Between the Poles

Private infrastructure funding and investment

Until 2004 almost all the funding of investment projects was by governments and traditional lending institutions, primarily commercial banks. Pure financial investors were almost absent as equity investors in major infrastructure projects. Global  infrastructure  fundraising  for  private  equity  investments  in  infrastructure began in  2004.  In  2007, just before the global financial crisis, this type of fundraising had reached  $39.7 billion.  This was  15% of  the total infrastructure project  finance loans  that year.  After the financial crisis,  fundraising for private equity investments dropped significantly to about 10.5% of total project finance loans. Fundraising set a post-Great Financial Crisis (GFC) high in 2015, but the midyear total for 2016 already exceeded that.

Sources of private equity

The primary pure financial investors in equity for infrastructure are pension funds, sovereign wealth funds, and insurance companies.  According  to  the  OECD, total assets held by pension funds globally was US$ 16.2 trillion. The top 70 insurance companies hold $20.7 trillion in assets.  Sovereign wealth funds hold an estimated $7.3-7.4 trillion in assets.

The OECD has estimated that the  total  commitment of  pension  funds to  infrastructure  in  2008 was $400 billion, primarily utilities,  but with around $60 billion invested in infrastructure other than utilities. An OECD  survey  of  large  pension  funds in 2013 showed that some funds had allocated important percentages to infrastructure.

The majority of sovereign wealth funds have infrastructure investments. A  recent  paper reported  that with total assets of $5.2tn  at  the  end  of 2012, sovereign wealth funds had invested $52 billion in infrastructure  between  2005  and 2012.  In 2013, the OECD surveyed a sample of the most important sovereign wealth funds worldwide and found that the percentage allocation of assets to infrastructure was signifiant with some reaching 10 - 12% of assets.

There are about  200  insurance companies worldwide with investments in infrastructure. Most of these are  located  in  Europe  and the USA,  with   about 20%  of  them in Asia. Insurance  companies typically invest in primary equity.

The Towers Watson and Financial Times’ Investor Survey 2013 reported that, out of the $3.1 trillion total assets under management by the top 100 investment asset managers, $127.6 billion was invested in  infrastructure.  It was also found that pension funds and sovereign wealth funds were  the most heavily invested  in infrastructure with 9% and 10% of their total assets, respectively.

According to the Willis Towers Watson Global Alternative Investment Assets Survey 2016, almost all private financial institutions are either not yet invested in infrastructure or are below their target allocation, but the demand is there.  According to Willis Towers Watson, "the reality is that the requirement for private investment in infrastructure is immense in all geographic regions."

Sources

Private Equity Institutional Investor Trends for 2016, Probitas Partners

PRIVATE FINANCING AND GOVERNMENT SUPPORT TO PROMOTE LONG-TERM INVESTMENTS IN INFRASTRUCTURE

Global Alternative Investment Assets Survey 2016 – Report Summary

Pension Fund Investment in Infrastructure OECD

World's Top Insurance Companies

Low carbon climate-resilient infrastructure requires private funding

A Report by the Global Commission on the Economy and Climate has recommended that since more than 60% of the world’s greenhouse gas (GHG) emissions are sourced from the world's existing stock of infrastructure, ensuring infrastructure is built to deliver sustainability is the only way to meet the COP21 goal  of keeping warming below 2°C and to guarantee long-term, inclusive and resilient growth. Infrastructure underpins core economic activity and is an essential foundation for achieving inclusive sustainable growth.  Investing in sustainable infrastructure is key for reigniting global growth and reducing climate risk.

The Global Commission is chaired by former President of Mexico Felipe Calderón and co-chaired by the climate economist Lord Nicholas Stern.

The report estimates that $90 trillion in sustainable infrastructure investment will be required over the next 15 years.  It stresses that this will require a shift in the world's construction and financial sectors to ensure that this money, which will be increasingly private, is spent on low-carbon, energy-efficient projects. 

Change in infrastructure spending required for a 2°C scenario (percentage change in expenditure over 2015-2030 compared to Business-as-usual)

The report has adopted a broad definition of infrastructure which includes both traditional types of infrastructure; energy, public transport, buildings, water supply, and sanitation and also natural infrastructure; forest landscapes, wetlands and watershed protection.  Infrastructure underpins core economic activity and is an essential foundation for achieving inclusive sustainable growth. It is indispensable for development and poverty elimination, as it enhances access to basic services, education and work opportunities, and can boost human capital and quality of life.

Investment is needed to replace ageing infrastructure in advanced economies and to accommodate higher growth and structural change in emerging market and developing countries. This will require a significant increase globally, from the estimated US$3.4 trillion per year currently invested in infrastructure to about US$6 trillion per year. The Global Commission found that it does not need to cost much more to ensure that this new infrastructure is compatible with climate goals, and the additional up-front costs can be fully offset by efficiency gains and fuel savings over the infrastructure lifecycle.

Importance of private infrastructure financing

Transforming the financial system and its intermediaries is essential to scaling up sustainable infrastructure finance.  Public finance and investment will continue to play a critical role, particularly in low-income countries.  But large amounts of private capital are needed and this will only flow if the right market signals are present within the financial system. The report suggests that reforms are needed in the financial regulatory system as well as other policy reforms, specifically, to price carbon to level the playing field between sustainable and unsustainable options in order to encourage private investment in sustainable infrastructure.

Private investment requires financial returns.  Efficiency in construction and operation and maintenance of infrastructure is essential. Increasing productivity drives technological innovation. Many governments as well as private sector engineering and construction firms have identified building information modeling (BIM) as a key foundation for increasing construction productivity.  Owners are beginning to recognize the benefits of full lifecycle BIM especially when augmented by geospatial technology.

Energy

The report estimates that energy infrastructure will require investment of US$25 trillion, or nearly a third of total core infrastructure investment over the coming 15 years. In addition energy efficiency will require investment of about the same magnitude.  Building sustainable energy infrastructure encourages economic growth, reduces air pollution and greenhouse gas emissions, and plays a key role in building resilience.

