Recently a number of India’s power grids collapsed leaving hundreds of millions of people without electrical power. This was in addition to the vast number of Indians living without electricity as a normal fact of life.
But for many Indian businesses, offices and other facilities the power outages were merely a costly inconvenience. India’s power grid is so unreliable and unable to handle peak needs that reportedly well over half of India’s businesses have back-up or independent power supplies. The problem is that most of these independent power sources make inefficient use of fossil fuels. This is costly to business, harmful to the environment and contributes to India’s trade deficits.
Anyone in the U.S. feeling smug about this should take note of the ageing patchwork quilt that is the American power grid – “grid” being an exaggeration in the eyes of many. The U.S. grid first developed as a bunch of isolated systems which gradually became interconnected beginning in the 1920s. Millions of Americans have been left without power this summer after several large storms, and an internet news search on any given day for a term such as “power outage” will likely return dozens of press-worthy events within the 24-48 hours preceding the search.
Most of our power grid was built 50 to 60 years ago. It suffers from ageing equipment, which suffers higher failure rates and require more inspection and maintenance; outdated layouts; and easily-subject-to-damage delivery systems such as above-ground power lines. The U.S. grid is subject to brownouts and blackouts, causing inconvenience, economic damage and sometimes death. Many of you reading this have been through a significant blackout within the past year or two.
While critical parts of our financial system such as the major stock exchanges have emergency backup systems, many of the components that feed into our financial system do not. When blackouts occur they can also affect air travel, traffic lights, water and sewage treatment plants and just about every other facet of our lives. These disruptions in turn impact the economy.
The conundrum is what to do about the problem. Modernizing the system would require billions and billions of dollars, which could add hundreds of dollars per month to families’ electric bills if passed through to customers. But not investing in the grid will also cost billions in economic losses, not to mention a lot of inconvenience.
Starting to modernize the grid would put people to work and improve energy efficiency. It would provide a direct stimulus to many businesses from small start-ups to giants like General Electric, and help the U.S. improve its competitiveness in the alternative energy solutions industry. In addition this would reduce the chances of numerous economic disruptions and the occasional calamity, and help us avoid looking like a third world country. It seems to be a case of pay for it now or pay for it later.