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Essay: No Time for Delay

Christopher J. Kearney, Chairman, President and CEO of SPX Corp., says we all have a stake in addressing the global energy infrastructure crisis.

Dennis Balogh

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Government and business leaders have acknowledged that a “perfect storm” of global trends is threatening to create an epic crisis: the world’s inability to meet its electrical power needs. Steady population growth, increased urbanization, the rapid development of emerging economies and an aging, outdated energy infrastructure across the developed world are all converging factors in the struggle to meet the more than 50 percent rise in global demand for energy anticipated between now and 2030.

For decades SPX Corp. (SPW) has been at the forefront of global power-generation innovation, supplying the products and technologies to build new, more efficient power plants and to renovate older ones. Thousands of power plants in more than 60 countries use our cooling towers; we’re a leading U.S. maker of medium-power transformers; and our valves, pumps and filtration products are applied to most forms of power generation. In China our dry cooling systems are enabling the building of power plants where water is scarce and are reducing water consumption by up to 90 percent. In South Africa, two major coal-fired power stations — the first to be built there in 20 years — are using our feedwater heaters to optimize boiler-system efficiency and reduce costs.

The United Nations expects the world’s population to grow to 8.3 billion by 2030, from roughly 6.7 billion today. Developing countries continue to advance, creating larger urban populations with better living standards and greater access to technologies and other power-demanding goods. Meanwhile, numerous countries struggle with electrical power outages.

Since 1960, U.S. investment in its aging infrastructure has dipped 50 percent, to roughly 2 percent of GDP. In contrast, China has budgeted 9 percent of GDP and recently set aside $170 billion of its stimulus package to upgrade its electrical grid. The hope is that the Obama administration’s plans to invest heavily in America’s power and energy infrastructure will help close that gap. U.S. demand for power and energy is projected to increase by as much as 30 percent by 2030. At the same time, the existing U.S. energy infrastructure is increasingly inadequate, as evidenced by the North American blackout of 2003, which left an estimated 50 million people in the dark and resulted in $4 billion to $10 billion in economic losses. Many of America’s power plants were constructed in the 1950s, and most transformers, transmission lines and circuit breakers are at least 25 years old.

The International Energy Association (IEA) estimates that $26 trillion will be spent globally on power and energy infrastructure between now and 2030. Even this amount is likely to be inadequate, and the current global credit crisis threatens to delay vital infrastructure projects and investments in the near term.

Many political leaders recognize that their countries’ economic growth depends directly on infrastructure improvements. Business leaders are also taking notice. A KPMG study released in early 2009 found that 77 percent of 328 global C-level executives believe that the existing level of infrastructure investment is insufficient to sustain the long-term growth of their organizations. As the IEA points out, current energy trends are socially, environmentally and economically unsustainable, and current economic worries do not justify delays in addressing the future energy challenge.

It is vital that the private and public sectors each recognize that they have a vested interest in avoiding costly future breakdowns in power capacity. Greater cooperation between governments and the private sector, including the creation of public-private partnerships that combine public and private capital, will help ensure that critical infrastructure projects get the funding they so desperately need.