Smaller, Cheaper Everywhere

By Jonah Wagner

Cities benefit from economies of scope and scale which tend to make them more ‘efficient’ places to live. In most countries around the world, it is ‘greener’ to live in a city than outside of it.[1] Home and work are closer together, reducing transportation time and cost. Population density also allows for the development of large, centralized, public utility infrastructure – lowering costs for energy generation and transmission, water purification and distribution, waste collection and management, etc. Historically, these utilities have benefitted significantly from scale.

Example: Water purification costs by plant size[2]

This may be changing. New technologies (e.g., remote sensors) are making possible the coordination of modular, scalable, decentralized systems of public service delivery in cities.

Sarvajal is an example. The business model was initially applied to rural India because population density in villages could not justify piped, centralized water distribution systems. We had to bring the plant to them. However, there was no technical reason[3] why the model couldn’t be applied to slums – places without consistent access to clean water, and with proven willingness to pay. On an individual basis, Sarvajal’s plants were inefficient, converting roughly half of processed water to waste. Yet even this level of efficiency is comparable to the waste endemic to Delhi’s piping infrastructure. And, Sarvajal’s remote plant management increases the likelihood that the water is clean and relatively constant.

This kind of distributed infrastructure has significant advantages versus the large public utilities serving most cities today. Large plants are only efficient at high capacity utilization. For new cities, achieving high utilization while allowing cushion for growth is very hard to do. Large, capital-intensive projects also create financing risk, should a downturn cut the flow of funds to key projects (e.g., King Abdullah Economic City). In addition, these plants are built to last for decades, narrowing opportunities for future technological innovation.

Modular, distributed infrastructure mitigates these risks. Additional units can be added to ensure consistently full capacity utilization. Financing can be phased in by project, as needed. New technologies can be integrated into the next build-out, or swapped in for old plants. The ability to seamlessly coordinate and automate information flows makes it theoretically possible to manage huge utility networks. It also enables the integration private contributions to the network, such as augmenting the grid with electricity generated from rooftop solar panels (e.g., Sungevity. There are a number of companies besides Sarvajal exploring this space (e.g., Bloom Energy), and capital is beginning to follow (e.g., Liberation Capital).

The temptation to build a big, shiny plant is very real. Big financing tends to look for big projects. However, new business models and new technologies are beginning to make a strong case for smaller, quicker, cheaper, everywhere.


3 thoughts on “Smaller, Cheaper Everywhere

  1. With 85% of Israeli households using rooftop solar heaters, I can certainly accept that there are specific circumstances in which distributed decentralized systems solve critical needs and/or market failures. However, while I agree with many of the benefits Jonah (and Jan) highlighted, I think that there are several drawbacks that should be taken into account when considering such systems. Specifically, I think a distinction between “distributed” and “decentralized” is important.

    The major viable force in enabling distributed systems is technology advancement that allows for reduced ‘minimum efficient scale’. For example, advances in computing power allowed for the transition from mainframe to personal computers. Have we reached that tipping point in power generation, water and waste treatment and other basic infrastructure services (not taking into account targeted government subsidies)? I would argue not. Once we do, we’ll be able to reap the benefits of scalability, modularity, reliability, robustness and other important attributes (all of which are hardly prices though). I would love for that day to come.

    However, decentralization – in the sense of the service provider/equipment owner, not the physical location – is not necessarily a good thing. It can put stress on infrastructure network management, dampen efforts for unified design and urban planning, make revenue collection difficult, lead to suboptimal maintenance, troubleshooting ability and system performance and other unexpected effects. If kept in the hands of large providers, many of these issues can be solved.

    Drawing again on the IT analogy, the advent of cloud computing demonstrates a reverse trend of centralization as a method to achieve increased efficiency, improved service and reliability (in many instances while using distributed systems).

    Can distributed decentralized systems solve specific market failures today? Yes. But when considering the overarching theme of our course: “how do we accommodate the needs of a rapidly growing massive urban population?” then large-scale projects still seem better suited to address the problem.

  2. Distributed systems are more robust and robustness will be the ultimate measure of sustainability.

    To be truly sustainable in the long-term, systems must be robust to changing conditions. The disadvantage of highly centralized large-scale systems (including utilities) is that they are introduce a single point of failure – which has always been a sought-after target in conflicts. What if a terrorist attack, war or natural disaster knocks out a super-large utility that supplies the whole megacity with water? It will take way way longer to rebuild such a large scale facility than any supplies can last so the city will become completely dependent on outside help. If such help cannot come (e.g., war, similar problems in other cities), the whole society will disintegrate within a couple of days. With distributed systems, the city would have been more flexible and therefore less vulnerable and more sustainable.

    The problem with “superlinear scaling” of cities is that it has not stood the test of time yet and authors are very naive in belief that we can “break away from the equations of biology”. There are clear limits in nature and therefore nothing can keep growing exponentially (and even stable annual growth compounds into exponential growth) and that is why we only the “poor” superlinear being survived evolution. Yes, elephants plod along, but dinosaurs were even bigger. They grew to lose their flexibility in the same way mega-cities are now losing flexibility. Dinosaurs went extinct and it were small agile rodents who survived. When our tapwater in Cambridge suddenly stops, we will be envious about the slums in India that have Sarvajal.

    As Jonah pointed out, distributed decentralized systems are becoming more competitive thanks to technology advances, especially when transportation losses are added to the large-scale production costs. Electricity generation can be decentralized even easier than water – just look at solar powered calculators. Our current electric installations evolved into AC, because that was more efficient for long-distance transportation of electricity. But increasing number of our current devices (personal electronics, LED lighting, EVs) use inherently direct current. Distributed systems lose efficiency when solar energy (DC) is first converted to AC at loss and then converted at another loss back to DC. Maybe the time came to again consider decentralized low-voltage DC networks that can be most easily added in new modular housing units?

    More on density and sustainability:

  3. By John Macomber

    Cities do benefit from economies of scale, and it’s more than a linear benefit. Geoffrey West calls this “superscaling” as profiled in the New York Times “A Physicist Turns the City into and Equation”

    [However, the cultural and economic superscalar growth can be subscalar with respect to physical plant – witness Mexico City water or Lagos traffic. Perhaps “district scale” water, electricity, and waste solutions will at least help address the basic commodities].

    “…West and Bettencourt refer to [this phenomenon] as “superlinear scaling,” which is a fancy way of describing the increased output of people living in big cities. When a superlinear equation is graphed, it looks like the start of a roller coaster, climbing into the sky. The steep slope emerges from the positive feedback loop of urban life — a growing city makes everyone in that city more productive, which encourages more people to move to the city, and so on. According to West, these superlinear patterns demonstrate why cities are one of the single most important inventions in human history. They are the idea, he says, that enabled our economic potential and unleashed our ingenuity. “When we started living in cities, we did something that had never happened before in the history of life,” West says. “We broke away from the equations of biology, all of which are sublinear. Every other creature gets slower as it gets bigger. That’s why the elephant plods along. But in cities, the opposite happens. As cities get bigger, everything starts accelerating.”

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