Energy efficiency

The report found that energy efficiency is a highly cost-effective way to manage demand and reduce the investment requirements for overall energy supply. Increasing energy efficiency in industry, buildings and transport could achieve up to half of the emission reductions needed globally to peak greenhouse gas emissions by 2020 according to the IEA.  Energy efficiency investments in IEA member countries since 1990 have avoided US$5.7 trillion of energy expenditure.  The IEA estimates further investments could boost global GDP by US$18 trillion by 2035, increasing growth by as much as 1.1% per year.  Energy efficiency measures are estimated to create up to three times as many jobs as fossil fuel supply investments per dollar of investment.

A key recommendation of the Global Commission’s 2015 report was to scale up commitments by development banks working with governments and the private sector to invest at least US$1 trillion per year by 2030 in clean energy, including energy efficiency.

Air pollution

Outdoor air pollution, much of which is associated with fossil fuels, is linked to nearly 4 million premature deaths per year. In China, it is estimated that air pollution killed around 1.6 million people in China in 2013. In India, the air pollution toll in 2013 stood at 1.4 million deaths.  In Europe, coal plant emissions account for more than 18,200 premature deaths, about 8,500 new cases of chronic bronchitis, and over 4 million lost working days each year.  Analysis for the Global Commission shows that the health and mortality burden of air pollution amounts to as much as 4% or more of GDP in some countries. Recent analysis by the OECD has found that globally air pollution-related healthcare costs alone are projected to increase from US$21 billion in 2015 to US$176 billion in 2060.

Cities

It is estimated that by 2050, two-thirds of the global population will live in cities, and over 70% of the global demand for infrastructure over the next 15 years is expected to be in urban areas.  How cities develop is important both for growth and for climate change.  The report emphasizes that investment in sustainable infrastructure is essential to make cities inclusive, safe, and resilient.

Global Commission

The global commission is supported by governmental and private sector leaders: Sharan Burrow, General Secretary, International Trade Union Confederation (ITUC), Australia; Suma Chakrabarti, President, European Bank for Reconstruction and Development (EBRD); Helen Clark, Administrator, UN Development Programme (UNDP); Former Prime Minister of New Zealand; Jamshyd Godrej Chairman and Managing Director, Godrej & Boyce Mfg Co. Ltd., India; Stuart Gulliver, Group Chief Executive, HSBC Holdings plc and Chairman of The Hongkong and Shanghai Banking Corporation Limited; Angel Gurría, Secretary-General, Organisation for Economic Co-operation and Development (OECD); Chad O. Holliday, Chairman, Shell, United States; and Sri Mulyani Indrawati, Finance Minister of Indonesia

Greening the Delhi Metro System

The Delhi Metrorail Corporation (DMRC) has signed an agreement with the U.S. Green Building Council (USGBC) and Green Business Certification Inc. (GBCI) that will make it possible to incorporate the unique needs of metro installations and mass rapid transit systems for new metro stations and depots within the LEED (Leadership in Energy & Environmental Design) green building rating system. India is one of the USGBC's top five countries for LEED.

This summer two of Delhi Metro's new stations were awarded the platinum (highest) rating for adherence to green building norms of the Indian Green Building Council (IGBC).  IGBC's Green Mass Rapid Transit System rating is the world's first exclusive rating system to address sustainability in new municipal rail systems.  The IGBC rating system enables new rail based municipal rapid transit systems (MRTS) to apply green concepts during design and construction to reduce environmental impact.  The rating system ranks stations and depots and on a scale of platinum, gold, and silver depending on their adherence to IGBC specifications.  All 90 new metro stations which will be completed by 2016 as part of Delhi Metro's Phase 3 are green buildings.  In addition five new solar power facilities have been installed by Delhi Metro at different stations, depots and residential enclaves.

The Delhi Metro is a remarkable achievement in other respects in addition to green.  The Government of India and the Government of Delhi jointly set up the Delhi Metro Rail Corporation (DMRC) in 1995.  The DMRC is a special purpose organization with great autonomy and powers. The DMRC has full powers to hire people, decide on tenders and control funds.  The initial phase of the $2.3 billion project wrapped up in December, 2005, on budget and nearly three years ahead of schedule.  According to Business Week "A well-run subway is a marvel even in a first-world city. In India, where public works are often models of dysfunction, it's nothing short of a miracle."  One reason was that DMRC relied on private funding from the Japan Bank of International Cooperation and other international organizations.

3D is transforming the construction industry and helping to build a new world

Increasing urbanisation, pressure on existing infrastructure, push for productivity in construction sector and environmental concerns are driving the convergence of geospatial, 3D and information modeling technologies.

Over the next two decades, construction of buildings and infrastructure (electric power, water/wastewater, roads and highways, and ports and airports) will see a massive infusion of investment, motivated by environmental concerns and the need to accelerate economic development.  As governments are discovering that they have less and less money for capital infrastructure projects, a greater proportion of the investment in infrastructure will come from the private sector, which will drive increasing productivity to improve returns on investment. As with other industries facing a productivity challenge, this translates into an investment in technology. The accelerating adoption of 3D technologies includes 3D visualisation, 3D building information modelling (BIM), 3D GIS, 3D CAD, 3D reality capture such as laser scanning (LiDAR) and ground penetrating radar (GPR), 3D photogrammetry from satellites, aircraft and UAVs, and technologies that enable 3D measurement such as oblique imagery is transforming the construction industry in important areas.

In a just published article in Geospatial World I discuss how 3D data and technologies integrated with geospatial and other technologies are being applied to model buildings, infrastructure, and entire urban environments ranging from individual buildings to neighbourhoods to cities, how this is feasible using today’s technology, and how it is already transforming the construction industry.

ncreasing urbanisation, pressure on existing infrastructure, push for productivity in construction sector and environmental concerns are driving the convergence of geospatial and 3D technologies across businesses. - See more at: http://geospatialworld.net/Magazine/MArticleView.aspx?aid=30905&utm_content=buffer67319&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer#sthash.MsgzMTNR.dpuf

Arizona's fixed charge on solar power customers and consumer empowerment

The dramatic reduction in the price of solar panels has made solar PV competitive with the central power grid in some parts of the country.  For the first time in 100 years there is a competitive alternative to the local power company's grid.  Consumers are installing their own solar panels or buying energy services from companies like Solar City.  But this is disruptive for the traditional utility business model, because distributed generation results in reduced demand for power from the grid and reduced revenue to the utility.

