Electricity Is the New Oil – Foreign Affairs Magazine

Last month, hackers launched one of the most ambitious digital assaults in recent memory. On May 7, a group known as DarkSide used a ransomware attack to shut down one of the largest pipelines in the United States, a vital artery carrying gasoline, diesel, and jet fuel from U.S. Gulf Coast refineries to ten states on the East Coast. The intrusion required the operator, Colonial Pipeline, to temporarily halt deliveries, resulting in widespread shortages as panicked drivers stocked up on fuel. The disruption also forced several airports to alter flight itineraries and pushed average fuel prices across the country to their highest level since 2014.

Although Colonial Pipeline quickly paid a $5 million ransom, averting an even broader crisis, the attack was a sharp reminder that defending energy supplies in an era of rapid digitization will be much harder and more complicated than it was in the analog oil-based era. As countries transition from fossil fuels to renewable electricity distributed via high-tech grids, governments will need to confront a new set of sophisticated threats.

This transformation poses a particular challenge to the United States. The U.S. government currently plays a preeminent role in global energy security through its navy, which protects the seaborne oil and gas trade. In a sign of things to come, however, the Colonial Pipeline incident was a complex digital attack launched by a murky and physically distant third party against vital domestic infrastructure.

In the coming years, as electricity constitutes an increasing amount of the world’s energy transmission, more infrastructure will be exposed to attacks such as the one that hit Colonial Pipeline. The United States is dangerously unprepared to defend the global energy system of the future. If the country wants to retain its outsize geopolitical influence, it must once again take the lead—mapping out how Washington and its allies can keep vital electric grids safe.

NETWORK EFFECTS

The global energy system that countries and firms built in the twentieth century relied on fossil fuels transported by ships, trucks, and pipelines. These hydrocarbons were often consumed directly but a vast infrastructure system also integrated oil and natural gas into a network of electric power stations that converted them, along with a range of other energy sources, into electricity. Today, however, a global transition toward renewable energy is displacing fossil fuels and the distribution systems that accompany them. Instead of pipelines and ocean-faring tanker ships, consumers are coming to rely on technologically advanced grids linking consumers to solar fields, wind turbines, hydro-electric generators, and geothermal power plants. 

As this transition gains momentum, cross-border trade in electricity will inevitably expand as countries seek to integrate energy from a variety of sources and locations. Europe is already taking the lead. Agreements such as Nord Pool, an auction-based electricity trading system that connects nine different national grids, are designed to improve energy security and reliability across the continent. On the other side of the globe, China’s Global Energy Interconnection Development and Cooperation Organization, established in 2016, has ambitious aspirations to connect Chinese power grids with those in other countries across Asia and even as far afield as Latin America. India is also building electricity connections to neighboring countries such as Bangladesh and Nepal.

The United States is dangerously unprepared to defend the global energy system of the future.

    

On the whole, these are positive developments. Reliable distributed grids would, among other things, address one of renewable energy’s greatest weaknesses. Because weather patterns vary based on location, wind and solar are sporadically unable to fully supply local needs. By drawing on sources of power from different locations, multinational grids reduce the risk that localized weather or technical issues will cause disruptions, allowing countries to improve some aspects of energy security and transition away from fossil fuels.

But there are also obvious downsides. A larger grid means more infrastructure in need of protection and additional opportunities for hackers to intrude—either in pursuit of personal gain or political concessions. Russian hackers, for instance, famously disrupted three Ukrainian electricity distribution companies in 2015, remotely switching off 30 substations and cutting power to hundreds of thousands of Ukrainian citizens. During wartime, hackers could infiltrate energy facilities, harming civilians and potentially creating an environmental catastrophe. In 2017, Iranian hackers allegedly penetrated a Saudi petrochemical plant with the intent of sabotaging its operations and triggering an explosion. Luckily, they failed.

BACK IT UP

Although these problems are new, the solutions to them are not. Countries in the same grid network could add backup energy generation capacity and redundant transmission systems to blunt the effect of a potential attack. They could keep retired fossil fuel plants in reserve, ready to be refired in an emergency; pay electricity providers to keep surplus power generation capacity on standby in case of disruption; and even use solar energy mini-grids (small-scale systems that operate autonomously from the wider electric grid) to bypass electricity from the centralized system if it was cut off. Countries or regions could also build up energy storage systems that utilize batteries, pumped air and water, or hydrogen.

