On the heels of my recent column on China's investment in clean technology, two news items really caught my attention in the last couple of weeks. They tell an interesting story of who in the U.S. is really prepared to build a modern energy system.
First, the Governor of New Jersey decided to stop the construction of a new commuter train tunnel between New Jersey to Manhattan (and again today, after further review, he still killed it). This much-needed expansion of our infrastructure would double the number of trains entering New York City from the west. Up to $3 billion in federal funding had already been lined up to offset some of the cost. The project would also reduce congestion on the roads (and/or allow population and economic growth), reduce pollution, improve property values, and employ 6,000 workers. But even with all of these benefits, unless Christie changes his mind, the project is now dead.
Rising costs -- which are always a part of big infrastructure projects -- were the stated reason for the Governor's defection. But the small-government fever that's taking over the United States is largely to blame. This country did not seriously debate infrastructure investments in the past. Republican President Eisenhower is credited with signing the Federal-Aid Highway Act of 1956, which committed the U.S. to build an interstate highway system. But he wasn't going out on a limb -- this was a bill that the House passed on a vote of 388 to 19, and the Senate by 89 to 1. This landmark infrastructure law raised the gas tax by 50% and allocated nearly $200 billion to the project (in today's dollars). Can you imagine our leaders making that kind of commitment today?
As many pundits have lamented, we seem to have completely lost our ability to consider, invest in, and complete big infrastructure projects. This does not bode well for our future.
But just when I was thoroughly discouraged, Google announced recently that it would invest heavily in a truly innovative energy infrastructure project. The tech giant and some other investors are proposing a $5 billion "transmission backbone" for offshore wind farms along the East Coast. This new 350-mile line would connect Virginia to, yes, New Jersey, and allow for much easier, cheaper development of offshore wind (it would also, as a side benefit, get some cheaper energy already produced in Virginia up to the northern states).
This is in no way the first time that Google has made noise about clean tech. A few years ago it announced its intention to invest a billion dollars to help make renewable energy cheaper than coal. The company has also put in place one of the largest corporate solar installations in the world.
But why would Google invest so much in these kinds of projects? It's easy to dismiss it as the socially-minded whim of a cash-rich company. But that's not giving the company much credit for being a smart operator. Given the resource-intensity of its giant data centers -- there's a persistent, believable rumor that Google is the largest energy user in the State of California -- trying to bring the cost of renewables down is a great hedge strategy. What growing enterprise wouldn't want to rely increasingly on energy with zero variable cost?
But the company must also believe that this wind transmission project is a good investment. Google is not even the first surprising organization to jump into renewables as an investment vehicle. I'm reminded of Goldman Sachs netting $900 million on the sale of a wind company back in 2007.
So while federal and state governments are somewhat incapacitated, some elements in the private sector are trying to move ahead with infrastructure and green projects anyway. Companies have gotten nowhere near the help they need. The stimulus bill does provide for some serious dollars, but we could've unleashed far more capital with price on carbon, the very thing comprehensive climate legislation would have provided.
But let's not kid ourselves. Infrastructure is way too large a project for the private sector to handle alone. Train tracks, roads, the Internet -- all were built with massive and sustained commitment from the government.
But, still, it's a good sign that companies are plowing ahead anyway. Let's hope that the Governor of New Jersey, and other leaders, seize the opportunity and actually start helping these kinds of innovative companies.
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