Energy Review Warns of Rising U.S. Costs From Climate Change

Severe weather is the leading cause of power disruptions, costing the U.S. economy from $18 billion to $33 billion a year, and climate change will only make it worse, a White House review on energy infrastructure concludes.

The report, released Tuesday by the Energy Department, recommends investments in the electric grid to protect it from the severe storms that may be occurring more frequently because of global warming, as well as from physical and cyber-attacks.

Vice President Joe Biden and Energy Secretary Ernest Moniz unveiled the report at Peco Energy Co. in Philadelphia. Biden noted that more electricity is being generated from solar and wind, which are challenges to the grid. Renewable energy resources often are in rural areas where power is needed least, requiring lines to bring it to consumers.

“How and where we’re producing energy is changing and our energy infrastructure has to keep up,” Biden said.

Moniz said in an interview Monday with Bloomberg News reporters and editors in Washington that “modernizing the electricity grid is critical,” particularly given the threats presented by extreme weather.

The review recommends spending about $15.2 billion over a decade to improve the grid, upgrade the Strategic Petroleum Reserve, and make energy infrastructure more resilient to the effects of climate change. Some of that money is in the proposed 2016 federal budget.

While the report focused on energy infrastructure, it didn’t mention the Keystone XL project, an $8 billion pipeline that would bring Canadian heavy crude to Gulf Coast refineries.

‘One Project’

The project, which TransCanada Corp. proposed in 2008, has opened a rift between Republicans in Congress who support it and President Barack Obama, who has said Keystone’s benefits cited by advocates are exaggerated. The State Department is reviewing whether the project is in the national interest, and Obama, while a critic, hasn’t said if he’ll grant the cross-border permit needed to start building Keystone XL.

John Holdren, director of the White House office of science and policy, told reporters Tuesday that it wasn’t appropriate to pre-empt the analysis and the report is “bigger than any one project.”

As part of the roll-out of the review, the U.S. Department of Agriculture announced $72 million in loans to support six new rural electric projects to improve transmission lines and implement smart grid projects, according to a White House fact sheet.

Company Meetings

The Energy Department also is planning a meeting with top executives from 17 energy companies, including Consolidated Edison Inc. in New York, Pepco Holdings Inc. of Washington and Minneapolis-based Xcel Energy Inc. on April 30 to discuss how to improve energy infrastructure resilience for extreme weather and climate change, which was described as “the most important environmental factor affecting” the electric grid.

Severe weather -- including hurricanes and tornadoes -- resulted in about 679 widespread power outages from 2003 to 2013. Those outages cost the U.S. economy as much as $33 billion annually, according to the federal government.

And the risks are growing. Sea-level rise caused by climate change worsens storm surge and the severity of downpours, intensifying coastal flooding. Warming temperatures are thawing large swaths of permafrost in the far North, with impacts on pipelines, roads and other energy-linked infrastructure, the report concludes.

“Extreme weather events with high societal costs have been increasing, a trend expected to intensify under continuing climate change,” according to the report.

Cybercriminals, Terrorists

Meanwhile, cybercriminals and terrorists are getting more sophisticated in their attacks.

The report finds that the nation needs better emergency response tools when energy disruptions occur, and should boost investment in security at sensitive facilities on the grid.

Congress should give the president more leeway to release oil from the Strategic Petroleum Reserve, a network of 62 salt caverns in Louisiana and Texas that hold about 691 million barrels of crude, the report said.

“The president should not have to wait until higher fuel prices have already damaged the U.S. economy before the SPR can be used without restrictions,” the report said.

The report is the first installment of the Quadrennial Energy Review, an audit of the nation’s infrastructure ordered by Obama in January 2014 as part of his effort to combat climate change. Subsequent reports will focus on energy supply chains and end-use infrastructure.

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