Investment in transportation spurs economic recovery
The pandemic has wreaked havoc on the country’s economy and on American workers, with millions of people losing their jobs. A recent US Census Bureau survey measuring the impact of the pandemic on American households found that 47% of adults reported that they or another adult in their household had lost employment income since the national emergency has been declared due to COVID-19. In addition, in the past year, the gross domestic product (GDP) of the United States has fallen by more than $ 668 billion or 3.5%, a level not seen since 1946. These numbers are striking, and with more than a year since the start of the pandemic, it is clear that while the country appears to be rebounding, the US economy is still struggling.
When the country has faced economic downturns of this magnitude in the past, building infrastructure, including promoting investment in the electricity sector, has been an effective and impactful way of stimulating economic recovery throughout. by achieving the main objectives of national policy. It worked in response to the Great Depression and then again in the aftermath of the Great Recession. In both cases, the infrastructure investments made in response to these crises not only boosted economic recovery, but also achieved urgent policy objectives such as the promotion of local public works and rural electrification projects in the years. 1930 and promoting the development of clean energy and smart grid technologies in the early 2010s.
Similar broad political goals were set by the Biden administration. President Biden has set an ambitious goal of decarbonizing the country’s electricity supply by 2035. This is in addition to other growing demands on the country’s electricity grid, driven by the need for reliability and resilience, aging infrastructure and increasing electrification. Additionally, regardless of federal and state clean energy mandates and goals, the country is undergoing a transformational clean energy transition from fossil fuel production to renewable energy. The order of magnitude of the transport investments needed to build the grid of the future and meet the country’s needs for clean energy, electrification, reliability and resilience over the coming decades, and the speed with which this must be done, is unprecedented. In the face of today’s extraordinary economic and infrastructure challenges, in the words of Treasury Secretary Janet Yellen, âIf there has been a time to grow, now is the time. “
A recent study by the research group London Economics International (LEI) analyzed the economic impact of $ 83 billion in investments currently approved and / or recommended in transportation in the United States The LEI report found that an investment in transportation of this magnitude would increase national local spending by nearly $ 39 billion, increase U.S. GDP by $ 42 billion, and create an estimated 442,000 additional quality jobs to support the family. . Beyond these initial economic benefits, the ongoing operation and maintenance requirements associated with the newly built and operational transmission will generate an additional $ 1.6 billion in GDP each year and nearly 9,000 jobs per year. In addition, investments in transmission can benefit customers by reducing the cost of electricity, integrating remote clean energy resources into the grid, leading to further investments in electricity infrastructure and helping to realize the benefits. decarbonization.
The other good news is that all of the benefits described above from investment in transportation can be achieved without the need to spend massive amounts of taxpayer dollars. The electrical industry is primarily a private sector enterprise in the United States, and current plans to invest in private transportation run into the tens of billions of dollars. Although significant private capital is available to finance most of this new infrastructure, investments in power transmission still face a number of challenges and uncertainties. Some of the barriers to transportation include: conflicting and unclear transportation planning frameworks, regulatory uncertainty over the allowed ROI and how the costs will be distributed, and the challenges of siting and obtaining permits.
All of this begs the question, how do you get there?
1. Implement improvements to transportation planning processes.
The Federal Energy Regulatory Commission, or FERC, should consider transportation planning reforms that incorporate dynamic data and trends from generation queues, local, state and local renewable energy targets. business and electrification assumptions in scenario planning. In addition, it should take into account any net benefits provided by a transport project, such as the economic value of decarbonization, resilience, and the achievement of other public policies such as economic and environmental justice.
2. Provide greater regulatory certainty on transport pricing and cost allocation.
Long-term investment in assets designed to last for decades requires stable economic regulatory policies. FERC should clarify and establish RCP policies that provide certainty to investors and encourage investment in transportation. Former FERC President Joseph Kelliher recently urged the Commission to consider establishing an initial standard ROE high enough above the level produced by its current core ROE methodology in order to attract the necessary investment in the transport. Improved ROEs were found to be effective in boosting transportation investment for several years in the late 2000s. FERC should seriously consider Kelliher’s recommended and proven approach to boosting investment in transportation.
3. Reduce delays caused by the site selection and authorization processes.
Congress and regulators may consider approaches to streamline the process of site selection and authorization for transport. For example, adopting uniform standards for information disclosure and finding ways to coordinate reviews by federal and state authorities could make it easier and faster to select a site and obtain permits.
Transport development is essential not only to meet the ambitious clean energy targets set by the Biden administration and a growing number of state governments, but also to provide a much needed boost to job creation. and economic recovery. Time is running out, but so far federal electricity transmission policy has yet to produce a robust transmission system to meet these pressing needs.
It’s time for the country’s leaders to match the rhetoric about the critical importance of transportation investments with actions designed to spur the massive construction of the transportation system that will be needed to meet clean energy goals, the resilience and electrification needs of the country. It’s time to act.
Larry Gasteiger is Executive Director of WIRES.