This Infrastructure Ideas column examines some of the implications of the contentious US elections for infrastructure investment. We’ll look at what the elections bode well for (accelerated energy transition) and not so well for (large-scale transport problems), and offer a handful of suggestions for the incoming Biden administration.
One interesting note on which to start is that, while infrastructure-related problems in the US have continued to worsen over the past four years (see America’s Infrastructure Grades), infrastructure slid well down the totem pole of issues in the 2020 election. Infrastructure was well-debated in the Democratic primaries, with the Klobuchar campaign plan probably the strongest of plans put forward by candidates, and the “Green New Deal” emerging, but the topic was largely overshadowed in the general election. By comparison, with its dueling trillion-dollar campaign plans, infrastructure issues were much more visible in the 2016 US election. Infrastructure’s visibility was nothing compared to the high-water mark it reached in North America, the 2012 Mexican presidential election where making energy costs competitive with the US was arguably the number one campaign issue. This does tell us that, as has been the case so often, practical matters such as infrastructure, however important and well-conceived they may be, are no match for populist rhetoric (or a pandemic) in appealing to voters. At least at the national level.
What can we expect for infrastructure in the US come 2021? The new administration will walk into a situation of sharply diverging trends. On the negative side, much traditional infrastructure has gone from bad to worse: mass transit, interstate transport, roads and bridges, rail transport. Long-deferred maintenance and capital investment has largely continued to be deferred since 2016. The Trump tax cuts further weakened the ability of the federal government to pay for any large-scale investment program, while COVID-19 reduced user revenues for passenger transit across the country. On the positive side, continued technology advancements have further reduced the cost of renewables and electricity generation. It is now far cheaper to power pretty much anything than it was 5-10 years ago, and even with the COVID pandemic raging renewable energy generation has kept growing. Energy cost problems are now largely a thing of the past, and the big debate now is rather over accumulated environmental externalities, climate change and the pace of transition.
In transport, there are some grounds for (faint) optimism. The main issue which the Biden administration will face is an issue which has been front and center for decades: where’s the money? Constrained public funding has been a roadblock in the US for a very long time. The massive fiscal effects of the combined Trump tax cuts and COVID have not helped the situation: the Biden administration will have to hope for the longshot of either democrats controlling the senate by winning one of the two January run-off elections in Georgia, or that the stance of senate republicans turns cooperative in a way we have not seen in a long time. It is conceivable that this could be the one area of bipartisan action, a thesis infrastructure champions Tim Kaine (D-Va) and John Cornyn (R-Tx) have been pushing. At the city and state level, ability to find capital for large-scale transport investments will also be the big issue, especially with COVID affecting city and state finances, although the politics are generally much less complicated than at the national level. Public-Private Partnerships (PPPs), which are underutilized in the US relative to the rest of the world, could be a way forward – drawing in plentiful long-term private capital for infrastructure financing. However PPPs, and any infrastructure asset ownership by the private sector tend to be distrusted by progressives in the US, and currently suffer from a pair of highly visible black eyes, the Purple Line and Silver Line mass transit projects in the Washington DC area (see A High Profile PPP Comes Apart and the Silver Line to Dulles).
The energy sector has more low-hanging fruit for a Biden administration. Electricity generation is fully private funded, and delivering increasingly lower costs with lower emissions. The key issues for policy do not require the large amounts of capital which transport does. The questions are rather how to accelerate the speed of the transition towards low-emissions, through encouraging faster development of energy storage, facilitating long-distance transmission of renewably-sourced electricity, and bringing forward the decommissioning of fossil-fuel based generation facilities. One can safely expect even more of a boom than we see today for energy storage companies, the return of fiscal incentives for wind and solar development, and the elimination of trade barriers on components for renewable generation plants. One can also expect tensions between a desire to increase the geographical market for wind power generated on the Great Plains, and “not-in-my-backyard” concerns over new, large-scale power transmission lines. And one can expect major tensions between on the one hand goals to hasten the decommissioning of coal-fired plants, and to discourage the building of new natural-gas fired generation, and on the other hand concerns about the impact on communities and workers involved with fossil fuels (see Prospects of a Republican Senate Majority narrows Democrats Clean Energy Options).
There are a few suggestions one can make to the incoming Biden administration to better navigate the infrastructure challenges it will face.
- Facilitate cooperation and coordination within the energy storage sector. There are fascinating developments taking place in energy storage technologies, and great advances are being made. But accelerated deployment of energy storage – with its important implications for emissions reduction and climate – will depend on policy-makers across many different levels being able to rapidly understand what their policy options are, and on large-scale and coordinated production and distribution of storage assets. Policy encouragement can play a major role here, without the need for large-scale public investment.
- Prioritize the design and execution of concrete alternatives for communities affected by job losses where coal and other fossil fuels are being decommissioned. This could go a long way to reducing the politically-charged and politically-powerful opposition to the ongoing energy transition. Much can be accomplished by the sharing of best practice and experience in this area, as evidenced by the work in other countries of the World Bank’s Community Development group (CommDev).
- Facilitate best-practice sharing between cities and states. Most cities and states enjoy stronger political consensus than the US as a whole. Voters in the 2020 election in many cases supported local bond referendums for infrastructure projects. Several cities and states also continue to show more appetite for PPPs than the Federal government. Because of their more limited experience and administrative base, the smaller governments in cities and states also need more help in avoiding reinventing the wheel, and/or in adopting design and execution approaches that have worked elsewhere. Groups like C40, which focuses on climate leadership at the city level, have demonstrated that there is widespread appetite for best-practice support, and that this can reduce the time and cost to move forward on infrastructure projects.
- Finally, leadership matters. Infrastructure issues are complex. The inability of senior leaders to listen to inputs from different sources will inevitably doom any complex plans, especially those dependent on implementation across many actors. As a consultant to the Infrastructure Task Force created by the Trump Administration in early 2017, this author has seen how quickly politics and an inability or unwillingness to listen can shut down any high-powered team. To date, President-elect Biden has indicated a willingness and an interest in gathering ideas and concerns: he’ll need all of that to make headway on the country’s infrastructure issues. Time will tell!