But a world of distributed and digitized electric grids presents a unique challenge to the United States—especially its role as guarantor of global energy security. Following the oil crises of the 1970s and the Soviet invasion of Afghanistan in 1979, U.S. President Jimmy Carter declared that the United States was prepared to use force to defend its national interests in the oil-rich Persian Gulf. This became known as the Carter Doctrine, and in the decades that followed, the United States built up its military presence across the region and intervened in several conflicts. Today, the U.S. role in defending oil supplies goes far beyond the Persian Gulf: the U.S. Navy plays a central role guarding international sea-lanes through which countries and firms trade fossil fuels.

In the coming world of cross-border electricity connections, however, keeping sea-lanes safe for oil exports will no longer garner the same geopolitical influence it once did. As the landscape changes, Washington must rethink its role in the global energy system. One area in which the United States can begin to take the lead is governance. Given the stakes, establishing limits on cyber-behavior might eventually be as important as nuclear arms control was during the Cold War. To start, Washington should initiate a global dialogue focused on developing treaties to fight ransomware hackers such as DarkSide. Russia’s ambassador to the European Union has already signaled Moscow’s willingness to discuss potential treaties under the auspices of the United Nations. Russian President Vladimir Putin also told state television recently that Russia would be prepared to hand over cybercriminals if the United States committed to similar extradition measures. Still, Washington will have to assess Moscow’s seriousness, given Russia’s role in housing, and possibly sponsoring, cyberterrorists.

A larger grid means more infrastructure in need of protection and additional opportunities for hackers to intrude.

The United States can also help develop new multinational institutions that oversee electricity trading agreements. Existing coalitions that include national grid operators and private firms may not be equipped to handle thorny diplomatic disputes and cybersecurity concerns. Given the U.S. military’s global presence and Washington’s central role in regional alliance systems, the United States is well placed to take a leading security role alongside future governance and regulatory systems.

Washington should also capitalize on its technological edge over its adversaries. With the help of tech companies in Silicon Valley, the United States has the potential to become a leading purveyor of high-tech electric hardware and software—including so-called distributed energy resources. These systems, such as solar micro-grids and virtual power plants, allow firms to purchase surplus energy capacity from rooftop solar panels, electric cars, and battery storage systems then sell it back to the grid when consumers need extra power. Stockpiling the equipment that such systems require would allow the U.S. military to help allies during emergencies or in times of conflict. Solar mini-grids, for instance, can be installed, replaced, or repaired in a matter of days, whereas large thermal power stations can take months or even years to fix if damaged by war, severe weather, or accident.

Hydrogen is another promising backup power source that Washington could develop. No country currently dominates international hydrogen production or trade, and like oil or liquified natural gas, it can be shipped and stored for future use. If the U.S. government mobilizes quickly to expand its hydrogen production, conversion, and export industry, the United States could maintain a dominant role in global energy markets.  

Above all, however, the United States needs to improve its research and development efforts—especially in battery technology, solar inverters (which convert energy from panels into a standardized electric current), and the software that new energy systems use. To keep up with China, which currently accounts for 60 percent of the world’s capacity to process lithium for battery production, Washington needs to focus research and development efforts on manmade substitutes for the mined metals and rare earth substances that Beijing currently dominates.

ELECTRIC SLIDE

Today, the United States is at a substantial disadvantage when it comes to electricity infrastructure. Largely built in the 1950s and 1960s, the aging U.S. grid is in dire need of repair. The consulting firm Brattle Group estimates that Washington needs to spend over $1.5 trillion just to modernize the country’s existing infrastructure and much more to meet the growing demand for clean energy. The Biden administration’s $200 billion infrastructure bill allocation for grid modernization and an additional $2.1 billion set aside for the U.S. cybersecurity agency are small compared to the magnitude of the challenge.

These disadvantages, however, are not fatal. The U.S. government has long shown its willingness to invest in energy preeminence. Alongside a massive multinational oil stockpiling system, Washington currently spends between $50 billion and $100 billion a year guaranteeing the free flow of hydrocarbons from the Middle East. If the United States wants to maintain its position as an energy security superpower, it must make a similar commitment to the energy systems of the future. Failure to do so could have grave consequences, imperiling not just the United States’ military superiority but the country’s ability to defend its homeland. To avert this dire future, U.S. leaders need to radically rethink the geopolitics of an electrified world.

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Source: https://www.foreignaffairs.com/articles/united-states/2021-06-17/electricity-new-oil

June 17, 2021 sally Wood