Heinz Experts Eye Future of U.S. Energy Infrastructure

This year, a series of devastating events highlighted the growing gaps and weaknesses in the American energy infrastructure. In February, a historic cold snap exposed vulnerabilities in Texas' power grid, leaving 4.5 million homes and businesses without power and resulting in the deaths of at least 151 people. In May, a cybersecurity attack on a major pipeline dealt a startling blow to the East Coast's fuel supply that rippled out to the transportation and airline industries.

In its 2021 Infrastructure Report Card, the American Society of Civil Engineers found that the investment gap in the American energy infrastructure is expected to grow to a cumulative $197 billion by 2029. As hackers pose increasingly sophisticated threats to critical infrastructure and the impacts of climate change continue to accelerate the frequency and intensity of weather events, the American energy infrastructure is in need of a serious overhaul to both increase resiliency and facilitate the transition to cleaner energy resources.

At the end of March, the Biden Administration introduced the American Jobs Plan, a proposed approach to revitalizing the American economy through investing in rebuilding the infrastructure. The $2 trillion plan allocated significant investment to the energy sector including the development of a renewed electrical grid, the creation of a Clean Energy and Sustainability Accelerator, and the allocation of $46 billion to support clean energy manufacturing.

For months, the contents of the American Jobs Plan were hotly debated across party lines. A bipartisan team of senators reached a compromise, resulting in a $1.2 trillion Bipartisan Infrastructure Framework. This framework proposes substantial changes to the energy sector, including the establishment of a new Grid Authority to upgrade the American power infrastructure. In an official statement, the Biden administration referred to these developments as the "largest investment in clean energy transmission in American history."

However, many experts insist that the measures proposed by the American Jobs Plan will not be enough to bolster the energy sector and mitigate the effects of climate change. In the following Q&A, Karen Clay, a professor of economics and public policy, and Akshaya Jha, an assistant professor of economics and public policy, discuss the state of the American energy infrastructure.

Q: Just to define the term, what is the energy infrastructure and what are its main components?

Akshaya Jha: So, when we think about the energy infrastructure, what we're really talking about is the means by which different forms of energy — be it electrical or otherwise — are produced, transported, and delivered.

Karen Clay: Right. Typically, we consider generation, transportation, storage and distribution to be the main categories of that infrastructure, or the steps that need to be taken. For instance, solar energy to be absorbed into a photovoltaic panel to someone miles away turning on their television. In addition to electricity, the main components of energy infrastructure also include petroleum products and natural gas, and the main categories of transportation and distribution include high voltage transmission lines, pipelines, and long- and short-distance transportation via truck, rail, barges and ships. Additionally, as I mentioned, the energy infrastructure also encompasses storage methods, such as batteries, underground and above ground storage of petroleum and natural gas, and hydroelectric storage methods.

Jha: I would like to add that one new aspect that more and more people are also talking about is electric vehicle charging infrastructure. Having these charging stations so that electric vehicles can go from point A to point B, possibly achieving longer-distance rides than what's feasibly occurring today. Which is to say that as technologies change and evolve, what is considered energy infrastructure can also change and evolve.

Q: The American Society of Civil Engineers gave the United States' energy sector a C- on its 2021 Infrastructure Report Card. What do you see as the most pressing issues or most pertinent areas of improvement related to our energy infrastructure as it is today?

Clay: As I see it, there are three areas where we need improvement: reliability, security and resilience. Reliability is ability to deliver service under normal conditions, security is the ability to avoid or mitigate physical and cybersecurity attacks, and resilience is the ability to quickly restore service when severe natural and human events occur. In particular, we've seen a lot of issues with security, as sophisticated cyberattacks increasingly target infrastructure, and resilience, with the uptick in severe weather events.

Jha: From a climate change perspective, we need to look at what facilitates a transition away from burning fossil fuels. When it comes to the electricity grid, we need to be thinking about how we build up transmission infrastructure so that a fossil fuel plant in Texas doesn't need to start up in order to satisfy electricity demand in Texas. Instead, we could be building up the transmission infrastructure so that it's more connected to other states. But there's a huge caveat that while this is feasible in a practical sense, it might not be politically. Connecting Texas' energy infrastructure to other states would mean that it would be subject to federal regulation. With this Texas example, there's also an inherent tension between the long-run shift away from burning natural gas and the short-term need to deliver gas for home heating and to fuel power plants.

On the transportation side, it comes down again to the same question. It's a question of priorities. Do we want to be building public transit or really investing in roads to get people from point A to point B? Do we want to invest more into electric vehicles or try to improve the fuel efficiency of vehicles that use gasoline? It really comes down to finding a clear vision forward. We need to decide the best path for moving away from burning fossil fuels.

Q: The Biden administration's proposed infrastructure bill addresses several avenues for preparing for and mitigating the impact of climate change. What do you see as some of the available opportunities with regard to tying infrastructure reform in the energy sector into sustainability and climate change preparedness?

Clay: Any plan to address climate change needs to prioritize investment in renewables, and these renewables require electricity storage technology. Otherwise, during periods of low sun or wind where an insufficient amount of renewable energy is being produced to power the grid, providers need to switch to fossil fuel to make up the difference. If we had better storage technology, providers wouldn't need to fall back on fossil fuels. So, by increasing battery storage capacity, we can facilitate the integration of renewables, improve reliability and possibly even build resiliency.

