The $33 Billion Cost That We Could Be Avoiding

It should seem ridiculous that the U.S. was able to send men to the moon some 44 years ago but it could not solve a problem that exists just 34 feet from the ground. The national power grid remains “highly vulnerable” to blackouts because of extreme weather fueled by climate change, according to a report by the White House Council of Economic Advisers and the Energy Department. The report also says that from 2003 to 2012, weather-related outages cost the economy between $18 billion and $33 billion annually. This financial burden could be avoided altogether.

Even without climate change, the power grid is susceptible to failures because most of it was built over a period of more than 100 years. There has been almost no major breakthrough in power transmission. What has been suggested as solutions to the problem ranges from replacing wooden utility poles with poles made of concrete, steel and stronger materials to burying power lines. These methods are either costly or impractical.

It is undeniable that investments in new technologies and infrastructure improvement are sorely needed. “Continued investment in grid modernization and resilience will mitigate these costs over time — saving the economy billions of dollars and reducing the hardship experienced by millions of Americans when extreme weather strikes,” according to a post on the White House blog. The only remaining debate is who is will foot the bill, which, as estimated by the American Society of Civil Engineers, may reach $673 billion by 2020.

The $4.5 billion allocated by the Obama administration as part of its 2009 stimulus plan for investments in energy efficiency and reliability systems is a start. However, more is needed. More funds should be directed to research and development to improve transmission technologies, which will be beneficial for both the industry and the wider economy in the long run.

Given the benefits, utilities companies should be willing to initiate these investments. However, they are not able to do so without charging a higher rate. As rate increase remains unpopular among voters, state regulators are reluctant ratify the idea. What the customers and the policymakers failed to see is the hidden $33 billion cost that comes with an outdated and weathered power grid.

For a start, the report says, power companies should be pressed by government to install technologies including smart meters and energy-storage devices to shield the electric grid from more frequent disruptions tied to weather.

The approach called “beneficiary pays” is also worth a closer look. Accordingly, states that benefit from a power grid upgrade should be responsible for the costs. It indeed does seem fair that a stable power grid that suffers no costly blackouts should be partly funded with the money that used to be spent on cleaning up the aftermath of outages.