable resources such as wind and hydroelectric power.

Thursday’s announcement deepens the Trump administration’s commitment to traditional, polluting energy sources even as it works to discourage the U.S. from clean energy use.

The move comes as the Trump administration has moved to cancel $7.6 billion in grants that supported hundreds of clean energy projects in 16 states, all of which voted for Democrat Kamala Harris in last year’s presidential election. A total of 223 projects were terminated after a review determined they did not adequately advance the nation’s energy needs or were not economically viable, the Energy Department said.

The cancellations include up to $1.2 billion for California’s hydrogen hub aimed at producing clean-burning hydrogen fuels to power ships and heavy-duty trucks. A hydrogen project costing up to $1 billion in the Pacific Northwest also was cancelled.

The loan guarantee finalized Thursday is the first offered by the Trump administration under the recently renamed Energy Dominance Financing program created by the massive tax-and-spending law approved this summer by congressional Republicans and signed by President Donald Trump. Electric utilities that receive loans through the program must provide assurances to the government that financial benefits from the financing will be passed on to customers, the Energy Department said.

The project and others being considered will help ensure that Americans “will have access to affordable, reliable and secure energy for decades to come,” Energy Secretary Chris Wright said in a statement.

“The president has been clear: America must reverse course from the energy subtraction agenda of past administrations and strengthen our electrical grid,” Wright said, adding that modernizing the grid and expanding transmission capacity “will help position the United States to win the AI race and grow our manufacturing base.”

The upgrades supported by the federal financing will replace existing transmission lines in existing rights-of-way with new lines capable of carrying more energy, the power company said.

More than 2,000 miles of transmission lines in Ohio serving 1.5 million people will be replaced, along with more than 1,400 miles in Indiana and Michigan serving 600,000 customers, the company said. An additional 1,400 miles in Oklahoma, serving about 1.2 million people and 26 miles in West Virginia, serving 460,000 people, will be replaced.

The projects will create about 1,100 construction jobs, the company said.

The loan guarantee will save customers money and improve reliability while supporting economic growth in the five states, said Bill Fehrman, AEP’s chairman, president and chief executive officer. “The funds we will save through this program enable us to make additional investments to enhance service for our customers,” he added.

Wright, in a conference call with reporters, distinguished the AEP loan guarantee from a $4.9 billion federal loan guarantee the department cancelled in July. That money would have boosted the planned Grain Belt Express, a new high-voltage transmission line set to deliver solar and wind-generated electricity from the Midwest to eastern states.

The Energy Department said at the time it was “not critical for the federal government to have a role” in the first phase of the $11 billion project planned by Chicago-based Invenergy. The department also questioned whether the project could meet strict financial conditions required, a claim Wright repeated Thursday.

“Ultimately that is a commercial enterprise that needs private developers,” Wright said. The company has indicated the Grain Belt project will go forward.

Trump and Wright have repeatedly derided wind and solar energy as unreliable and opposed efforts to combat climate change by moving away from fossil fuels. Wright said the Grain Belt Express loan was among billions of dollars worth of commitments “rushed out the doors” by former President Joe Biden’s administration after the 2024 election.