Regulators are concerned about this.  At the recent SGIP meeting FERC Commissioner Norris mentioned that the National Association of Regulatory Utility Commissioners (NARUC) and FERC periodically meet for what they call a Sunday Morning Collaborative to discuss common burning issues.  As a measure of the level of concern, Commissioner Norris said that the burning issue currently being discussed at these meetings is new utility business models.

Consumer empowerment

It is important to recognize that the regulators' customer is the public not the utility.  Competition tends to reduced prices to the consumer.  In addition many consumers are interested in helping to reduce emissions.  But most of all consumers like the idea that solar PV (and storage) puts them in control even to the point of creating their own microgrid.  FERC Chairman Jon Wellinghoff in a recent GreenTech Media Energy Team podcast on distributed generation pointed out that consumers are strongly driving the solar PV industry.  "I think the most exciting thing I see in the solar industry is the enthusiasm of the consumers and really wanting to embrace this technology and that is driving the growth of the industry."  He mentioned a recent solar industry trade event that attracted 600 exhibitors and 12 000 attendees.   On the other hand if the organization responsible for ensuring the availability and reliability of the power infrastructure is not able to cover its costs, the consumer may experience more and longer duration grid outages. 

Last week the Arizona Corporation Commission (ACC), the power regulator in Arizona, took the middle road and  instituted a fixed charge of $0.70 per kilowatt effective January 1, 2014 on future customers who install rooftop solar panels.  It is estimated that this will collect $4.90 per month from a typical (future) rooftop solar customer.   The ACC said that the current net metering program creates a cost shift, causing non-solar utility customers to pay higher rates to cover the costs of maintaining the electrical grid that all customers use.

APS, the Arizona power utility which brought the net metering issue to the ACC, in a press release highlighted that the ACC agreed that the current net metering program creates a cost shift, causing non-solar utility customers to pay higher rates to cover the costs of maintaining the electrical grid.

But according to APS the fixed charge "does not increase APS revenue, but instead will modestly reduce the impact of the cost shift on non-solar customers."  APS said that the new charge addresses only a portion of the cost shift.  The charge wiill be reviewed in 2015 as part of the APS rate case review. 

In a state that is second in the U.S. in grid connected solar PV capacity, that the ACC decision was a split decision (3-2) and that the decision does not cover the total cost shift and does not provide new revenue to the utility suggests that the regulator is listening very closely to the consumer and recognizing that the traditional utility business model is being challenged.

Convergence of BIM, geospatial, imagery and 3D enables new vertical industry solutions

Earlier this year I was invited to give a keynote at the South Africa Surveying and Mapping Indaba.  PositionIT has just published the paper Geospatial Information Technology Enables Vertical Industry Solutions based on my keynote.

Over half of the world's 6 billion population lives in cities and this proportion is expected to increase as we move toward 9 billion by 2050. This driving investment in new and refurbished buildings and infrastructure.  The world's construction industry including buildings, electric power, water and wastewater, roads, rail, and sea ports and airports contributes about $7 trillion annually or 10% of the world GDP.  Over the next two decades these sectors will see a massive infusion of investment estimated in the range $20 to $50 trillion.  In addition, as governments find they have less and less money for capital infrastructure projects, a greater proportion of the investment in infrastructure will come from the private sector, which will drive an increased focus on productivity to improve returns on investment.  That in turn is driving a transformation of the construction industry that is reflected in accelerating adoption of vertical industry solutions based on integrated BIM, imagery, geospatial, 3D visualization, and geospatially-enabled data management. 

The article presents some real-world examples of the application of converged BIM, imagery, geospatial, and 3D solutions.

• In the construction world 3D modeling and model-based design which integrate BIM, GIS and survey, and laser-scanning (LiDAR) in a 3D visualization environment are increasingly being used to reduce the risk of budget and schedule overruns.  Parsons-Brinckerhoff, part of the the large global construction firm Balfour Beatty, has been a leader in applying 3D modeling for design validation, clash detection, parameteric modeling, and design visualization during design and 4D modeling (time+3D), 5D (cost+time+3D) for construction scheduling during construction.
• Laser scanning (LiDAR) has become an integral part of the 3D construction process.  For example, construction monitoring involves capturing construction progress as well as being able to automate the process of checking for divergence from design when contractors for a variety of reasons don't build what is designed.
• Heathrow's Map Live system allows everyone within the business to query, including geospatial query, retrieve and view information about the geolocation about Heathrow's underground infrastructure.
• City of Las Vegas's intelligent 3D model of one and half miles of Main Street in the older part of Las Vegas provides access to geolocation information about Las Vegas's below and above ground facilities including roadways, utilities and telecommunications, as well as buildings.
• Los Angeles Community College District's created 3D BIM models of all the buildings including interior power, water, mechanical, and lighting systems together with 2D models of underground infrastructure on the nine LACCD campuses.
• Energy performance analysis helps architects and engineers to optimize energy usage of new buildings, often motivated by programs such as LEED certification.  By integrating a 3D BIM model with the geolocation of the building and surrounding natural and man-made structures and local environmental conditions, an energy performance analysis is often able to reduce annual energy consumption and power bills by 40%.

These real-world examples show that the application of converged BIM, imagery, geospatial and 3D technology to vertical industries is not star wars, but is already feasible with existing technology.

A new business model for electric power utilities: market enabler

I have blogged on previous occasions about the impact of distributed generation and renewable sources of electric power on the traditonal business model of electirc power utilities.  In this context the recently released Annual Stakeholder Report 2012/13 from Ergon Energy which supplies power to most of Queensland makes for very interesting reading.

