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Energy infrastructure needs have to be addressed

January 6, 2019

Seventeen new oil and natural gas pipelines came online in 2018, but the country still needs additional energy infrastructure to meet growing energy needs. The question is which types. Energy infrastructure is a broad term, encompassing not only oil and natural gas pipelines, but also power plants, transmission lines and the other parts of what is generally termed “the grid.”

As currently designed, the grid has been successful in getting the U.S. — even in its most rural areas — electrified. Now the challenge is integrating intermittent renewable energy sources, such as wind and solar, and also trying to better secure the grid against attacks from cybercriminals and foreign adversaries.

According to the Energy Information Administration, or EIA, domestic crude production was expected to average 10.9 million barrels per day in 2018. This year, this average is predicted to be 12.1 million barrels a day, while the same agency predicts that “both the level and volume growth of natural gas production” will continue to rise in 2019 after setting new records this year. Getting this oil to market will require a continued expansion of pipeline infrastructure.

The industry trade group Interstate Natural Gas Association of America, or INGAA, released a study this fall that found that even in supposedly unfavorable market conditions, Canada and the U.S. will need to add 7.7 million barrels per day of new oil transport capacity to keep pace with market and production demands.

This breaks down to projections of capital expenditures of between $685 billion and $898 billion from 2018 to 2035, or $38 billion to $50 billion per year.

Construction on that scale would be a boon to both local and regional economies, adding 242,000 direct jobs and supporting hundreds of thousands more. States likes Texas, Louisiana, Pennsylvania, California and Ohio would especially benefit from infrastructure expansions, which would support tens of thousands of high-paying jobs that don’t require college degrees.

With all the excitement in fossil fuels, it can be easy to lose sight of the broader picture of energy infrastructure, which also includes the electric grid. Historically, economic growth has generally been accompanied by increased energy needs. Energy researchers view the past decade’s pattern of flat electricity demand as an anomaly and doubt that trend will continue. New generation capacity does little good if it can’t be connected to consumers.

When he came into office, President Donald Trump hyped his infrastructure plan, a proposal that quickly stalled. Now Democrats are the ones pushing for increased infrastructure spending.

Bolstered by tax breaks and other government incentives, clean energy installations set records in 2017 and have remained strong this year.

Now that the projects have been announced, the thing to watch will be how the states handle getting this power to market. For traditional generation methods, transmission companies handle the costs and infrastructure of getting power from generators to consumers. Renewable energy sites, which are frequently farther away from population centers, are less attractive investment prospects. To get the power to market, backers of offshore wind and solar plants have often footed the bill for transmission costs themselves and in some instances have gotten help from state governments.

Other states, like Texas, have explored shifting some of the increased transmission costs of renewables back to the companies generating the power through changes in the state’s capacity markets. In December, the Texas Public Utilities Council dodged a decision on this.

Making the operators of solar and wind installations responsible for a larger share of transmission costs would be another cost increase during an era when natural gas remains an attractively cheap alternative. For consumers, the fear would be that state renewable energy standards would require the use of these renewables despite their higher costs.

Decisions on transmission costs are just one element of what would be needed to modernize the American grid. With increased risks of cyberattack, grid modernization and security has become more of a priority for the Department of Energy. Changes to the physical structure of the grid have occurred in a more piecemeal fashion, however, largely driven by the priorities of states and regional transmission companies.

In short, there is a lot to build in the coming year and 2019 looks to set records of its own.

Erin Mundahl is a reporter with InsideSources.

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