What Leads to Investment in Resilient Power?

Author: Gavin Dillingham, PhD

Will Hurricane Matthew lead to greater investment in resilient power infrastructure, specifically combined heat and power? The record is mixed as to how communities and states respond to massive power outages caused by natural disasters. After Hurricane Sandy the state of New York invested $1.4 billion to hardening the grid2, Con-Ed the investor owned-utility committed $1 billion to infrastructure upgrades3 and the PSE&G utility in New Jersey has created Energy Strong, a program to invest $3.8 billion in infrastructure over a 10 year period4. These are just a handful of examples of the investment in grid infrastructure and combined heat and power in the aftermath of the $71 billion hurricane. In contrast, after Hurricane Ike, where 95% of CenterPoint’s 2.6 million Texas customers lost power, many for more than a couple of weeks, little investment has been done. The biggest focus has been on trimming trees and some infrastructure upgrades that helps to better track outages and reroute power when lines go down. Will North Carolina and Florida go the route of its northern neighbors or take a different route?

It is important that more attention gets paid to why there is such a divergence in how state and local governments respond to natural disasters. A significant issue is the level of uncertainty regarding the likelihood and risk of natural disasters happening in the future. Will it be flooding, drought, extreme heat, more major hurricanes? Investing in resources and technologies to adapt to and deal with any of these contingencies can be expensive and politically costly if the wrong path is taken. For example, a City invests infrastructure to mitigate flooding and then falls into a 10 year drought. Voters may not be happy and legislators and council members may soon find themselves out of office.

There is uncertainty as to what the next major disaster will be and with limited resources and shrinking coffers, choosing which direction to take can be difficult. Planners and policy makers are dealing with multiple possible outcomes without any known relative probabilities. The uncertainty as to what climate will look like over this time makes it difficult to decide where to place the investment for optimal adaptability over time. Therefore, it is important that we place greater focus on this decision making process that drives investment in adaptive and resilient infrastructure. Decision making is driven by both the internal characteristics of a state or community and by the external activity of other states and the federal government. As we look into the decision making process, elements that should be considered are resources of the state, ideology of the state, recent climate related activity, as well as factors outside of the state, such as federal regulatory and policy activity and planning and investment activity of similar states. States will look to others to see what their neighbors are doing who are facing similar problems. Network development and learning among states could be a key factor in reducing uncertainty, as well as providing political cover. Finally, how do states see these disasters impacting their economic output and competitiveness? Is there a competitive advantage for investing in certain infrastructure and reducing risks relative to other states? What is the risk to their economy if they do not take specific actions to reduce climate impacts? If we want to see the right investment in the right places, it is important that these questions are asked and effort is made to find the right answers.

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