Transitioning from transporter of power to market enabler

Ian McLeod is the Chief Executive of Ergon and in his summary of the year he sees Ergon transitioning from a monopoly delivering power to a market enabler.  Ergon customers are increasingly becoming producers selling energy into the grid.  This change means that Ergon's value proposition needs to shift to enable a strong market for energy, storage and demand management solutions, while still ensuring a safe, secure and reliable supply.

Reduced demand for power from the traditional grid

Since the summer of 2010/11 customers have been using less electricity for the first time in Ergon Energy’s history.  In addition peak demand has been well below forecast for the past three years.  There are several reasons for this but a greater awareness of energy efficiency and the availability of alternatives like solar PV are among the more important. Decreased demand has resulted in increased rates for electric power, up about 22.6% in 2013/14.  Bascially the cost of maintaining the infrastructure remains the same, but less power is being bought by consumers so to keep revenue commensurate, rates have to go up to compensate.

Power infrastructure increasingly being funded by consumers and third parties

The uptake of solar PV, which was initially primed by government rebates and hgh feed-in-tariffs, is continuing even after the reduction of the feed-in-tariff rate from 44 to 8 cents/kWh.  14 % of households in Queensland now have solar PV. "Capital investment and technology is now flowing downstream into the customer installations – from traditional regulated infrastructure funded by Ergon Energy to unregulated solutions funded by customers or third parties."  In response to this and in order to mitigate the risk of parallel investment into the supply chain, Ergon Energy has been reducing its works program and the size of its workforce.

The convergence of geospatial and BIM is gathering steam

The August edition of Geospatial World Magazine is focussed on the theme of the integration of geopatial and building information modeling (BIM) in both its vertical and horizontal (BIM for Infrastructure) forms. Together the articles and interviews portray the convergence of these technologies and processes as gathering steam, driven by business drivers such as better outcomes, more environmentally friendly designs, and improved productivity.  I've extracted a few paragraphs to provide a feel for the breadth and depth of the coverage.

Editorial - Prof. Arup Dasgupta, Managing Editor, Geospatial Media

This academic year I was pleasantly surprised to find five students from the Masters of Construction Engineering and Management attending my core postgraduate course on Fundamentals of Geomatics. It is becoming increasingly clear that geomatics, geospatial to our readers, needs to collaborate with end users to achieve greater acceptability. We have seen that geospatial integrated with enterprise resources planning, business intelligence, building information modelling or design and engineering results in dramatic improvements in these systems.

Cover Story - Geoff Zeiss, Editor - Buildings and Energy, Geospatial Media

The adoption of BIM processes and technologies is a major trend that has been gathering steam over the last decade, motivated by the need for better outcomes. According to McGraw-Hill Construction, the overall adoption of BIM has increased from 17% in 2007 to 71% in 2012 in the US, registering a 45% growth over the last three years, or 400% growth over the last five years.  McGraw-Hill Construction estimates that the use of BIM for infrastructure is about three years behind the BIM use on vertical projects but predicts that adoption in the horizontal market will occur at a faster rate than the rate of adoption in the vertical market.

McKinsey singled out poor construction productivity as an important factor in eroding returns on infrastructure, making the sector less attractive for private investment.  Thus, the stage is set for a radical transformation of the construction industry with a focus on improving productivity. It is expected that investment in technology will be a key element of the strategy to ensure that our infrastructure is expanded and transformed.

In the construction world, 3D modelling and model-based design, which integrate BIM, GIS and survey, and laser-scanning (LiDAR) in a 3D visualisation environment, are increasingly being used to improve the design and build phases of the construction process.  ARCADIS Netherlands is a large engineering firm that has been involved in projects which integrate geospatial into the design process. The integrated approach simplified communication and increased the quality of the final design. It also enabled automated analysis of the consequences of design choices with the result that the planning cycle was shorter.

.Interview - Anne Kemp, Director - BIM Strategy and Development, Atkins United Kingdom

At a recent BIM for Infrastructure Conference at the Royal Geographical Society, we had David Henderson from the Ordnance Survey talking about smart cities, with some superb illustrations of the integration of geospatial and what people would regard as BIM data. The boundary between what is coming from which technology becomes rather incidental; it is much more about what questions you are asking of that data and what are the intended outcomes of the project. Geospatial people are realising that it is about managing and integrating all of infrastructure. And that is just core geography. Being able to analyse and blend that with what is coming from the CAD and BIM world will get really exciting. The goal of what that enables you to do is what is important, not the individual technologies.

There was a UK Government Construction Summit recently where an immersive technology Mission Room was demonstrated. That is an immersive space where you have visuals on all sides including photogrammetry data or video; and CAD or BIM models. It was such a visual way of being able to spatially locate and remember in your mind key assets within that space. What they are using was very much spatial data: survey and photogrammetry data, combined it with junction diagrams and CAD drawings which were put into real-world coordinate space for accurate display. I asked one of the people demonstrating Mission Room if this was GIS. He admitted that it was, but they didn’t call it GIS.

Interview - David Bartlett, Vice President Smarter Physical Infrastructure, IBM United States

Buildings last for many years and if significant improvements and cost savings are to be made, we should be looking for better ways to run these assets more efficiently. There are emerging IT solutions that can apply analytics to BIM models to drive down energy costs, improve building utilisation, optimise property portfolio management and maintenance, and reduce environmental impact.

There is a link between IT and smart buildings. IBM's background is IT and we deal with huge amounts of data. That is why IBM got into smart buildings in the first place. It got everyone in our company fired up because it is an opportunity to help communities, cities and governments to operate at lower cost more efficiently and improve the quality of life.

What IBM is talking about is a big IT play on top of those systems [energy systems, air handling systems, building management systems] which can not only connect multiple buildings but can also aggregate and look at what is happening at a city and at a state level.

Interview - Shannon McElvaney, Global Community Development Industry Manager and Geodesign Evangelist, ESRI United States

Technology today enables us to move beyond the separate process of planning, designing, construction, and maintenance. That continuum is called geodesign, and from the very early stages of a project, it enables the creation of an iterative and informed design.

