To Secure America's Power Sector, Invest in Infrastructure and Free Markets
The calculus of America’s power generation has long relied on a delicate balancing of economic and environmental concerns. Utilities have traditionally sought the most affordable, most plentiful, and most profitable method of generating electricity while also minimizing pollution.
But a third factor, national security, has recently become central to the debate swirling around the future of America’s power generating fleet. The security issue arrives as the power market has tilted in favor of abundant and affordable supplies of natural gas, thanks to the use of hydraulic fracturing to unlock vast reserves in shale formations across the country. Coal and nuclear have found it difficult to compete with natural gas on the basis of price and environmental performance — and they don’t like it.
A recent U.S. Department of Energy (DOE) memo on the resiliency of the national power system concluded that natural gas’ reliance on pipelines creates physical and cyber security vulnerabilities. The report, leaked to the media in May, lays out a proposal that threatens to upset the existing balance between cost, security and environmental performance in favor of tossing a lifeline to coal and nuclear.
What can only be called a bailout of these industries was rejected by the Federal Energy Regulatory Commission (FERC) in January. In its rejection, FERC asked regional transmission operators to provide information on resilience challenges in their markets. The DOE memo, which links America’s increasing dependence on natural gas for power generation and potential vulnerabilities in its transmission system to national security, represents the latest attempt to justify government putting a thumb on the scale in favor of coal and nuclear at the expense of ratepayers.
The risk of cyber and physical attacks against pipelines, transformers, and other critical energy infrastructure are serious matters. Congress and FERC should work together to adopt smart policies to improve protections from such attacks. But fear mongering and self-interest should not obscure the fact that the energy industry, together with federal regulators, has been proactive in improving security measures around critical infrastructure.
The reality is that stakeholders from both the private and public sectors have been collaborating for years to gather information on and respond to potential threats. Examples of this focus on improving security are everywhere. Globally, the oil industry is on track to spend an additional $1.9 billion on cybersecurity this year, according to ABI Research.
PJM Interconnection, which operates the electrical grid across 13 states and serves 65 million customers in the mid-Atlantic region, is conducting a study to better understand the fuel-supply risks in an environment trending toward greater use on natural gas. The study will help the utility determine its systems’ resilience to potential pipeline shutdowns, cyberattacks or the impact on gas deliveries of a prolonged cold snap.
More than 50 natural gas and oil companies — including a number of the nation’s largest natural gas pipeline operators — now share cyber threat intelligence with each other and the federal government through the Oil and Natural Gas Information Sharing and Analysis Center.
The American Gas Association (AGA) chairs the Oil & Natural Gas Sector Coordinating Council Cybersecurity Working Group with the Department of Homeland Security to better coordinate physical and cyber infrastructure initiatives. Utility executives from AGA’s member companies have also signed onto the AGA Commitment to Cyber and Physical Security to better ensure their pipelines are able to resist potential cyber and physical security threats.
These quantifiable industry actions are bolstered by proposed legislation from policymakers like Rep. Fred Upton (R-MI) to ensure heightened standards for physical and cybersecurity. The power system is also protected by a myriad of regulations imposed by a host of federal agencies, including DOE and the Transportation Security Administration. The energy sector has also adopted the official framework of cybersecurity objectives and standards established by the federal National Institute of Standards and Technology to include protection, defense, resilience and recovery methods.
While there are physical constraints on natural gas’s ability to serve the entire electrical system — which could and should be addressed with a nationwide commitment to infrastructure investment — focusing on the security of natural gas pipelines is a red herring. Instead of the government’s thumb on the scale, the market should determine what fuel supplies will best meet the diverse needs of America’s power-generation sector.
There’s no silver bullet that can ensure the absolute security of our nation’s power system. Investment is needed in the redundant capabilities and preparedness of utilities as well as to improvements of pipelines and other delivery systems. To get there, DOE should encourage more private and public sector investment in the infrastructure needed to power America with the most abundant, affordable, and clean sources of energy available domestically.
To ensure consumers pay the lowest rates for the most reliable energy, the energy sources that power our future should be allowed to compete in an open and fair market.
Dan K. Eberhart is CEO of Canary, LLC, one of the largest independent oilfield services companies in the United States.