Meeting the World’s Expanding Need for Infrastructure

Meeting the World’s Expanding Need for Infrastructure By Chad Holliday Cities and communities have a lot to learn from each other’s experiences in building sustainable infrastructure that will serve us now and in the future. “Stranded in energy poverty, one in five globally lack electricity to light homes, pump water or support business, while nearly 40 percent of the world’s population still relies on wood, coal, charcoal or animal waste to cook food.” “Ridesharing startups like Uber can be more efficient than taxis roaming around looking for a fare, and there is no need for infrastructure to dispatch vehicles.” Growing Global Need for Infrastructure Converging economic, population and societal trends are increasing the need for infrastructure worldwide. In rapidly industrializing countries, there are growing needs for energy to power factories, water systems and waste water treatment, and transportation to move manufactured goods. Demand for energy is expected to grow by more than one-third by 2040. Demand for electricity alone is projected to grow by more than 70 percent during the same period. The global middle class is expected to increase dramatically. Over the next two decades, the middle class is projected to expand by nearly 3 billion people, most from the developing world. These new middle class consumers will purchase homes, appliances and other manufactured goods driving new demand for energy, and their personal vehicles and increased air travel will raise the need for roads and airport expansion. Yet, many of the world’s population live in places where little, if any, modern infrastructure has reached. Stranded in energy poverty, one in five globally lack electricity to light homes, pump water or support business, while nearly 40 percent of the world’s population still relies on wood, coal, charcoal or animal waste to cook food. Infrastructure, Economic Development and Competitiveness Infrastructure is the platform for economic development, and can play a key role in the cost structures of business and manufacturing operations, which, in turn, affect patterns of global business investment. For example, the availability of low cost and reliable supplies of energy can provide a critical competitive advantage to companies and countries. Due to a shale oil and gas boom, U.S. manufacturing competitiveness has increased. Natural gas and electricity prices are now much higher in Japan, the EU, and China than those in the United States. The U.S. chemical industry, where I spent most of my career, has gone from being the world’s highest cost producer to among the world’s lowest cost. As a result, American energy is attracting billions of dollars to the United States for new industrial facilities, and many U.S. producers plan expansions. But that shale oil and gas must travel to refineries and chemical plants through pipelines, and on barges, trucks and rail; transit is up dramatically and new port infrastructure will be needed for exporting. Investments in U.S. infrastructure for oil and gas transport, processing and storage have increased significantly, but not kept pace with production. New technologies can lower the costs of infrastructure, and give developing economies a chance to leapfrog to modern, sustainable energy systems. Access to electricity is the golden thread, paving the way to meet other important needs—it powers goods production, equipment to clean and distribute water, modern hospitals and transportation systems, and high-speed telecommunications that support business and deliver education. Infrastructure for the Cities In the coming decades, urbanization will be a key driver for infrastructure development. We are seeing the largest wave of urban growth in history. Since 1950, the urban population has grown five-fold, from about 746 million to about 4 billion in 2014, more than half the world population. Urban dwelling is expected to increase by about 60 percent by 2050 to 6.3 billion people, two-thirds of the world’s population. Today, there are 28 mega cities with more than 10 million inhabitants. Imagine the infrastructure demands in the urban agglomerations of Tokyo with 38 million people, Delhi with 25 million or Shanghai with 23 million. By 2030, we could have as many as 41 of these urban giants. Leveraging New and Existing Infrastructure Meeting the global need for infrastructure will require new ideas, innovation and squeezing more out of the infrastructure already in place. Transportation is critical in making a city work, and cities need to think differently and creatively about how we move people and things. For example, bus rapid transit—dedicated bus lanes that don’t get clogged up with traffic and speed travel—can be a better transit option for commuters. In London, new cycling superhighways are under development, more than 20 miles of segregated bicycle routes crossing the city. New models, pricing schemes and smartphones are creating new options in personal transportation. For example, ridesharing startups like Uber can be more efficient than taxis roaming around looking for a fare, and there is no need for infrastructure to dispatch vehicles. Variable pricing models allow them to charge more when demand is high, encouraging more drivers to work when most needed. Shared-use transportation, such as bike share and Zip cars, are providing other options, and helping to enable the rise of the ‘sharing’ economy, and potentially reducing the need for new transportation infrastructure. The digital revolution offers new possibilities for urban automation, smart vehicles and sensor-based infrastructure. We are moving closer to intelligent, autonomous vehicles that do the driving and for mass transit. Google is working on self-driving cars designed to navigate safely through city streets. These are being tested in cities in California, Texas, Washington and Arizona. And Heathrow airport already uses autonomous pod cars that follow a track reaching speeds of 25 miles per hour. Automated transportation could enhance safety, mobility and sustainability, and further reduce the need for infrastructure. In the built environment, we can help reduce the need for new energy infrastructure. When buildings and their systems are designed for optimal energy efficiency, energy savings of 60-80 percent are possible, without sacrificing comfort or cost effectiveness. Infrastructure Planning and Financing Infrastructure has high up-front costs and, once in place, may be there for more than a century. For example, some U.S. drinking water pipes and water mains are more than 100 years old. Careful planning is essential, and especially critical in the rapidly developing economies and urbanizing areas of the world. Land use and use of infrastructure should be optimized, value sustainability, and consider regional needs. For example, connect a city’s markets (labor, goods and services) with other neighborhoods in the metro region, with adequate mass transit options. Concentrate growth, mixed-use development, housing and community facilities in more walkable and bicycle-friendly urban centers to avoid sprawl. With proper planning, a city should be able to use its water multiple times, for example, for industrial use, city use, and for use in agricultural or watering city parks. Financing infrastructure projects can be challenging, especially for communities where the tax base is struggling, or in the underdeveloped world where government budgets are barebones. However, there are financing opportunities through public-private partnerships if the conditions are right. Investment is not being constrained by the availability of private capital or investment opportunities. The money and the desire to invest are there, but new financial tools are needed. In some places in the emerging world, financing instruments needed for infrastructure projects don’t exist. People want to invest, but projects are not aligned with the right terms and conditions. For example, there may not be adequate legal means to ensure utility bills are paid. Green Banks, while focused on sustainability, offer a model (and infrastructure today should be sustainable). A financial institution uses financing mechanisms that leverage public funds to attract much greater private investment. As projects generate returns, public capital can be recycled to expand investment and reduce the burden on taxpayers. With new stresses on our environment, it is imperative that we determine how society can best integrate our natural and built environments, and our resources—and the synergies we can create among them—to meet the needs of our growing, increasingly prosperous and urbanizing population. There is no single model or solution. Diverse approaches are needed, tailored to the different natural endowments, and economic, environmental, social and cultural conditions around the world.

The Circular Economy: An Opportunity for Renewal, Growth, and Stability

Strategy Masters

Big Idea by Don Tapscott

Evaluating the State of Assessment

Letter to the CEO | Richard D’Aveni

In Conversation with Michael Porter

Innovation Leadership in Uncertain Times

Meeting the World’s Expanding Need for Infrastructure

Error thrown