When we consume BIM models we only extract what we need. On a large Middle East project, we got these huge BIM models, but we needed only the walls, the piling, the floors, and the roof. And from that we could do solar energy modelling for PV panels, energy performance modelling, transit accessibility, shadow casting, and much more. The developers needed to know proximity to stations, value of real estate, floor space, proximity to amenities, and they used this information to value the real estate and forecast their return on investment. The sustainability group needed to do the same, in order to calculate their GHG emissions, energy, water, and waste needs. BIM and GIS integration is essential to be able to do this.

Interview - Stephen Lawler, Chief Technology Officer, Microsoft Bing Maps United States

I think the user experience will take a huge leap forward and things will get more immersive with 3D. Companies like Microsoft, Google and others have been increasing imagery coverage through efforts like aerial or streetside. I think the move is towards 3D. The real-world basemap is moving to 3D to provide visually real and symbolic digital experiences, enrich the realworld view with augmented reality and enhance the underlying data and relations.

We will see a lot of augmented reality coming in different forms. You already have things like Google Glasses. The whole visual field of view will become enriched with relevant and personal data. Ultimately, the convergence of technology between the understanding of intent, new natural user interfaces, the location semantic organisation of data, a 3D model and ontology and adaptive 3D contextual rendering will set the stage for our future digital 3D world.

Interview - Andy Powell, UK Head of BIM, and Paul Trethewey, UK Rail BIM Manager, Parsons Brinckerhoff

[This interview didn't make press time for the paper edition.  You can find it here.]

BIM is disruptive in the sense that the introduction of Building Information Modelling (BIM) working methodology in many ways is not an evolutionary change but a fundamental change in the way we produce engineering design content.

Parsons Brinckerhoff is organised into business units that cater to different market sectors. Buildings, Civils & Structures, Power, Rail and Highways are the big units within our UK offices. BIM working practices and the associated digital tools that are utilised to achieve this output are relatively well proven within the building design sector. One reason for this is the self-contained nature of a vertical structure; geospatial constraints are usually defined and the entire building itself can be viewed as one asset. The design of linear assets such as highway or rail infrastructure presents some additional, albeit stimulating, challenges to take into consideration. These include questions on how one manages the geospatially correct digital representation of such a large geographic scope of design whilst ensuring existing IT infrastructure is not over-tasked.

Article - Terry Bennett, Senior Industry Programme Manager - Civil Infrastructure, Autodesk

Globally, the use of PPPs has led to increases in efficiency and certainty of delivery. In Australia, PPPs delivered projects at a price closer to the expected cost as compared with those procured through traditional mechanisms. In the UK, a treasury department study showed 89% of PPP projects were delivered on time or early. In Canada, PPPs led to efficiency gains of up to 61.2% over those done with conventional methods, according to a study by the Conference Board of Canada.

BIM for infrastructure is a geospatial- enabled model-centric process, which can transform the infrastructure and asset lifecycle by increasing productivity, improving efficiency, and lowering costs. 3D design and modelling tools enable planners, engineers and contractors to leverage existing GIS information, explore innovative designs and ‘whatif’ scenarios with project investors to test alternatives and simulate realworld performance, develop a better understanding of scheduling and cost (4D and 5D), assess environmental impacts, and provide the public with accurate visualisations of various stages of the project, all while keeping a geospatial context which in turn reduce risk and liability.

Article - Bart De Lathouwer, Director, Interoperability Programs, Europe, Open Geospatial Consortium Belgium

Access to and manipulation of diverse information is a vital tool for Architecture, Engineering and Construction (AEC) firms looking to compete globally. Firms may seek to deliver comprehensive Building Information Model (BIM) as part of their final product, or deliver building information services for years beyond the completion of a building. They may want to combine information from different sources in simulation, analysis, “clash” detection and visualisation. Unfortunately, it is often difficult to discover, assess, access, share and fuse information because these data reside in multiple systems.

We argue that smart building practices as well as smart buildings, smart cities and smart infrastructure advance more through cooperation among standards organisations than they ever could through the efforts of any single technology vendor or small group of technology vendors.

Advanced scenarios will become reality only as integrated standards platforms enable cities and citizens information systems to integrate information not only from GIS, BIM and civil engineering documents and services, but also from a wide variety of increasingly sophisticated — and increasingly connected — consumer products and services

Electricity and Gas User Forum at Geospatial World Forum 2013

I chaired the Electricity and Gas User Forum at the Geospatial World Forum 2013 conference.  There were very interesting presentations from Africa, Europe, Middle East, India and Canada touching a range of topics relating to the application of geospatial  in the gas and electricity sector.

Lead speaker: Geoff Zeiss, Editor-Buildings and Energy, Geospatial Media and Comms

Growing population, increasing urbanization and environmental concerns are putting a strain on existing infrastructure including electricity and other energy networks, water and wastewater, road and rail, airports and seaports.  It is estimated that an investment in infrastructure of between $24 to 53 trillion will be required worldwide over the next two decades.  Governments are increasingly devoting their limited resources to services, so much of this investment will have to come from the provate sector which will drive increased returns on investment (ROI) if infrastructure is going to attract the private investors it requires.  This will focus the construction industry, designers, engineers, architects, and construction contractors on improved productivity in an industry where productivity has stagnated in the US, EU, Japan and Korea over the past decades.  The convergence of building information modeling (BIM), new geospatial data and technology such as LiDAR, and 3D visualization is changing how we design, buld and operate and maintain buildings and infrastructure and is resulting in increased efficiency and reduced risk.  Not only is this trend leading to improved efficiency in the $7 trillion construction industry, but by enabling modeling entire cities it is leading to a more holistic approach to the challenges of increased population and urbanization.

Jan van Gelder, Information Manager, Alliander, The Netherlands

Jan van Gelser gave an overview of how Alliander successfully consolidated four different GIS database and software environments including Smallworld, GFIS, Oracle and DB2 into a single web-based geoservices environment for managing Alliander's gas and electricity networks. Alliander took a data-centric approach that focused on three types of data, thematic, reference, and asset data and made all of these accessible over the web via OGC standards-based (WMS, WFS, KML) geoservices.

