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 / Spring 2007 / Issue 46(originally published by Booz & Company)


Lights! Water! Motion!

The acceleration of demand is already evident in the developing world. In 2002, the three geographic locales with the fastest-growing rate of electricity use, between 4 and 5 percent per year, were China, India, and Latin America (including Mexico and the Caribbean). Together, they consumed about 4,500 terawatt-hours (TWh) of electricity; the United States and Canada, with about one-tenth the population, used about the same amount. But by 2020, according to International Energy Agency projections, the combined electricity consumption of these three areas is expected to reach more than 12,000 TWh — double or triple the expected demand of North America, which itself is growing at 2 percent annually.

Meanwhile, the quality and quantity of supply are increasingly threatened everywhere:

  • Power. After the “energy crisis” of the 1970s led to a worldwide power generation boom, there were such gluts of electricity capacity that spending on utilities — new construction as well as maintenance — slowed measurably. The cycle has shifted back to scarcity, and cities everywhere now face shortages again. For example, even if the many European power plants built in the 1950s had been well maintained, there would still not be enough of them to meet the growing commercial electricity demand on that continent, especially in the awakening economies of Eastern Europe. The  International Energy Agency’s last comprehensive study of world energy (“World Energy Outlook,” 2004) estimated that almost $4 trillion in power-sector infrastructure improvements will be needed in the OECD countries over the next 30 years: half for power generation and half for transmission and distribution. In the U.S., the North American Electric Reliability Council found that demand for electricity is increasing three times as fast as resources are being added.
  • Transportation. Although many roads, rail lines, and airports have been built or upgraded, need is growing at a faster pace. The U.S. Department of Transportation estimated in 2006 that freight bottlenecks and delayed deliveries due to congested highways and inefficient rail and deep-water transportation systems cost the U.S. $200 billion annually. According to the Texas Transportation Institute, rush-hour travelers in major metropolitan areas spent 3.6 billion hours in traffic jams in 2000. One measure of air travel congestion, the number of planes operated by private carriers, is up more than 30 percent since 1990, even as the number of airports serving commercial airlines has shrunk. To be sure, some of the demand for increased mobility is, as Danish planning professor Bent Flyvbjerg puts it, a desire for “utopian frictionlessness”: the impossible dream of being able to get anywhere, from anywhere, instantly. But if the population and mobility trends of the last 30 years continue for the next 30 years, the United States and Europe would have to at least triple their transportation infrastructure just to get back to the congestion levels of 30 years ago.
  • Water. Cairo provides a prime example of how a poor water infrastructure constrains the new urban centers and megacities of emerging markets. Dependent on old pipes and conduits that snake to the Nile River, Cairo residents regularly endure low water pressure and high levels of lead contamination. Because water and sewage lines run side by side, endemically corroded pipes often lead to leaks that pollute freshwater with wastewater. As a result, cholera and other waterborne diseases are a constant hazard for this relatively cosmopolitan Middle Eastern city, preventing it from assuming a more prominent role in the global economy.

Developed nations are no less vulnerable to water crises. In some of the largest U.S. cities, water mains and feeder pipes date back to the 1860s; it is not unusual for a metropolitan area to have as many as 1,000 water main breaks a year. In Detroit, where 35 billion gallons of water leak from the water supply each year, residents pay about $23 million annually for water that never reaches their homes or businesses.

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  1. Alan A. Altshuler and David E. Luberoff, Mega-Projects: The Changing Politics of Urban Public Investment (Brookings Institution, 2003): American political history from Robert Moses to Boston’s Big Dig, proposing new forms of multiple accountability.
  2. H. Spencer Banzhaf and Randall P. Walsh, “Do People Vote with Their Feet? An Empirical Test of Environmental Gentrification,” Resources for the Future discussion paper 06-10, March 2006: The answer to the title’s question is yes, when the quality of life declines. PDF download.
  3. Shaila Dewan, “Cities Compete in Hipness Battle to Attract Young,” New York Times, November 25, 2006: Atlanta and Portland, Ore., are magnets, whereas Philadelphia struggles.
  4. Bent Flyvbjerg, Nils Bruzelius, and Werner Rothengatter, Megaprojects and Risk: An Anatomy of Ambition (Cambridge University Press, 2003): Skeptics document how enthusiasts negligently green-light bad projects and explain how to build in better accountability, particularly in Europe.
  5. Daniel Gabaldon, Tom Hansson, Eric Spiegel, and Joseph Van den Berg, “The Next Wave of Generation Investment,” Booz Allen Hamilton white paper, May 2006: Strategy for electric power companies to invest presciently amid the risk of gas prices, regulations, and new technologies. Adapted as “Baseload in the Balance,” Electric Perspectives, May–June 2006, and as “Betting Big on Baseload,” Electricity Journal, August 2006. PDF download.
  6. Mark Gerencser, Reggie Van Lee, and Fernando Napolitano, “The Megacommunity Manifesto,” s+b, Summer 2006: How to bring together multiple organizations to develop solutions to complex problems. Click here.
  7. Joseph Giglio, Mobility: America’s Transportation Mess and How to Fix It (Hudson Institute, 2005): Impassioned, well-reasoned plea from a financier–academic for transportation infrastructure investment.
  8. International Energy Agency, “World Energy Outlook 2004,” OECD/IEA 2004: Comprehensive forecasts of energy demand and supply. PDF download.
  9. Bill Jackson and Vikas Sehgal, “One Billion New Automobiles,” s+b, Winter 2006: One billion new cars will need at least 1,000 new roadways. Click here.
  10. Jeffrey Rothfeder, Every Drop for Sale: Our Desperate Battle over Water in a World about to Run Out (Tarcher/Putnam, 2001): Journalist’s view of the pending global crisis in water infrastructure.
  11. Lord Andrew Turnbull, “Toward a Flexible Energy Future,” s+b, Winter 2006: How governments can promote better capital investments despite imperfect information. Click here.
  12. Eric M. Weiss, “Beltway Toll Plan May Need Virginia Funds; Rising Costs Strain Private Partners,” Washington Post, October 23, 2006: Private ownership is not a panacea for infrastructure projects.
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