Example of using the SP.Web.ShareObject REST endpoint to share a file or folder with a user email address.

Grant-UserPermission.ps1

#requries -modules "PnP.PowerShell"

function Get-PeoplePickerValueForEmail
{
    [CmdletBinding()]
    param
    (
         [Parameter(Mandatory=$true)]
         [string]
         $Email
    )

    begin
    {
        $web = Get-PnPWeb
    }
    process
    {
        return [Microsoft.SharePoint.Client.ExternalSharingExtensions]::ResolvePeoplePickerValueForEmail( $web, $Email )
    }
    end
    {
    }
}

function Grant-UserPermission
{
    [CmdletBinding()]
    param
    (
        # the full url of file or folder to grant access to
        [Parameter(Mandatory=$true)]
        [System.Uri]
        $ObjectUri,

        # email address of the user to grant permisions to
        [Parameter(Mandatory=$true)]
        [string]
        $EmailAddress,

        # the level of access given to the user
        [Parameter(Mandatory=$false)]
        [ValidateSet("View", "Edit")]
        [string]
        $ExternalSharingOption,

        # determines if permissions should be pushed to items with unique permissions
        [Parameter(Mandatory=$false)]
        [switch]
        $PropagateAcl
    )

    begin
    {
        $roleValue = ""

        switch( $ExternalSharingOption )
        {
            "Edit"
            {
                $roleValue = "role:1073741827" # Edit
            }
            default
            {
                $roleValue = "$ole:1073741826" # View
            }
        }
    }
    process
    {
        $peoplePickerInput = Get-PeoplePickerValueForEmail -Email $EmailAddress

        Write-Verbose "PeoplePickerInput: $peoplePickerInput"

        $content = [PSCustomObject] @{
                        url                         = $ObjectUri.ToString()
                        peoplePickerInput           = $peoplePickerInput
                        roleValue                   = $roleValue
                        groupId                     = 0  # the id of the group to be added to. Zero if not adding to a permissions group.
                        propagateAcl                = $PropagateAcl.IsPresent
                        sendEmail                   = $false
                        includeAnonymousLinkInEmail = $false
                        emailSubject                = ""
                        emailBody                   = ""
                        useSimplifiedRoles          = $true
                    } | ConvertTo-Json

        Write-Verbose "Share Request: $content"

        Invoke-PnPSPRestMethod `
            -Method      POST `
            -Url         "/_api/SP.Web.ShareObject" `
            -Content     $content.ToString() `
            -ContentType "application/json" `

    }
    end
    {
    }
}

Connect-PnPOnline `
            -Url        "https://contoso.sharepoint.com/sites/teamsite1" `
            -ClientId   $env:O365_CLIENTID `
            -Thumbprint $env:O365_THUMBPRINT `
            -Tenant     $env:O365_TENANTID 


$grant = Grant-UserPermission `
                -ObjectUri             "https://contoso.sharepoint.com/sites/teamsite1/Shared Documents/Folder2" `
                -EmailAddress          "adamb@contoso.com" `
                -ExternalSharingOption Edit `
                -PropagateAcl

Where can I find this part?
[Microsoft.SharePoint.Client.ExternalSharingExtensions]::ResolvePeoplePickerValueForEmail( $web, $Email )

Where can I find this part? [Microsoft.SharePoint.Client.ExternalSharingExtensions]::ResolvePeoplePickerValueForEmail( $web, $Email )

You can find it in the PnP.Framework assembly

PS C:\Windows\system32> [Microsoft.SharePoint.Client.ExternalSharingExtensions].Assembly.FullName
PnP.Framework, Version=1.11.2.0, Culture=neutral, PublicKeyToken=0d501f89f11b748c

@joerodgers Thank you!