Phil Mannell, Director, Enbridge Gas Distribution, Canada

Phil Mannell outlined how Canada's largest gas distribution company Enbridge evolved geospatial technology from mylar plates in 1998.  Enbridge first focussed on core GIS in the early 2000s, he moved to enterprise gis in the late 2000s, and is now treating GIS as a platform, which enables Enbridge to identify new business units/groups and their common tasks that can benefit from a map-based application.  With GIS as a platform Enbridge found that they can rapidly develop lightweight, focused maps and apps to support business processes including conducting proof of concepts and pilots to establish the business benefits.  This results in less risk and shorter implementation durations with from 10 to 15 weeks turnaround time for new applications.

Brian Soliday, Senior Vice President, ikeGPS, UK

Brian Soliday showed how a handheld device incoportating a GPS with earth station support, a laser range finder, a digital camaera and a notepad can transform field surveys resulting in field staff productivity improvement of up to 125 % and dramatically reduced risk through improved safety. Brian enlightened the audience that the mysterious "ike" stands for "I know everything", which is approporiate for this multiple input device.

Harsh Sharma, Vice President, BSES Yamuna Power Ltd, India

Harsh Sharma discussed how GIS is used by a large electric power utility with about 1.23 million customers in Delhi.  BSES Yamuna has leveraged a number of information technologies including GIS to improve the flow of information and implement analytics to create an effective decision support system.  One of India's biggest challenges is the 30% of India's power generation that is lost to aggregate technical and commercial (AT&C) losses.  The most impressive result of BSES Yamuna's investment in geospatial and other IT technologies is that they have reduced their AT&C losses by 45% over 10 years.  Geospatial technologies enables them to identify and track specifically where non-technical losses are occurrring.  This represents about 4.5 % reduction per year, significantly better than the 0.8% per year average for the entire Indian electric power industry.

Andrew Evans, Topcon, UK

Andrew Evans showed how vehicle-based data capture technologies can automate the field work that used to require field workers to laboriously walk pole lines.  For example, the traditional approach to pole inventorying used to achieve about 65 poles/person/day.  With mobile data capture technology Up to 800 poles/hour can be processed.  The type of data that can be captured in this way includes Utility Pole location, Vegetation encroachment, Splices, joint Use, pole heights, clearances, and sag.  Andrew presented results that showed that mobile data capture automation can result in 26% cost savings and more importantly in this age of the aging workforce 55% less time.

Dr Ioannis Manakos, Chairman, EARSel, Greece

Dr Ioannis discussed opportunities for EARSel's (European Association of Remote Sensing Laboratories) earth Observation products in the Energy sector.  He outlined a number of earth observation products including land cover, land features, and sea features.  There are many wasy that data is being captured these days including land surface and sea surface platforms for in situ ground and ground truth information, spectroradiometers and imaging spectrometers which acquire reflectance from various surface targets, and both active and passive sensing.  Unmanned airborne vehicles offer a multifold range of solutions.  They offer finer spatial and spectral resolution that can be used to bridge laboratory and in situ methods with with space-borne, wide coverage data.  In the area of space-born sensors, there are a plethora of sensors deployed in various spatial, spectral, and angular ranges.  EARSel offers sophisticated information extraction techniques ranging from simple regression analysis to complicated ray following models. Classification algorithms are available for land cover mapping needs for almost all possible targets and biogeographical zones. Change detection is another important application where the analytical tools are becoming much more sophisticated.  During the last decade about 14 % of all papers in major EO journals address change detection.  Renewable energy is another areas where earth observation data and technology is becoming critical in identifying optimum locations and assisting in forecasting wind and solar power generation.

Eng. Atif A Karrani, Managing Director, E;ectricity and Water Authority, UAE

Eng. Atif Karrani's presentation focussed on the implementation of enterprise GIS by the Sharjah Electricity and Water Authority(SEWA).  SEWA supplies electricity, Water and natural gas to the population of the Sharjah Emirate, with more than 360,000 customers.  The enterprise GIS system is used for managing electricity, water, natural gas, communications (FOC), and street light networkd.  SEWA's goal was to enable all SEWA Departments to use GIS technology effectively for improving services to the citizen and responses to citizen’s request.  This translated into a development objective to convert and integrate all available data into a standard format in a centralized data store accessible to all relevant departments. SEWA recognized that implementing enterprise GIS requires planning.  In particular it is necssary to be prepared to identify and overcome organizational and technological barriers.  But their successful implementation of enterprise GIS has resulted in GIS being recognized as an essential building block in SEWA’s application landscape.

Jennifer Oduor, Property Department, Kenya Electricity Generating Co, Kenya

Kenya Electricity Generating Company (KenGen) is the leading electric power generation company in Kenya, producing about 80 percent of electricity consumed in the country. Jennifer Oduor outlines some of the ways that geospatial data and technology are used by KenGen. These include geothermal field potential assessment to reduce the risk of expensive, unproductive geothermal wells; geothermal infrastructure planning to optimize the design and location of power stations, wells, steam pipe networks, and other infrastructure; management and monitoring of environmental impacts; conflict prediction and management with local communities to identify, in advance, the areas of possible conflict between the company and local communities due its operations and to plan for ways of mitigating the effects; and land acquisition to aid in providing information for purposes of zoning the land to facilitate purchase negotiation decisions. KenGen found that an important benefit of GIS is the ability to integrate data from a wide range of company sources using location as a common point of reference.

Jasper Roes, Project Manager, Geological Survey, of the Netherlands (TNO), The Netherlands

Jasper Roes described a project called CERISE-SG, which is a public-private partnership (PPP) to develop a foundation for efficient information exchange between different domains relating to smart grid.  The project will focus on several use cases.  The first use case is a smart grid information broker, a tool for mapping information relating to smart grid across domains.  The simplest case involves transformations where there is a straightforward mapping between different terms in different domains, for example, kWh  to Joules. The more common and more complicated case involves transformations with unequal semantics where it will be necessary to develop ontologies to provide a basis for mapping terminologies between domains.

