Failure to invest in infrastructure leads to D+ grade for U.S. energy system

Published on July 20, 2017 by Kevin Randolph


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SAN DIEGO – A panel of public utility experts this week reviewed the American Society of Civil Engineers’ (ASCE) 2017 U.S. infrastructure report card for the energy sector, where a shortage of investment has led to a dismal grade.

Every four years, the ASCE grades the nation’s energy, transit, drinking water and other systems on a number of criteria including capacity, condition, public safety and future need. It then assigns each category a letter grade from A to F, said Greg DiLoreto, chair of the ASCE Committee on America’s Infrastructure and a past president of ASCE. He spoke on Wednesday during a National Association of Regulatory Utility Commissioners conference in San Diego.

The nation’s “cumulative GPA” came out to a D+. The energy sector received the same grade.

Replacing aging electric transmission and distribution lines and other equipment, increasing capacity and storm resilience are viewed as critical investments needed to strengthen U.S. energy infrastructure and minimize power interruptions.

When the panel’s moderator Ann Rendahl, a commissioner on the Washington Public Utilities and Transportation Commission, asked DiLoretto why the nation struggles to improve its infrastructure, he cited a lack of investment overall. Strong leadership and thoughtful policy making, he said, are also important factors.

The cumulative investment gap for electricity, including generation facilities and transmission and distribution infrastructure, is estimated at $177 billion through 2025, ASCE’s infrastructure report said.

According to Philip Moeller, executive vice president of the Business Operations Group and Regulatory Affairs at Edison Electric Institute (EEI), that investment doesn’t need to come from government, because the capital is already available. If Congress were going to provide funding for infrastructure, he said, he’d suggest focusing on smart cities. Smart city initiatives involve integrating information, communication and energy technologies to improve services for customers.

What Moeller says the government does need to do is reform siting and permitting processes. He also noted that uncertainty surrounding rules and regulations has caused companies to hesitate to invest in transmission.

“If we have legislative and regulatory relief on some of the siting and permitting issues, we can get this country building more transmission again, and I think we will,” Moeller said.

Government policies could be suppressing price signals and leading companies to invest in less-than-optimal mixes of infrastructure, Lawrence Makovich, chief power strategist at IHS Markit, said.

“I think a well-functioning power market will give you price signals that will get you the right mix of fuels and technologies, and the problem we have with the infrastructure spending today is that with the mandates of subsidized renewables that we’ve seen, we’ve seen a suppression of these price signals,” Makovich said.

Instead of creating subsidies and mandates, he suggested that, in order to curb emissions, the government put a price on carbon dioxide emissions. He also mentioned providing compensation for facilities with environmental attributes such as zero emissions.

DiLoretto stressed that while the ASCE report says that investment is crucial, long-term revenue forecasts and construction plans are needed to make sure those investments are made efficiently and sustainably.

“If you gave us all the money we needed tomorrow, we couldn’t fix this,” DiLoretto said. “It took years to get where we are, and it’s going to take years to get out of it. We need thoughtful, long-term, financial forecasting that allows us to gradually raise rates to make that investment over that period.”

Makovich, however, warned that putting too much faith in forecasts is risky, because the future is hard to predict. Investing in a balanced mix, he said, reduces that risk.

“Smart investment will only be possible with leadership, planning and a clear vision for our nation’s infrastructure,” DiLoreto said. “Leaders from all levels of government and the private sector must come together to ensure all investments are spent wisely, while also planning for the cost of building, operating and maintaining the infrastructure for its entire lifespan.”