As the dust from the recent election settles, one of the first orders of business for the incoming Trump administration is a massive public infrastructure investment plan. Although the economic benefits associated with improved infrastructure are popular with many citizens and both sides of the political aisle, the real-world practicalities of ensuring positive economic return from such investments are nonetheless daunting.
Specifically, three major considerations must be addressed: (a) where to focus the investment; (b) how to finance the projects; and (c) how to produce viable long-term benefits. It stands to reason that infrastructure revitalization efforts should be aimed at projects that improve conditions for large portions of the general public as well as address the needs of private sector businesses in order to ensure that the United States remains economically competitive. Although the visible disrepair of roads, bridges, and airports gets much of the public’s attention, those making decisions would do well to consider an active role in managing the unseen but increasingly crucial issue of reinvigorating – or, indeed, reinventing – the nation’s power grid.
Securing the Power Grid: Past, Present & Future
Given the enduring nature of power grid infrastructure investments, the full opportunities and benefits of a secure, resilient, and modern power grid hold much promise for years to come. In fact, with many custom-designed but decades-old components of the current national power grid system having reached their maximum useful life at the same time as local power generation, enhanced grid cybersecurity, and the coming wave of internet-enabled “smart grid” technologies are all converging, the timing to focus on this industry could hardly be better. It would be a great accomplishment indeed to focus on ensuring that the United States develops the required modern electrical power backbone to meet the needs of the next 100 years.
Consider that the current U.S. model of a mostly centralized and highly regulated electrical power industry relies on industrial-age ideas about leveraging size to provide affordable power across the country, and yet today the world is much more mobile, fluid, and flexible. In fact, the nation is already in the early stages of a two-decades-long modernization effort that will spend a projected $2 trillion to replace many aging pieces of the current electrical power grid infrastructure – a massive investment that offers a rare opportunity to re-think how the whole system of power generation, delivery, and usage operates. Further, given that it is always more cost-effective to build in new technologies and features than to retrofit them later, a clear-eyed strategic effort to make the most of these investment dollars would ensure both improved operations as well as systemic improvements in resilience, survivability, and integration of secure cyber solutions. At the same time, developing the intellectual property by designing the new architecture and solutions for tomorrow’s grid at home could ensure the U.S. remains a world leader in meeting growing global energy demand for decades to come.
Similarly, there is rising concern over the negative externalities of the current power grid, including quality and reliability, environmental impacts, resilience against prolonged system-wide disruptions, and the energy wasted by outdated generation and transmission equipment. As a result, the economics that underpin the United States’ current and future means for generating, transmitting, and delivering reliable, stable, and affordable electrical power are undergoing a period of significant change. The time is right to develop a new, more modern architecture that includes a combination of microgrids, localized renewable energy sources, and end-user access to even more stable and secure energy.
Tailored Public-Private Partnerships
Having identified the grid as a worthy area of focus, there is also the challenge of how best to finance all the myriad investments required to achieve significant change. The answer here lies with the often discussed but also often poorly understood concept of tailored public-private partnerships. Although the term may seem complex, all it really means is that by combining forces for a specific project it is possible to share each parties’ inherent assets in the way that best offsets their shared liabilities. For example, if the federal or state government can reduce the investment risk of the project by providing seed capital, issuing tax-exempt bonds, and/or signing a letter of intent to purchase energy for a guaranteed period of time, the private sector can then provide investment capital at more favorable rates because total project risk is reduced.
In this way, all the involved parties share the up-front construction costs, promote open access to usable land, and lock-in the commitment of long-term users. Similarly, if a military base, civilian manufacturing facility, and local municipal critical infrastructure are all sharing a purpose-built microgrid, they could, for example, take best advantage of excess land owned by the base while: (a) sharing tax credits that offset investment costs borne by the private sector; and (b) ensuring that the energy produced is optimized to meet local municipal needs and sustain a local effort to develop new industrial capacity.
Ultimately, investing in the overall industrial sector of energy generation and distribution by funding domestic infrastructure improvements represents an important mix of new technologies that can significantly improve the operation and cost-benefit analysis of ensuring the robust, resilient delivery of “always-on” clean energy. Just as importantly, owning the designs, patents, and know-how about the underlying technologies of the smart grid also will allow for sustained economic advantages. Therefore, as the incoming administration considers where and how to make investments that best prepare this nation for the future, a large-scale public-private partnership supporting the innovation and creativity associated with burgeoning energy technologies and the “smart grid” would be a smart place to start.