Between the Poles

Report Supports National Infrastructure Bank

A report released last week released by the US Treasury Department and the Council of Economic Advisers supports the development of a National Infrastructure Bank as proposed by President Obama last month.

Its first conclusion is that Americans want more infrastructure investment and cites statistics to support this assertion.

• In 2008, over 80 percent of the 59 transportation infrastructure projects proposed in local referenda were approved by the voting public
• 98 percent of the funds requested for these projects was approved by the voting public
• Americans’ satisfaction with their public transit system ranks 25th out of 32 OECD nations.
• Americans’ satisfaction with their roads and highways system ranks only 17th out of 32 OECD countries
• 19 out of 20 Americans are concerned about America’s infrastructure
• 84 percent of Americans support greater investment to address infrastructure problems
• Poor conditions of roads cost the average motorist who drives in cities on a regular basis over $400 a year
• A two adult household using public transportation could save an estimated $6,250 a year compared to a similar family that is unable to use public transportation

The report says that the average American annually spends $8,600 a year on transportation, one-third more than on food, and concludes that public investments which lower the cost of transportation would reduce transportation-related costs including car maintenance and fuel consumption.

Compared to other major economies the US underinvests in infrastructure and this affects its international competiveness. 

• US         2 % of GDP 
• China     9% of GDP
• Europe   5% of GDP

President Obama first proposed a National Infrastructure Reinvestment Bank in his presidential campaign that would invest $60 billion over ten years in "a world-class transit system, green energy technology, ports, roads, and high-speed rail."

The President's current proposal for renewing the transportation network includes

• $50 billion up-front investment connected to a six-year reauthorization of the surface transportation program
• National Infrastructure Bank
• Rebuilding 150,000 miles of roads,
• Constructing and maintaining 4,000 miles of passenger rail
• Rehabilitating/reconstructing 150 miles of runways
• Upgrading the air traffic control system

The objectives of the National Infrastructure Bank is to increase investment in infrastructure by attracting private capital, secondly, to implement a merit-based selection process for infrastructure projects, and thirdly to encourage investments in multi-modal and multi-jurisdictional infrastructure projects.

The report suggest that investing in transportation infrastructure creates middle class jobs.  The distribution of jobs among the various sectors of the economy most affected is estimated to be

• 61 % of the jobs in the construction sector
• 12 % in the manufacturing sector
• 7 % in retail trade

The report estimates that 90 percent of the jobs in the three sectors most affected by infrastructure spending would be middle class jobs.

US 2011 Budget Adds $100 billion to Stimulus

Here are some highlights of President Obama's 2011 budget request

Eliminating tax credits and subsidies for the carbon industry

• Eliminating more than $2.7 billion in tax subsidies for oil, coal and gas industries. Estimated to generate more than $38.8 billion dollars for the federal government over the next 10 years.
• Terminating Ultra-Deepwater exploration program, saving $50 million.
• Canceling planned expansion of the Strategic Petroleum Reserve, saving $71 million.

The 2011 Budget provides $28.4 billion for the Department of Energy (DOE) to support scientific innovation, develop clean and secure energy technologies, maintain national security, and reduce environmental risk.

Increased support for nuclear power, renewable energy, and the smart grid

• $36 billion in new loan authority – for a total of $54.5 billion – to expand support for DOE loan guarantees for nuclear power facilities.
• $500 million in credit subsidy to support $3 billion to $5 billion in loan guarantees for innovative energy efficiency and renewable energy projects.
• $144 million for research, development, and demonstration activities to modernize the grid including smart-grid technologies that will spur the transition to a smarter, more efficient, secure and reliable electric system, resulting in energy- and cost-saving choices for consumers, reduced emissions, and growth of renewable energy sources.

Investment in clean energy technologies

$4.7 billion in clean energy technology investments at DOE, including:

• Nearly $2.4 billion, an increase of $113 million, for energy efficiency and renewable energy programs including $302 million for solar energy, $220 million for biofuels and biomass R&D, $325 million for advanced vehicle technologies, and $231 million for energy efficient building technologies.
• $545 million for advanced coal climate change technologies to focus resources to develop carbon capture technologies with broad applications to advanced coal power systems, existing power plants, and industrial sources.
• $300 million for the Advanced Research Projects Agency–Energy to accelerate game-changing energy technologies in need of rapid and flexible experimentation or engineering.
• $793 million for clean energy activities and civilian nuclear energy programs, including research and development and infrastructure programs. The budget includes a new cross-cutting research program to address technology needs for all aspects of nuclear energy production.

The Department of Energy has identified additional high performance goals including

• Double renewable energy generating capacity (excluding conventional hydropower) by 2012.
• Assist in the development and deployment of advanced battery manufacturing capacity to support 500,000 plug-in hybrid electric vehicles a year by 2015.
• DOE and HUD will work together to enable the cost-effective energy retrofits of a total of 1.1 million housing units through 2011.
• Commit (conditionally) to loan guarantees for two nuclear power facilities to add new low-carbon emission capacity of at least 3,800 megawatts during 2010.

Government of Canada Says 97% of Stimulus Funding Committed

The Government of Canada's fourth quarterly report on the implementation of Canada's Economic Action Plan, which earmarked about $12 billion for infrastructure spending including $4 billion to restore aging infrastructure, reports that 97 per cent of the stimulus funds has been committed to more than 12,000 infrastructure and housing projects, of which 8,000 or over 65% have already begun.

