NIC: synthesise don’t analyse

October 15th, 2015

 

Whether or not the National Infrastructure Commission (whose brief is to deliver a politically independent infrastructure strategy) will be useful depends not so much on what it does but on how it does what it does!

If it considers projects independently of each other (an energy project, a transport project) then it risks continuing to generate sector specific independent solutions to infrastructure challenges which are both by their nature and by the extent of their interdependence, systemic; its value will be limited.

If on the other hand it embraces the ‘infrastructure as a network of networks’ view outlined in the CST report of 2009 then it has potential to be transformative. The ultimate asset of a network is the network and it is that which enables value.

The CST report argues that the contemporary level of interdependency and interaction of the five elements (water, waste, energy, ICT, transport) of the infrastructure is such that a systemic view must be taken. For me that view extends beyond the interaction of those elements at a functional level into their societal utilisation for value through commerce, education, healthcare, defence, civil administration, housing and so on.

We must, before all else, consider what infrastructure is for (its purpose, the reason it exists, the value we wish to derive from it) before we are able to consider what infrastructure we should have. From that understanding of purpose we can derive what projects should be undertaken with which priorities.

Purpose precedes process and project.

For me, the real worth of any individual infrastructure artefact should be measured not in terms of its cost but in terms of:

  • the value it enables in the network to which it belongs;
  • the contribution it makes to the resilience of its own network;
  • the contribution it makes to the resilience of interdependent networks;
  • the contribution it receives from interdependent networks;
  • the value it enables in the utilising infrastructures.

To achieve that understanding the NIC needs to focus on synthesis not analysis. What does that mean?

It means that great answers cannot be achieved through conventional analytical methods, especially those with a project cost focus. It is not that cost is unimportant but that value needs to be fully understood before cost becomes meaningful. Value is an economic AND a social measure and a systemic approach to infrastructure investment will embrace both.

The conventional approach to infrastructure projects is to consider them in isolation from each other, to cost each independently, to prioritise them and then procure them – probably from the lowest cost bidder.

The unconventional approach, the systemic view, is to consider all of the known and anticipatable infrastructure needs and desires of the country – in the light of changes in population size and demographics, of political desires and intentions (devolution, localisation, rebalancing North & South and so on) and then to synthesise an infrastructure strategy which can deliver the value generating capability needed to sustain the nation. Over time, and as the strategy delivers value, the requirements will evolve so the NIC and NIP must do likewise. The synthesis must take account of constraints such as time, affordability, impact on carbon, emissions, regulation etc. but importantly must look at the long term value generation associated with the projects.

The evolving plan will still be a set of projects, we will still procure them, but against the highest value outcome, not the lowest (up front!) cost to build.

What does all that mean? For me, if the NIC approaches its challenges from a systemic perspective we can have more infrastructure at less cost thereby increasing value.

To illustrate…….

It is widely considered (and this sub-clause is important) that within the current operating and business models the UK has challenges with:

  • Runway capacity
  • Rail vehicle capacity
  • Energy generation
  • Regenerating the economy (apart from in the South East).

A number of projects are proposed which are expected to, at least in part, address those challenges some of which are:

  • Additional runway capacity – about £25bn (assuming Heathrow is the answer)
  • HS2 – about £36bn (or £54bn+ with the extension beyond Birmingham)
  • Nuclear Power Stations in Somerset and Suffolk (at least) – about £25bn

Let’s call that a nice, neat £100bn – not insubstantial.

Each of those projects has been (or is being!) criticised for the quality of the supporting business case and/or the cost to taxpayers, energy consumers and so on. Each is defended as ‘necessary’ within the existing operating models although no clear expression of value is being made.

So, systemically, how would it be if (and it is an ‘if’ because I have not done the arithmetic nor explored the feasibility) we were to consider them from a systemic perspective…..

A significant proportion of flights, especially to Heathrow, (and note it is runway capacity that is argued to be short – not passenger capacity) are short-haul, they are to and from destinations which could be served by rail….

HS2 will, on current plans, start outside the centre of London and finish outside the centre of Birmingham, so any reduction in journey time will be outweighed by increase in walking time at either end: the benefit is all in the vehicle capacity. The volume of passengers required to make the business case work will need either further substantial growth in the number of passengers moving between near London and near Birmingham or cannibalisation of passenger traffic from other lines with London as a destination. Perhaps then all existing lines from the North should terminate NOT at London but at the Birmingham HS2 station?

HS2 might then have spurs to Heathrow and St Pancras (and via there to the continent) obviating the need for short haul flights in the UK and to near European destinations – Paris, Brussels, Frankfurt, Amsterdam, Cologne.

That would reduce the demand for the runway at Heathrow perhaps by as much as 30%. Thus not only might we more easily bear the investment in HS2, but we can save the creation of additional runway capacity (and the social and economic disruption associated with it – whether at Heathrow or Gatwick) and the funds can be applied to some other infrastructure project – perhaps one focused on economic regeneration of the Midlands and the North.

Rail travel is reckoned to be significantly less polluting per passenger mile than air travel, particularly if using electricity as the energy source. The increase in the number of trains (including ongoing electrification on parts of the classic network) is increasing demand for electricity while, currently (pardon the pun) generating capacity is falling. But wait, we have a plan for new power generation, wind, wave, gas and nuclear (the big ones). However, the investment in those nuclear power stations is very high and there is such uncertainty around them that the taxpayer is, in effect, having to subsidise them.

Now, if only the suppliers could do a long term deal with a major customer that would reduce the risk and uncertainty associated with the projects by selling generation capacity forward…………so, how about the generators enter a long term supply arrangement with the rail infrastructure operator for, oh, I don’t know, 35 or 40 years? The life of the generating plant? That gives certainty to both sides, reduces financial risk and gives continuity of supply.

In the meanwhile, and bearing in mind that the three biggest risks to the railway from anticipated climate change are the wind, heat and precipitation effects on the overhead wires delivering the electricity, we might think about locomotives with gas turbines and hydrogen fuel cells for propulsion. We could generate the hydrogen using waste heat from power stations and use UK technology (Cella Energy) to pelletise it and make it safe – AND we could plug the locomotives into the grid at the end of each day to supplement our power supply.

With a bit of thought and a lump of connectedness might we be able to eliminate one project, give commercial certainty to two others and free up funds for at least one other, all with the net effect of reducing the total investment required while ‘solving’ all of the challenges and increasing the overall value generated for UK plc.

I’m just saying….