The crisis started during one of the worst winter storms in the region’s history…

Millions of people lost power for days. Temperatures hit negative 2 in some places… and hovered around the teens and 20s in most areas. Folks scrambled to find ways to keep warm. Some even sat in their cars just to warm up – which can be extremely dangerous if you breathe in exhaust fumes.

It was a full-blown disaster. The local infrastructure didn’t stand a chance… Hospitals lost power and water, icy roads halted food deliveries, and frozen conditions led to burst pipes.

Hospitals are hectic enough when operating at full capacity… and many were already stretched to their limits due to COVID-19. These outages meant that on top of dealing with the pandemic, many hospitals had to go without the most basic essentials.

It’s a crazy story. And it has major investment implications. But before we get to that, we need to understand how this crisis occurred…

Now, I’ve been in foreign countries where power outages occur regularly. These are typically underdeveloped nations where the infrastructure for power and water is almost nonexistent.

Sometimes, clean running water isn’t an option in these areas. You need access to bottled water to ensure it’s safe to drink. But this massive power outage didn’t happen in a third-world country…

It happened right in the heart of America.

In February, Texas went through an extreme cold snap. Temperatures hit the lowest level we’ve seen since 1949. And record snowfall came down as well.

The state’s infrastructure wasn’t able to handle such a dramatic winter storm. Texas is used to milder weather… And the lack of insulation and other measures meant the power grid was exposed to ice and freezing conditions.

That’s why energy sources like nuclear reactors, coal and gas generators, and wind farms went down. No matter what form of energy you look at, Texas wasn’t ready.

The state has struggled with this before. A similar crisis struck in 2011, during another winter storm… Then, it happened again in 2014.

One of the main challenges is the age of the current power grid. The average U.S. power plant is 30 years old. Meanwhile, the average power transformer is more than 40 years old.

This outdated infrastructure is vulnerable to extreme weather events. And it’s not just cold…

California has been experiencing the same situation as Texas… for the opposite reason.

Extreme droughts in the state are causing massive blazes. The 2020 wildfires destroyed roughly 4.4 million acres. Hundreds of homes burned down.

Governments around the state shut down electricity to prevent “high risk” power lines from sparking other fires. In fact, several of the wildfires were caused by downed power lines.

So millions of citizens went without power because the grid was overwhelmed… or because the grid could actually cause more damage.

Today, Congress is trying to fix the problem. That’s through the $73 billion currently included in the bipartisan infrastructure bill that recently passed in the Senate.

Out of $1 trillion overall, that $73 billion will go toward making sure the power grid is equipped to handle extreme weather.

The House of Representatives still needs to pass the bill. But that seems likely based on the updates coming out of Washington. It would be one of the first pieces of bipartisan legislation to pass in years.

Here’s an excerpt from the White House’s fact sheet about the deal (emphasis added)…

It upgrades our power infrastructure, including by building thousands of miles of new, resilient transmission lines to facilitate the expansion of renewable energy.

In the end, upgrading our power infrastructure will be great for Americans. If the new transmission lines can withstand drought conditions and extreme cold, companies won’t have to worry nearly as often about costly shutdowns.

We’ll see a wave of infrastructure investment to make this happen. And it might not take long before it starts… The House expects to vote on the bill as soon as the end of September.

Ultimately, this will be a big win for the economy. And infrastructure companies closely tied to an upgraded power grid could be big winners.

Good investing,

— Steve

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Source: Daily Wealth