The Energy Department is launching a new $2.5 billion revolving fund on Tuesday to spur construction of major transmission projects.

Why it matters: New and upgraded transmission is needed to link expanding renewable power to demand centers. But financing and permitting are notoriously tough.

Driving the news: DOE just issued a formal "notice of intent" for the "Transmission Facilitation Program" (TFP) in the bipartisan infrastructure law. It's a way to gather input ahead of a solicitation for proposals.

How it works: The program provides DOE tools including loans and authority to purchase power off-take capacity in new projects — capacity it would resell to replenish the fund.

• The contracts, the subject of the first solicitation, are meant to help give investors confidence.
• "It's always that challenge of, you may have generation but you need to have buyers on the other end," Patricia Hoffman, DOE's top grid official, tells Axios.

The big picture: It's among several pieces of the new law aimed at spurring transmission and grid upgrades to boost reliability and clean energy.

• The White House climate targets include 100% zero-carbon power by 2035 and a 50% cut in economy-wide emissions by 2030.
• "Transmission is very important to achieving the administration's goals to achieve low-cost and low-carbon electricity sources and connecting those sources to consumers," Hoffman said.
• The program is part of DOE's wider "building a better grid" initiative.

The intrigue: The new program is the first time DOE can enter into these capacity contracts outside the federally owned Power Marketing Administrations, Hoffman said.

• "What is exciting about this is, it is a solution that that industry has an opportunity to take advantage of," she said.
• "I've seen a lot of excitement around this because it's new. It has the ability to move things forward," said Hoffman, who is acting director of DOE's Grid Deployment Office.

Yes, but: The U.S. probably can't meet White House climate targets without the big clean energy tax credits and other deployments tools in President Biden's stalled "Build Back Better" legislation.

What's next: The department expects to begin a process under TFP early next year that adds the program's loan and public-private partnership financing tools, DOE said.