2009 is shaping up as the Year of the Stimulus. The consensus for a massive fiscal stimulus of the US economy, in the form of direct government spending and targeted tax breaks, grows daily. The biggest remaining questions focus on how much and how quickly. Estimates of the magnitude under consideration range from $400 billion to over a trillion, spread out over two years. Some would even like to see a stimulus bill ready for President Obama's signature on Inauguration Day. As urgent as the need to kick-start the economy appears, however, there are good reasons to spend at least as much time considering what to stimulate and how to go about it. That's particularly true of the energy economy, where the results of a stimulus will be felt for the next forty years.
An essay in Sunday's Washington Post highlighted some of the pitfalls of past government spending on infrastructure. Despite the best of intentions, our elected and appointed officials don't appear to have any keener insights into the future than corporate executives. It's inevitable that some of the stimulus will end up funding inefficient and ineffective projects, and in the interest of avoiding an economic implosion and a deflationary spiral of job cuts, demand reduction, price cuts, output reduction, and more job cuts, that might not be the worst outcome. But we need to ensure that the lion's share of the stimulus is focused on things that really need doing and that the private sector, even in the best of times, has difficulties undertaking. My top candidate for this is a major upgrade of our electricity infrastructure.
It's going to be very tempting for the federal government to invest directly in energy technology deployment--not just R&D--and even in private firms. The $350 million loan sought by Tesla Motors, the Silicon Valley electric car start-up that has just sold its 100th $100,000 electric sports car, comes to mind. We need clear guidelines that avoid putting tax dollars into companies that operate in markets that are already distorted by federal mandates and subsidies, such as those supporting biofuels production. But while I would not wish the government to invest in wind and solar power developers or their projects, the infrastructure necessary to make those projects more effective and competitive is a different story.
The case for increased federal investment in our power grids is similar to that for the Interstate Highway system in the 1950s, as another great enabler of economic transformation. Ever since the northeast blackout of 2003, we've known that the grid must become more resilient and reliable, and utilities and the grid operators have been working hard on that. But it also needs to be able to accommodate a much larger number of generators, ranging from rooftop solar arrays to widely dispersed utility-scale solar power installations and wind farms. Moreover, we need more long-distance transmission, particularly from the ten or so states that are home to roughly 80% of US wind power potential. Our best solar resources are similarly concentrated. If we're serious about reducing greenhouse gases from the electricity sector, which contributes a third of US emissions, this will require a better-integrated, higher-capacity, faster-reacting electrical grid to ensure that we make the most of distributed and intermittent renewable energy sources. It is also the sine qua non of the eventual mass electrification of our transportation systems, which account for another 28% of our GHGs and two-thirds of our petroleum consumption.
Unfortunately, we must also be realistic about how much can actually be accomplished, or in stimulus terms, spent on this task within the next two years. Although we might like to imagine a massive, Works Progress Administration-like marshaling of the nation's unemployed to undertake great tasks, those Depression-era efforts faced nothing like the modern regulatory requirements for permits and environmental impact reports. I've been associated with a fair number of large projects in my day, and the practical obstacles for quickly revamping the power grid boggle my mind. For starters, it would require setting aside all of the existing regional, state and local permitting processes and handing someone--a "grid czar"?--sweeping powers even greater than the power to designate "National Interest Electricity Corridors" that was given to the Federal Energy Regulatory Commission under the Energy Policy Act of 2005. Even if permits were no problem and plans already in place, I wonder how much actual "steel on the ground" we'd see by the end of 2010, beyond "last-mile" investments, such as smart electricity meters. Perhaps the best we can hope for in this timeframe would be to fund the planning and design process and get all of the environmental impact studies done. That might stimulate a lot of engineering and consulting firms, but it wouldn't necessarily put many construction folks to work. I can't help wondering how many other aspects of a federal stimulus beyond energy will be subject to similar constraints.