The answer to all problems is not for the federal government to throw money and its power at them. In the case of our energy infrastructure there is clearly a role for the federal government but it should be directly related to what part of the infrastructure is being addressed.
In the case of our transportation system, primarily roads, the federal government should reform the Highway Trust Fund so that monies are no longer reallocated to subsidize public transportation and the construction of bike paths etc. That would be a big step in increasing capital for construction and maintenance. The next step would be to increase the federal fuel tax if more monies were needed. In addition, states need an incentive to raise their taxes, which in most states has not been done because it is politically unpopular. The American people understand that if we want modern, well-maintained roads, users have to pay for them. Resistance comes from not trusting government and the way it taxes and spends.
Pipelines, rail and other forms of transport represent private investment. The role of the government should be to set standards for safety and have a reasonable inspection system. Recent problems with rail shipment of crude oil have not been due to a lack of safety standards, they have been a consequence of the Obama Administration’s making Keystone XL a political tool to pander to its environmental allies.
The most critical part of the energy infrastructure is our old and decaying grid system. It has been known for decades that the demand for electricity was going to grow almost in lockstep with the economy and that substantial investment would be needed to upgrade and protect it. Electricity generating capacity involves long term planning and investment. It has been known for years that reserve power margins are slim and yet there has been no coordinated public-private initiative to expand capacity, upgrade and harden the grid, and address the growing threat from terrorist acts. And, the challenge to a reliable and robust grid system has been complicated by renewable performance mandates and subsidies to promote wind and solar.
The electric grid operates as a series of networks that are defined by geography. These networks create dependencies in the system and as a result, failure in one area can lead to failures in other areas that can have cascading effects, as happened in 2003 when a problem in Canada produced a major blackout on the East Coast. The grid now is used for long distance transportation of electricity and for switching among providers to obtain electricity at the lowest cost. The grid was never designed to operate the way it does today, which is a source of risk.
The biggest risk, however, comes from potential attacks on the grids weakest links—transformers. Last year, this was confirmed by the Congressional Research Service. It wrote, “the electric power grid consists of over 200,000 miles of high-voltage transmission lines interspersed with hundreds of large electric power transformers. High voltage (HV) transformer units make up less than 3% of transformers in U.S. power substations, but they carry 60%-70% of the nation’s electricity”. Attacks on these HV units, like the 2013 attack on a California transformer, could have catastrophic economic consequences. While much progress has been made in dealing with this vulnerability issue, others remain and need to assigned a higher priority for addressing and solving.
Improving the grids performance, making sure that it reflects 21st century technology and reducing its vulnerability is both complex and costly. The Federal Government, state governments, and private utilities all have a role to play but each has different interests and incentives. The Federal Government can play a critical role by serving as a catalyst for cooperation and collaboration. Working with the North America Electric Reliability Corporation, the National Governors Association, it can foster a strategic plan for making important improvements in the grid and ensuring that needed investments are made in a timely manner.
As the composition of our economy has shifted from manufacturing to services, the importance of a world-class electric power system has taken on greater importance. This has been known for at least two decades and yet politicians at the federal and state level have avoided the hard choices needed to achieve that objective. Throwing tax dollars at the problem is not the wisest way to solve it.
This article appeared on the National Journal’s Energy Insiders weblog at https://disqus.com/by/wokeefe/