Also, decarbonization to address climate change will increase our reliance on the electricity grid. Updating older transmission and local distribution systems should help improve reliability and increase resiliency. This can mitigate crises, such as what we saw in Texas this winter, when millions of people lost access to power. Where electricity was unavailable, Texans were in some cases still able to draw on fossil fuels. Some users of gasoline and diesel-powered vehicles were able to access fuel, and owners of fossil fuel generators who had access to fuel produced electricity. If fossil fuels are less common and have more limited availability, the reliability, security, and resiliency of the electricity grid will become even more important than it currently is.

I should add that additional measures beyond the items in the infrastructure bill will be needed to achieve decarbonization. Economists are currently focused on tradable performance standards and a hybrid clean electricity standard with a 100% clean target, partial crediting of gas generation, and a $40 per metric ton [carbon dioxide] alternative compliance payment backstop. Alternatives such as clean electricity standards alone or the extension of tax credits alone are not sufficient in many or even most scenarios.

Jha: Going off of that Texas example again, building up electricity transmission infrastructure from these isolated grids feels like a great opportunity. Currently, states like Texas have relatively few interconnections to neighboring states. In principle, this seems like a relatively low-cost, high-value intervention. Of course, as I mentioned before, there is a political aspect to this, and Texas may not want to develop that kind of interconnection.

Also, there are technology hurdles that we still need to overcome before we can move to a 100% carbon-free grid. For example, electricity storage is one of the biggest obstacles right now. If we had more electricity storage, when a wind farm or solar panel doesn't produce as much as we would expect, we wouldn't need to turn to natural gas to fill that gap. So, investing in the research and technology to develop cost-effective energy storage feels like a great opportunity.

Q: So, what would the U.S. need to invest in as a nation in order to accomplish these goals and encourage innovation?

Jha: As an economist, they would take my economist card away if I didn't say that we need to tax carbon. If we tax carbon, then the technologies that will "win" will be the ones that will be the ones that get put into place. It's not necessarily that we're putting money into technology A, technology B, and technology C and picking those technologies. We're letting the market dictate, well, if there's a price on carbon, then I can do it at this price, you can do it at that price. So, we'll pick the lowest cost way of reducing carbon emissions. So, if we have a carbon tax or carbon cap and trade policy that was federal, then we would see innovation on the technologies that are the lowest cost.

Those are different things that would definitely help move us towards less carbon-intensive energy and transportation sectors.

Clay: I also think that regulatory and economic pressures during energy transitions create opportunities for innovation. In some recent work, my coauthors and I have shown that there was a significant increase in innovation in the power systems area in the lead up to the 1970 Clean Air Act. Other reports have suggested that clean energy companies are doing well at the moment. It is unclear that funding is the primary barrier, meaning that this might be more aligned with motives and incentives around regulation, rather than just a need for more investment.

Q: In your opinion, what is one aspect of the energy infrastructure debate or discourse that requires reframing or another layer of nuance? As in, "People who talk about _____ tend to overlook _____" or "Policymakers spend a lot of time talking about ______, but they should be focusing more on _______."

Clay: A few points come to mind. The first is the need to carefully mitigate risks as we move to increased reliance on a single source of energy: electricity. Over the nineteenth and twentieth centuries, we have drawn energy from diverse sources. While decarbonization is necessary, we need to carefully manage the transition to ensure that if the electricity grid goes down that it can be restored very, very quickly.

The second is that decarbonization will yield significant benefits in the form of reductions in air pollution. This tends to get overlooked, but it will generate benefits across the United States. Reductions in air pollution help everyone and particularly help disadvantaged communities, which often have higher than average exposure to air pollution.

The third is that we will pin most of our hopes for climate change on the current infrastructure bill. The bill can certainly help set the stage for change. Additional measures, such as tradable performance standards or a hybrid clean electricity standard, will be needed to achieve decarbonization.

Jha: Building efficiency. It's relatively easy politically to sell that, hey, we want buildings to be more efficient from an energy perspective. But buildings are actually not that much of an energy consumer relative to other sources and it's not necessarily the lowest cost means of reducing energy consumption. So that would be one that perhaps there's been too much policy focus on relative to its benefit. The fact that electricity and transportation are two major carbon-intensive industries. It's not that we don't focus so much on these areas as much as there certainly should be more focus on those sectors. We have really old bus fleets all over this country, for example. Electrifying those fleets would be a great intersection of these two sectors.

Something that gets left out of the debate about pipelines is that fact that if we don't build pipelines or if we shut down crude oil pipelines, we don't look enough at what is going to happen as an unintended consequence of that. One of the things that will happen is that less crude oil comes out of the ground, and so less gasoline will be burned. This is good for the environment. But the other thing that could happen is that the crude oil is transported by trains or trucks, instead of by pipeline. We saw this when the Colonial Pipeline shut down after the cyberattack. The Administration relaxed restrictions on trucks and trains, allowing them to transport crude oil more than they normally could. Trains and trucks produce a lot more pollution than a pipeline working at maximum efficiency. So, without a plan in place to avoid that, we'd actually have a higher environmental cost. That's a trade-off that doesn't get talked about a lot.