Jene van der Heide and Martinus Vranken, Project Managers, Cadastre, The Netherlands

Martinus Vranken and Jene van der Heide of the Dutch Kadaster, the land registry and geospatial agency in the Netherlands,  described a project to model a square kilometer of downtown The Hague with the objective of reducing and stabilizing energy usage and costs for the entire area. In the study area the buildings are large and mostly owned by the national and municipal governments. The Dutch Kadaster has assembled land registry information like ownership, monument status; building information such as year of completion, surface area, energy labels, energy indices; information on underground networks like heat networks, gas and electricity grids; together with government information on heat pump facilities, energy consumption of buildings, and available building facade area suited for solar panels.  Combining this information provides a tool that the Ministry of the Interior is using to develop the busness case for a new form of energy supply that is reliable, clean, and affordable. The two main challenges have been to translate this information to fit the domain perspective of the Ministry of the Interior and structuring the information so that it can be reused for similar projects in the future.  More about this project can be found here.

Can alternative business models for water distribution help resolve the water crisis ?

There are several business models for water distribution including investor owned, coops, regional associations, private-public partnerships and municipal.  In the UK there are a small number of regulated regional investor owned water utilities like Thames Water, Northwest Water and Southern Water each of which serves millions of customers.  But in many parts of the world water and waste water are a municipal responsibility.  In France water and waste water are the responsibility of municipalities, but 75% of water and 50% of waste water services are contacted out to private sector companies like Veolia and Suez.  In the Unites States there are about 54,000 community public water systems, which are either publicly owned, cooperatives or privately owned.  But about 50,000 of these systems provide water in localities with less than 10,000 inhabitants.

Water and waste water funding gap

Only a portion of water infrastructure maintenance and operations costs are covered by rates in the United States, the rest comes from grants from several levels of government.  Both the American Society of Civil Engineers (ASCE) has estimated that the water infrastructure funding gap is on the order of $20 billion per year.   As a result most municipalities across North America under-invested in water infrastructure for years and many are now faced with the reality of aging infrastructure with increasing leakage and breakage, competition for more limited (quality and quantity) sources of water, and the increasingly costly impact of regulation from state and Federal regulators.  Assuming every pipe would need to be replaced, the cost over the coming decades could reach more than $1 trillion, according to the American Water Works Association (AWWA).  Capital investment needs for U.S. waste water and storm water systems are estimated to total $298 billion over the next 20 years according to the ASCE.

Municipal water systems are typically departments of the city government and are controlled by the mayor and the city council.  And like public water companies around the world, it has been very difficult to persuade elected officials to raise water rates to cover the funding gap.  From Margaret Catley-Carlson's perspective, the crossover between elected officials and water and water pricing is one of the universals around the world.  She told a story of how even in the great drought of Spain two summers ago Spain was still charging less for water than any of the other European countries.  She talked to people in Spain and they understood that paying more for water was part of the solution, but it was not possible to get elected officials to make the decision to increase water rates.

Utilities that have surmounted the funding gap

At the Canadian Water Network conference we heard about two examples of municipally water companies, both of which are unique  in their own ways, but both have been able to get the needed funding to fill the gap in infrastructure spending.  These companies which may be pointing the way to the future of water delivery. 

The first,  EPCOR Utilities based in Edmonton, Alberta, is run like a private corporation, but is wholly owned by a municipality for which it is a source of revenue, estimated at about $1.5 billion since it was formed.

The second, Greater Victoria Water Services, is structured like a municipal public water company, but because it is a regional water utility it has a board that has an arms length relationship to its constituency.

One important thing that both of them have in common is that they were both able to successfully structure solutions to problems facing their water utility as a result of a major crisis, a financial crisis in the case of EPCOR and a major water main break in the case of Greater Victoria Water Services.

EPCOR Utilities

Don Lowry, past President and CEO of EPCOR Utilities, is a strong believer that the only way to have a functioning water distribution system is that everyone must pay for water.  In his view water is not an entitlement,   it's a hard earned right.  You have to be diligent and work 24x7 on continuously earning that right to have access to water and a sustained, continuous supply of water. 

EPCOR was formed in a crisis.  The city was faced with a significant financial crises during the Canada's National Energy Program.  Facing massive layoffs and job losses, the water system had no choice.  It had to carry its own weight, recover its own costs and start to be a growth engine for the city as opposed to a burden for the city.  As a result EPCOR Utilities is 100% owned by the City of Edmonton, but it is operated completely as aa commercial enterprise.  EPCOR has become the water and waste water provider for a large footprint  of water and waste water utilities in Western Canada. They are also the largest private water supplier in the states of Arizona and New Mexico in the U.S. 

The way that EPCOR is setup is that it is 100% owned by the City but has an independent board of directors under a universal shareholders' agreement that puts it on a standalone basis.   It must finance its operation completely from earnings of the business or what it raises on the capital markets.  It has a BBB+ credit rating.  EPCOR pays its shareholder a dividend.  Since 1998 the dividend was $67 million annually, today it is $144 million.  The company has returned back to the shareholder over $1.5 billion in cash, taxes, fees and dividends and this is growing.  EPCOR pays tax in every jurisdiction in which it does business and it competes in the capital markets.  Most importantly EPCOR fully costs its water, there are no subsidies.  They are able to compete and EPCOR's water utilities are thriving and growing..

The three key challenges EPCOR sees facing water today is the scarcity of it, the deterioration of the infrastructure and and most importantly the fragmented approach that we in North America take to its operation, regulation and financing.
 
Scarcity

The increasing scarcity of water is an absolute growing concern.  In southern Alberta it has been fully allocated.   There can be no further development unless there is trading of water rights or the diversion of water from one use to another.  EPCOR is working to make better utilization of the water that they use.  For example, they are capturing the water that we would have previously diverted back into the river after processing it through their waste water treatment plant and are piping 15 million liters per day to a Suncor refienry ro make petrochemical products.  But in the long run the scarcity of water is going to lead to longer pipes, bigger pumps, more chemicals,  more competition for water, higher costs and Don believes that the current service delivery model is not going to make it.

