The impact of “smart” on infrastructure assets

The business models for underlying assets are also changing significantly. This is a very real consideration for resilient infrastructure, especially as smart technologies increasingly shape the way infrastructure is designed, built, operated and owned.

In October 2017 Smart Cities Week in Washington, DC, where changing business models for public-private infrastructure investment was a major theme. The event gave me food for thought in the form of two overarching ideas:

  1. Municipalities, like consumers and businesses, are intent on becoming more “asset-lite”. So rather than procuring a fixed infrastructure asset, they want to procure that asset as a service – and have ongoing access to new and better technologies. (Think of street lighting infrastructure becoming a “street lighting system as a service”, for example, or transportation infrastructure becoming a mobility service.)
  2. The infrastructure assets themselves are changing thanks to new technologies. These changes can be incremental, such as sensors and solar changing how lighting assets work. Or they can be transformative, changing the whole delivery model for the category.

Distributed energy is a key example of transformative change. Businesses, individuals and municipal assets are now financing their own infrastructure, becoming self-sufficient and selling energy back into the grid. But this has big implications for resilience in terms of more intermittent and volatile supply. It also demands effective storage capabilities, including batteries.

Conventional network utilities also need to keep investing in infrastructure upgrades and mitigate climate change, despite compromising their revenues and risk appetite.

Electric vehicle charging points will be important to a resilient future, too, and perhaps harder to coordinate across a decentralized model. There are also broader resilience issues around who pays, and the impact of a distributed model on communities.

A different model for financing
This energy example is about more than building resilience into an existing financial model. Rather, it’s major structural change in the business model, built on new technologies. And if the model is different, the financing will need to be different, too.

Looking again at distributed energy. How can potential investors in a project capture the resilience benefit of a distributed model? What does the revenue structure look like? What asset are you actually investing in? And how does a service agreement affect risk and returns, especially if the city is procuring this “as a service”?

The growing prevalence of smart technologies, and resilience challenges, put us at an exciting juncture. And in the process of using “smart” technologies to become more resilient, city infrastructure faces a big change in its business and financing models.

I think this confluence of resilience and smart can really shake things up for the better. That’s why I enjoy exploring new models for quantifying resilience in my work. But as an end user, I’ll also be looking for its effects in my daily life in New York. It’d be great to see less traffic congestion, experience a commute without delays and have seamless access to internet throughout the city, for example. It’d be even better if my apartment building started to generate and store its own energy. “Smart” investment in these areas, and being able to put a number on resilience, could all contribute to a more resilient city.