strategy+business is published by PwC Strategy& Inc.
or, sign in with:
strategy and business
Published: February 28, 2007


Lights! Water! Motion!

These problems would be challenging enough if they were happening separately. But they may all be hitting a crisis point simultaneously. Cycles of infrastructure fatigue seem to be timed in many metropolitan areas so that major replacement efforts will have to occur within a few years of each other — and decay in one technological arena (energy, transport, or water) may well exacerbate decay in others. (See Exhibit 3.)

At the same time, voters and taxpayers are increasingly resistant to funding massive new infrastructure projects. This can be traced partly to limited budgets, but it also reflects the poor reputation that many infrastructure projects and “megaprojects” have earned. For example, Ireland spent billions of dollars on highways between the mid-1970s and the mid-1990s, but the government favored two-lane roads where cars cannot easily pass one another. The result was a nation beleaguered by slow-moving traffic. (Ultimately, the authorities changed their approach, building high-density roadways connecting Belfast, Dublin, and Cork, and the problem eased somewhat.) If Ireland underestimated capacity, many projects do the opposite: The Channel Tunnel rail line, linking London and Paris, experienced cost overruns of 200 percent, and passenger and freight volume, after seven years of operation, was less than half the original estimates. Other negative associations also linger in the public mind. Neighborhoods demolished by freeways and highways gave rise to the antidevelopment movement made famous by writer–activist Jane Jacobs; Swedes disproportionately use the Øresund rail tunnel to take advantage of Denmark’s more liberal liquor laws; and the cost overruns and production problems of Boston’s “Big Dig” Central Artery/Tunnel project were linked, fairly or not, with the fall of a poorly anchored ceiling panel that killed a motorist in 2006.

Furthermore, citizens seem unwilling to make many concessions to improve the quality of their infrastructure. Urbanites regularly say they want to live in a place with high quality of life, but they resist the easiest means by which governments can pay for it: increased highway tolls, abandonment of water and heating fuel subsidies, and energy taxes. Because the political will to provide more than minimal services at the lowest possible cost doesn’t exist in many places, delivering infrastructure services on a sustainable cost-recovery basis is beyond the financial ability of most urban authorities. This is particularly true for nascent democracies, whose leaders are just learning how to lead in societies where their control is diluted.

Many governments have responded to these pressures during the last few decades by muddling through. They fix problems in a piecemeal fashion, “satisficing” the population, giving residents just enough improvement so that they don’t boil over in anger or move away. Highways expand from three lanes to four, but only in areas where the cost is low, which may not solve the worst gridlock problems. Or, as California did after its 2002 energy crisis, governments line up new electricity suppliers sufficient to meet current demand, but fail to plan for increased demand in the future. Some localities cope by refurbishing archaic technologies, without either the up-front investment or the eventual savings that a complete redesign would provide. Such incremental solutions not only fail to address the need for infrastructure, but exacerbate it in the long run, by drawing more people into the region without satisfying the need for better service.

Interdependence and Imagination
What, then, would a comprehensive solution look like? It would start with recognition of the interdependence of the many players involved. Water, energy, and transportation, for example, are typically administered by different regulatory bodies and innovated by separate companies. Yet they are closely related. Wherever roads and rails are built, water and power quickly follow. Electricity plays a central role in the control instrumentation that manages transportation and water systems; power plants depend on water for operations and transportation for fuel. Desalination of seawater, currently so complex and expensive that only wealthy, arid nations like Saudi Arabia use it routinely, can become much more cost-effective with expanded power capacity  (along with new membrane osmosis technologies). Up-front costs have slowed the adoption of “smart grid” approaches (use of computer controls of the electric grid to balance peak loads, mitigate crises, and integrate multiple power sources) and “vehicle infrastructure integration” (use of wireless technology, sensors, and signals to coordinate traffic and thus improve highway safety and expand capacity). All of these approaches could benefit from being planned in tandem. But even when they take advantage of common resources, such as sharing rights-of-way, they are typically planned separately. That should change.

Follow Us 
Facebook Twitter LinkedIn Google Plus YouTube RSS strategy+business Digital and Mobile products App Store



  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.