Aging infrastructure

North American infrastructure is getting older.  Most of the infrastructure that was put in Canada and most in the US was put in major chunks.  A lot of it in the 60s and 70s and it is old and deteriorated and needs to be replaced.   On top of that you need to layer the growth requirements and the replacement requirements.  In Canada alone it is estimated to amount to about $80 billion for replacement and to plan for the growth of infrastructure, pumps, pipes, valves, plants, and meters necessary to deliver that essential service.  In the US it's estimated to be over a trillion dollars.  In Edmonton EPCOR has a major program underway to replace the cast iron pipe that was put in shortly after the Second World War, that  has deteriorated dreadfully, causing leaks and water main breaks.  As a result they are starting to see results, fewer leaks and less breakage.  This is an example of a program EPCOR expects that that other municipalities are gong to have start to aggressively implement to replace ageing infrastructure.  \

Fragmentation

North America is backward in terms of how we approach the treatment, the delivery, and the recycling of water across Canada and US in terms of the shear number of companies.  There are over 54 000 water companies in the US, ranging from the local water company in a town of 10 people up to millions of people in New York,  However, 8% of those companies serve 81 % of the entire population.  The other 92% serve 19% of the population.  The story is not much different in Alberta.  Of the over 530 water companies in Alberta, the top 10 water utilities serve 76 % of the population, the other 520 or so  serve 24% of the population.  Don's point is that with such a fragmented structure we can't get the economies of scale that we see in other industries in our society, such as airlines, telephony, wireless, natural gas, and electricity.  The present fragmented state of the industry it brings its own stream of inefficiencies and concerns such as how do you adequately train people in very small water utilities and how do you fund all these water utilities.  Even more critically how do you ensure that what happened in Walkerton and North Battleford (well publicized outbreaks of water borne disease outbreaks in small communities) don't get repeated.

According to Don, the Government of Alberta has taken a first step in this direction and has embarked on a conversation with the regions within the province to look at the watersheds and consider the creation of utilities similar to EPCOR that could achieve an economy of scale for all of the water needs for each region.  This could be a first step toward shrinking the over 530 existing water companies down to perhaps 10 or 12 to begin to achieve some efficiencies of scale.

Water Services, Capital Region District, Greater Victoria, British Columbia

Jack Hull, General Manager of Water Services of the Capital Region District in Victoria, British Columbia, gave an overview of some of the successes Greater Victoria Water Services have had in implementing some of the measures that have been implemented by EPCOR. 

First of all he said categorically that there is no infrastructure deficit in the Greater Victoria water supply system.  It was eliminated over a 15 year period.  Like a lot of municipalities the Greater Victoria Water started off in the early 90s with underinvestment.  “If it breaks, we'll fix it,  but we won't be proactive.”  Greater Victoria Water put a strategic plan in place to address water supply, water quality, and infrastructure and pricing issues.  They moved to a utility model for pricing, which is based on the asset base.   Over the next 15 years with over $200 million in investment Greater Victoria Water eliminated its infrastructure deficit and addressed its water quality and quantity issues. 

All the decision making was ultimately done by a group of politicians who recognized that if they didn't invest,  there was going to be a major negative impact on the quality of life within the capital region.

Greater Victoria Water also runs the distribution systems that serves about 60 000 people in five neighbouring  municipalities.  Similarly to EPCOR's cast iron pipes problem in Edmonton, it was necessary to replace asbestos cement pipes.  Greater Victoria Water recommended a 10 year program to address this issue, but the politicians came back and said no we want to do it in five years and they put the money behind it to do it in five years.

Greater Victoria Water has been able to successfully promote water conservation.  A utility model obviously is able to generate revenue.  According to Jack every cent of that revenue goes back into improving the infrastructure and eliminating the deficit.  During the same period, particularly in the last 10 years, Greater Victoria experienced 14 % growth in population, but water demand dropped by 8% during that same period.  In 2001 Greater Victoria Water had a ban on outdoor water use for 9 months of the year.  Last year normal water use was down to that level without anything extraordinary in terms of water restrictions.  

From Jack's perspective, given the right group of politicians and the right group of managers you can achieve much of what EPCOR has done without going to the fully corporatized model.

Jack said that he fully supports what EPCOR has done with small systems because that is where the real issue is.  Small systems do not have the resources to deal with some of these issues and that is where an organization like EPCOR can  provide significant assistance, which a regional government  can't do because of the legislation that controls regional government.
 
With respect to governance the Greater Victoria Water board is one step away from the electorate because they are members of local councils who are appointed to the regional board.  They are elected officials at the local level, but appointed to the regional board and appointed to the water commission so they are one step away from being directly elected to the board.

The other thing that contributed to this achievement was a crisis.  On New Year's Eve in 1992 Victoria had a major water main break.  A 36" water main burst and caused a lot of damage.  So when Greater Victoria Water reviewed its budget that year they had lots of photos of all the damage caused by the water main break.  The fact that it took 18 hours to shut the water off because the valves hadn't been serviced probably since 1915 when they were installed.  There were photos of air release valves that couldn't be recognized as valves, because they were just  clumps of rust.  As a result when at the budget review Water Services asked for some money to do a study on infrastructure, Jack related that this was one of two times in the last 20 years when politicians asked him if he was sure he had enough money in his budget, didn't he need some more ?

Conclusions

The most important conclusion I take from this is that water needs to be fully costed from the water source to treatment and reinjection if we are going to have sustainable water systems that work.  The second is that there are several ways to skin the cat but setting up a governance structure that allows the water utility to be run an arm's length from the elected politicians seems to be key. Thirdly, small water systems are facing a crisis, because it is going to be increasingly difficult and expensive for them to access the resources they need and it may be regional companies based on the EPCOR model that can resolve this problem.  And the moral of the story is don't waste a good crisis.