The projects are distributed all over Canada as you can see at the Government of Canada Economic Action Plan web site.

Department of Energy ARRA Stimulus Smart Grid Grant Awards

A list of the DoE $3.4 billion grant awards is available.  The awards are matched so that the total value of the projects is $8.1 billion according to DoE.  Apparently only about a quarter of the 400 applicants under this program won funds. The DOE said the process was very competitive.

Canadian Stimulus Report Card

Prime Minister Stephen Harper tabled a report that said that 90 per cent of the funding for the 2009 stimulus has been committed and that of the 7,500+ projects that are on the drawing board across the country, 4,000 have actually begun.  At the beginning of the year the government's budget provided a $40 billion stimulus to be spent over two years.  The government believed that the stimulus would create or protect 265,000 jobs by the end of 2010.

The stimulus included almost $12 billion in new infrastructure stimulus funding for roads, bridges, broadband internet access, electronic health records, laboratories and border crossings and $7.8 billion to build quality housing, stimulate construction and enhance energy efficiency.

Canada's Economic Action Plan (Jan 27)

                                                           2009 2010 Total

                                                                 (millions of C$—cash basis)

Help Canadians and Stimulate Spending 5,880 6,945 12,825

Stimulate Housing Construction                  5,365 2,395    7,760

Housing leverage                                     725    750    1,475

Immediate Build Infrastructure                  6,224 5,605 11,829

Infrastructure leverage                                  4,532 4,365    8,897

Support Businesses and Communities          5,272 2,255    7,527

Sectoral leverage                                  1,300            1,300

Total federal stimulus                                 22,742 17,200 39,942

Total stimulus (with leverage)                 29,298 22,316 51,613

    As a share of GDP                                                    (%)  

Total federal stimulus                                      1.5       1.1        2.5

Total stimulus (with leverage)                      1.9       1.4        3.2

First Economic Impact of the ARRA Report Released by Council of Economic Advisors

The Council of Economic Advisers (CEA) has released The Economic Impact of the American Recovery and Reinvestment Act of 2009, the first quarterly report by the CEA to Congress on the effects of the Recovery Act on the economy and employment.

By the end of August, $151.4 billion of the total $787 billion ARRA has been paid out or has gone out in the form of tax reductions. 

It is estimated that the ARRA added 2.3 percentage points to real GDP growth in the second quarter and is likely to add more to growth in the third quarter.

This analysis indicates that the ARRA and other policy actions caused employment in August to be slightly more than 1 million jobs higher than it otherwise would have been especially in manufacturing, construction, retail trade, and temporary employment services. 

Worldwide, it was found that countries that adopted larger fiscal stimulus packages outperformed expectations relative to those adopting smaller packages.

ComEd Applies for $175 million from ARRA for Smart Grid Pilot

ComEd (part of Exelon) has submitted a petition to the Illinois Commerce Commission (ICC) to approve the utility's application for federal stimulus grants that would fund half of a $350 million Smart Grid

pilot. ComEd has applied to the U.S. Department of Energy (DOE) to expand its proposed AMI pilot and double the number of customers receiving new Smart Meters to about 320,000 customers in Chicago and other communities. The funding would also be used to expand investment in other advanced automation technology to make the transmission and distribution systems "smarter" and more reliable.

If approved, the benefits from the ComEd application would include the deployment of smart meters together with advanced pricing and billing options, some customers would receive in-home displays, programmable devices that would allow them to control their air conditioners remotely and Web application options to help manage energy usage and costs, dynamic Voltage Reduction technologies to reduce line losses, and intelligent substation technologies to improve safety and optimize operations while improving reliability and performance.

G-20 Finance Ministers Plan to Maintain Stimulus

G-20 finance ministers meeting in London have committed to maintaining the economic stimulus packages put in place in response to the global economic recession. Finance ministers considered whether nations could begin to repeal some of the emergency economic measures but agreed to continue the "financial support measures and expansionary monetary and fiscal policies... until recovery is secured."

The total amount of stimulus in the G-20 amounts to about $692 billion for 2009.  The U.S. stimulus package for 2009 is 1.9 percent of its 2008 GDP and the corresponding numbers for China and Japan are 2.1 percent and 1.4 percent, respectively. In 2010 the U.S. stimulus package amounts to 2.9 percent of 2008 GDP, China’s 2.3 percent, and Germany’s 2.0 percent.  (Table Prasad and Sorkin)

NTIA and RUS Receive 2,200 Applications Totaling $28 Billion for Stimulus Broadband Grants

The ARRA includes $7.2 billion for broadband infrastructure development. Of this $4.7 billion has been allocated to the National Telecommunications and Information Administration (NTIA) for projects that will build out broadband infrastructure in unserved or underserved areas and to promote broadband education, awareness, training and support.  The other $2.5 billion has been allocated to the Department of Agriculture for loans to companies building out broadband infrastructure in rural areas.

The federal agencies have announced that to date they've received roughly 2,200 applications totalling approximately $28 billion.

Recovery.gov Reports $84.6 Billion of ARRA Stimulus Funding Paid Out

The US Federal Government's web site devoted to the American Recovery and Reinvestment Act (ARRA) stimulus reports that as of Aug 21, over US$208 billion has been allocated and US$84.6 billion has been paid out.

Each federal agency is maintaining a similar report for the stimulus funding allocated to it.  I've attached the progress report for the Department of Energy that shows that almost US$10 billion has been allocated, and so far almost half a billion has been paid out.