Infrastructure: Roads and The Smart Grid

Wednesday, December 31st, 2008

Alex Tabarrok talks about Infrastructure:

The first thing people think about when someone says “infrastructure” is roads and bridges. That’s unfortunate because we already spend over $100 billion a year on transportation infrastructure and the truth is we don’t need that much more. Peter Orzag, President-Elect Obama’s choice for OMB estimated — when Director of the CBO — that an additional $20 billion in spending, mostly to maintain current transportation infrastructure, would achieve 83% of the net benefits to be had from more transportation infrastructure spending. Moreover, in many cases, congestion pricing would be both greener and more efficient than greater spending. A better program would be to follow Germany and several innovative state programs to get congestion pricing using GPS technology up and running, especially for trucks.

Even more valuable than transportation infrastructure would be greater investment in electricity infrastructure, a smart grid. Consider that in 2003 a massive, widespread, power outage threw 50 million people in the Northeastern states and Ontario, Canada out of power — disrupting lives and the economy. Why did this happen? Because of a failure to “trim trees” in Eastlake, Ohio — now that’s a dumb grid. And remember that only a few years earlier, the most innovative, high-tech industries in the world were shut down by blackouts caused by our primitive electricity grid. Overall, blackouts cost the U.S. on the order of $100 billion a year.

The smart gird is a not one idea but many technologies such as real-time pricing (smart meters), superconductive smart cable, and plug-n-play architecture that combine to produce a grid that is decentralized, self-healing, robust, and smart for both producers and consumers. Decentralized power, for example, makes it easier to isolate problems, “route” power to different areas, and maintain robustness in the face of falling trees and other problems. Plug and play architecture means that new technologies such as electric cars can be automatically used as both consumers and producers (via storage) of electricity, as needed, on the fly. Plug-n-play, the open-source of electricity infrastructure, will also open the field of electricity generation and storage to far greater innovation than is possible now.

Useful references include the Department of Energy’s somewhat breathless introduction for the layperson, The Smart Grid, The National Energy Technology Laboratory’s The Modern Grid Strategy, the Smart Grid newsletter and papers by Kiesling and also Dismukes in Electric Choices (a book I had a hand in).

The smart grid did not receive prominent attention in Obama’s infrastructure speech but the campaign called for matching grants to investment in smart grid technology and support for smart meters and real-time pricing. An investment tax credit for smart grid technologies and more foresighted regulation (price regulation has limited investment in needed infrastructure) could encourage the construction of much-needed electricity infrastructure while maintaining private investment incentives and promoting innovation.

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