INSIDE TAKE: So. What the Hell Is an Energy Hub?

What the hell is an energy hub? You might think I’m sick of the question. But the truth is, the question is almost never asked. The “Philadelphia energy hub” is stuck in the self-promotional stage of the issue attention cycle, in which hucksters, doomsayers, and eggheads all try to create a narrative they can benefit from. And lest I appear to think that I’m somehow above this fray, au contraire. I’ve enjoyed playing all those parts.

But all the chatter has skipped past basic questions like, what is an energy hub?

Let’s start with what it is not. An energy hub is not a business plan. That means it is not just about building pipelines to bridge an infrastructure gap that would benefit a limited set of firms. Nor is an energy hub a sectoral strategy. That means it is not just about a set of inter-industry connections creating a value chain stretching from upstate and upstream gas wells to gathering pipelines to processing and storage facilities to transmission pipelines to more processing and storage facilities to distribution pipelines to consumers of fuel and feedstock to producers and consumers of intermediate and final products.

Nope. An energy hub is way more complicated than that.

Of course, you can call a business plan or a sectoral strategy an “energy hub”. But dumbing it down only insults folks, leaving lots of potential gains on the table and potential partners wondering whether they are for it or against.

A true energy hub creates value by connecting things in ways that makes them worth more than the sum of the parts. The hub is, if you will, the center of a wheel connected to gears that transform the same pedal power into higher speeds. Being an energy hub would change what jobs people do here or not, what research and discoveries happen here or not, why people come here to study or visit or not, who moves or stays here or not. All these things happened the last time Philadelphia was an energy hub, during the 75 years or so after 1850.

So to have a real discussion about a Philadelphia energy hub, we need to add enough spokes to build an actual wheel.

Here are three obvious sets of interests that must be part of any serious energy hub strategy.

First, every booster of the Philadelphia energy hub pitches prosperity to the public in the form of job creation, payroll expansion, and local spending multipliers. We can ask many questions of that pitch. Let’s pose just one. What will it take to ensure that Philadelphians are well-qualified applicants for those jobs? The “energy hub” answer to that question implicates our education and workforce development systems. We need to ensure that resourcing worker readiness is as high a priority as resourcing infrastructure to raise the returns to investors.

Second, every booster of the Philadelphia energy hub pitches environmental protections to the public in the form of adequate standards and practices. We can ask many questions of that pitch. Let’s take just one. How will we know that standards for, say, methane leakage are being met, regardless of what those agreed standards are? The “energy hub” answer to that question implicates our regulatory and enforcements systems. We need to ensure that the capacity to monitor and protect our regional air, water, and land amenities is an integral part of an energy hub strategy.

Third, every booster of the Philadelphia energy hub pitches safety to the public. Again, just one of many questions. What is an acceptable level of exposure to low-probability, high-consequence events to residents and businesses? The “energy hub” answer to that question implicates our advocacy and legal systems. We need to ensure that sufficient transparency and monitoring is in place to address community concerns.

What each of these examples has in common is a set of disputed facts people might argue over. How many jobs? How much air pollution? How often will things blow up? For that matter, how much gas is really in the Marcellus Shale play and how do we know if it’s really enough to justify some huge number of dollars in public investment?

Planners and economists typically promote careful analysis to provide estimates of these kinds of projections. Now I enjoy reading econometric studies as much as the next person, especially ones I didn’t pay for. But dueling forecasts rarely if ever settle such a contest.

As a policy designer, my attention is focused elsewhere. I don’t really care if the smartest possible gas supply forecast can justify a level of capital investment, or whether the smartest possible employment estimate can justify a level of worker training. I’m more comfortable with market outcomes than consultant outcomes.

All I need to know is, who bears the liability if the numbers are wrong? If I’m promised jobs in return for taxpayer funding, fine. Then I want “one throat to choke” if those jobs don’t appear. Same for a bankrupt pipeline, water contamination from long-closed mines, etc. There need to be ways to claw-back both public subsidies and concessions made by community and advocacy groups in order to allocate fairly the costs and losses if pipelines turn into pipedreams.

It’s not simple to design and build these kinds of “enforceable partnerships,” of course. But a risk-based use of insurance mechanisms to appropriately locate liability is a proven way of both reducing risks as well as compensating for them. This approach can turn stalemate into a risk-sharing effort to achieve a common vision.

Right now, however, we have no productive dialogue on the risks and rewards of a Philadelphia energy hub. We have two monologues: one saying “absolutely yes” and one saying “absolutely no.” The extremes have a right to state their yes or no positions, and personally I’m glad to have them both on the scene. But the question for the large majority of us is not, yes or no? The question is, under what conditions?

In order to get some working agreement on that question, we need to get the “whole system in the room” and explore whether those conditions even exist. Without that process, we can’t know whether a set of conditions can be devised that would address the economic, environmental, and equity concerns of a stable majority in the City and Commonwealth. Are we willing to find out?

Mark Alan Hughes teaches at Penn and directs the Kleinman Center for Energy Policy. He is also a Citified insider.