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Upgrading Infrastructure -- What, How, Who Pays?

Infrastructure is a hot topic today: Trump’s ambiguous one trillion dollar tweets, pot-hole disasters, the 2017 hurricane disasters.  It’s become painfully obvious to anyone with access to television, radio, newspapers or the internet that infrastructure in this country is aging, overcrowded, under-maintained and sadly out of date.  The American Society of Civil Engineers, in its most recent assessment in 2017, gave U.S. infrastructure the dismal grade of D+.  The World Economic Forum ranks our infrastructure twelfth in the world for overall quality, and singles out our roads, ports, railroads, air transportation infrastructure and our electricity supply system for particularly low grades. 

The general public has been less concerned about the state of our electricity infrastructure than about the decaying roads and bridges that are so obvious to anyone who drives.  But the infrastructure of our electric system is extremely out of date and vulnerable on several fronts.  Most obvious is its vulnerability to weather disasters, which are increasingly frequent, with hundred-year floods occurring every few years, but it is also vulnerable on two other fronts: cyber security and the advent of new, disruptive technology, including electric and autonomous cars.

The risk to the system from weather disasters is much greater than had previously been assumed.  While utilities have been aware of the threat of hurricanes and have improved above-ground infrastructure, a recent study by scientists at the University of Bristol in England suggested that the risk from flooding was 2.6 to 3.1 times higher than the numbers derived from the older official maps from FEMA that utilities rely on.  Upgrading the infrastructure to address flood risk is far more complex, since it requires either building seawalls, dunes or wetlands; elevating substations or replacing current equipment with submersible units; or simply retreating from coastal areas or other places that are particularly vulnerable.  Those are costly upgrades.

Power grids as well as chemical and gas pipelines and water utilities are at tremendous risk from cyber-security threats, and those threats will only become more severe as the internet of things expands, offering hostile forces infinitely more possible entry points.  Furthermore, the interconnectedness of critical infrastructure means that each component functions as a part of a highly interdependent network.  An attack on one part is a threat to the entire system.  Upgrading the infrastructure of electric companies therefore requires an upgrade to every system those companies are connected to, which means virtually every company and individual they serve.  A “smart” refrigerator or television can serve as an entry point.  Protecting the infrastructure from hostile cyber attacks – or, for that matter, innocent cyber failures – will therefore require a massive and highly coordinated approach to a potentially disastrous problem.

Upgrading the grid to account for what society will look like in ten or twenty years requires establishing a multi-talented task force drawn not just from the electric community; it will require cooperation from a broad range of industries, as well as academics from fields as diverse as economics, medicine, sociology, engineering and the hard sciences.  Certain trends are already fairly obvious.  Electric cars will soon become a major part of U.S. transportation, distributed generation will surge and peer-to-peer power sharing is already beginning to disrupt the basic infrastructure that has, from its beginning, been designed as a one-way system.  Accounting for these fundamental changes will have to be central to upgrading the electric infrastructure.

Because of the enormous complexity of upgrading our infrastructure and because of the interconnectedness of virtually all parts of our economy and society, it would be unwise, at best, for any one sector to proceed on its own.  At worst, enormous effort and money could be wasted, and plans worked out in isolation could actually be destructive.  Certainly, government has a central role to play, although the thought of coordinating the various, often antagonistic, factions is a daunting thought but it’s essential, and it can work.  The interstate highway system, although established in much simpler and less antagonistic times, is an example of the federal and state governments working in concert to meet an ambitious goal.  That kind of cooperation will probably require a concerted effort to develop a public-service campaign to convince the public to support the effort to upgrade our infrastructure.  The public tends to take the infrastructure for granted until a disaster makes it obvious how essential and how vulnerable it is.  Educating the public and convincing them of the need to support both governmental and private efforts for upgrade is essential if the massive funding needed is to be procured.

Which raises the final issue: who pays?  While the Trump administration talks about a trillion-dollar investment, it suggests that only a small part of that – some estimates are $200 billion, others even less – will come from the federal government.  The rest is up to the states and the private sector.  That could include equity investment as well as long-term revenue-bond financing.  While individual investor-owned utilities have obvious revenue incentives to upgrade infrastructure as well as access to private capital, many of the more than 2,000 municipal utilities are far more dependent on government assistance.  If that comes at the price of tax increases, the fight could take longer than our society can afford.  Or, it could mean increased privatization.  One way or the other, there is no time to lose.

Richard Schlesinger's picture

Thank Richard for the Post!

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