The presence of taliks (perennially unfrozen zones in permafrost areas) adversely affects the thermal stability of infrastructure in cold regions, including roads. The role of heat advection on talik development and feedback on permafrost degradation has not been quantified methodically in this context. We incorporate a surface energy balance model into a coupled groundwater flow and energy transport numerical model (SUTRA-ice). The model, calibrated with long-term observations (1997–2018 on the Alaska Highway), is used to investigate and quantify the role of heat advection on talik initiation and development under a road embankment. Over the 25-year simulation period, the new model is driven by reconstructed meteorological data and has a good agreement with near surface soil temperatures. The model successfully reproduces the increasing depth to the permafrost table (mean absolute error <0.2 m), and talik development. The results demonstrate that heat advection provides an additional energy source that expedites the rate of permafrost thaw and roughly doubles the rate of permafrost table deepening, compared to purely conductive thawing. Talik initially formed and grew over time under the combined effect of water flow, snow insulation, road construction and climate warming. Talik formation creates a new thermal state under the road embankment, resulting in acceleration of underlying permafrost degradation, due to the positive feedback of heat accumulation created by trapped unfrozen water. In a changing climate, mobile water flow will play a more important role in permafrost thaw and talik development under road embankments, and is likely to significantly increase maintenance costs and reduce the long-term stability of the infrastructure.