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. 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
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 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.