The 7 Megatrends that Will Affect Tomorrow’s Infrastructure

by senior futurist Richard Worzel, C.F.A.

I was commissioned by the Residential and Civil Construction Alliance of Ontario to produce a report by September, 2015 on the future infrastructure needs of the Province of Ontario, Canada. The conclusions of my report really apply to the United States as well as Canada, and, indeed, to most of the world’s developed countries.

Because of the length of this report, I’ve divided it in half. You can find the second half here.


Definition

Infrastructure is the set of systems that supports our way of life, and includes things like roads, transit, water and sewer systems, communications, electric power, garbage disposal, health care, housing, the penal system, and education.

It is a subject totally lacking in sex appeal, and absolutely necessary to our lives.

Conclusions

In preparing this report, I came to three primary conclusions about the future of infrastructure investments in Ontario:

  1. We will have to address the massive underinvestment of the past several decades, as well as prepare for the growing needs of Ontario’s future. If we do otherwise, the costs to society will be higher than the costs of investment. We will pay either way, but we will be better off if we make the investments needed.There are always people who will take a populist stand, arguing against raising taxes for any purpose. They are either ignorant of the costs of inadequate infrastructure, or deliberately advocating something they know to be harmful in order to gain a selfish, political advantage.
    Some argue that governments cannot be trusted to use tax funds effectively. This is a reasonable argument, and, with the scarcity of funds that I expect we will experience in future, it is vital that we make good use of any funds earmarked for infrastructure. Yet, while finding ways of making sure results are measurable and transparent, and that those responsible are accountable, is entirely appropriate, refusing to allocate money for infrastructure investment is simple-minded, selfish, and, ultimately, self-defeating.
  2. We will be stretched to find the money to make the investments that we must make. In particular, demographics, notably the aging of the Boomers and the cost of their health care needs, threatens the financial solvency of Canada’s government-sponsored health care system. Climate change will make us spend money in places we don’t wish to. The global economy will force us to be lean and effective, giving us no cushion for bad planning, or careless investing. And the rapidly mutating job market threatens the underpinnings of our economy, as well as the very fabric of our society.
    We will have to plan carefully, allocate funds on the basis of real, measurable needs as opposed to political expediency, and use means of ensuring that the taxpayer is not left on the hook for sloppy implementation, or unreasonable cost overruns.
  3. The infrastructure systems that we have used in the past may be too expensive to use in future. Accordingly, we must seek new solutions to infrastructure needs when such solutions can be shown to be more cost-effective. In particular, we need to look at new possibilities being brought forth by ever-accelerating technologies for ways to do things more effectively, and with less money.

The raw necessity of investing heavily in infrastructure should drive us to find better ways of doing things in a time when resources will be scarce. In a very real sense, we will invent our future. We should work hard at doing it well.


 

Why and How We Need to Make Major Infrastructure Investments

As the human race has changed, so have the systems we need for our societies and ways of life. We no longer need caves, or horse stables in every town, or extensive canal systems. Our infrastructure needs have changed, and continue to change. And now, with the light-speed acceleration of technology, the changes coming to the Earth’s climate, and the unprecedented aging of society, we and our governments need to respond more quickly, and to think differently about infrastructure, than we have in the past.

As well, we have seriously neglected investing in infrastructure in the past, and will be forced to make up for it, whether we like it or not. According to an article contributed to the Globe & Mail in December of 2014, Canada has an infrastructure deficit of between $350- and $400 billion.[1]

Deciding what infrastructure to invest in, when to make such investments, and how much to invest are all difficult decisions, but they all have one common element which can simplify such decisions: they can all be rendered in financial terms. Making an infrastructure investment has a cost associated with it, plus an expected rate of return to society. (Or alternatively, not making such an investment imposes a cost on society, which can also be measured or estimated.)

Where the rate of return is greater than the cost, the investment should either be made, or the government involved should provide a clear explanation why it is preferable to pay the higher cost of not making the investment. In the present, low interest rate environment, the cost of investing is probably about as low as it is likely to get, which means we should be aggressively pursuing infrastructure investments right now.

The likely direction of interest rates in the future, and the steadily rising costs of delaying infrastructure investments clearly indicate that now is a better time to make such investments than later.

But what else about the future will affect infrastructure decisions?


 

The 7 Megatrends that Will Affect Infrastructure Planning

With the changing needs for, and forms of, infrastructure in mind, I would identify the following megatrends that will affect infrastructure investing in Ontario’s future:

  • Demographics – An aging population has many implications, some of which are daunting.
  • Technology – We’ll be able to substitute technology for earlier, more expensive solutions, as well as do things that were never possible in the past.
  • Climate change & environmental degradation – Mother Nature’s bills always get paid. We must plan accordingly.
  • The global economy – The continuing emergence of a unified, world-wide economy has major implications for Ontario, especially in education.
  • Human longevity & health management – While related to demographics, this factor has major implications that go much further.
  • The widening tears in the fabric of society – The rising costs of the penal system, plus the rise of homelessness, unemployment, and underemployment, have significant implications for Ontario.
  • The rapidly mutating job market – Lifetime employment is long gone, and the future is ever more uncertain, with major implications for society, the economy, and infrastructure funding.

Let’s consider each of these seven megatrends, and their effects.


 

Demographics

In many ways, demographics is destiny. It is not the only force that drives change in our future, but it is the central one. After all, you can’t have an economy without people.

There are many implications of demographics that will affect the province of Ontario, and its needs for infrastructure. Let’s start with a demographic profile.

The first graph, below, shows the current population of Ontario, distributed by age. The big hump highlighted is (by my definition) the Baby Boom, who are currently between ages 48 and 68.

Ontario 2015

The second graph shows how Ontario population age groups will either increase or decrease in size over the next 10 years. (The groups shown are 5-year age groups: 0-4 years old, 5-9 years, 10-14, and so on.) Hence, the 70 to 74 year old group will increase by roughly 265,000 between 2015 and 2025, for instance.

Ontario 2015:25:2

What this means is that while several groups will increase in size, such as young children, and 30-45 year olds, the biggest change is going to be the Baby Boomers moving towards retirement age.

These changes have some clear implications for infrastructure:

  • We will need more schools (but, as I’ll point out later, most of these needs will be near the major urban centres).
  • Millennials will be moving into the family formation stage of their lives, which means they will need all of the community infrastructure appropriate to young families, including playgrounds, pediatric care, and the ability to get to and from work, which can be some combination of roads, public transit, and bike trails. At the same time, most of them probably won’t be able to afford homes in the downtown areas of the major urban centres, particularly Toronto, and so will move farther and farther into the suburbs.
  • The number of retired and elderly is going to grow faster than at any time in history, which means the needs of the elderly are going to overwhelm virtually all other infrastructure needs. This is due to three overlapping trends: greater life expectancy; the growing number of “oldest elderly”, being people 80 and up; and the aging of the Boomers. Combined, this makes people 65 and up the fastest growing group in the population. And they are politically potent, more or less getting anything they vote for, and defeating anything they vote against.
  • Where the Boomers choose to retire is going to have a huge impact on communities, transportation, and social services. Some will stay in their family homes for a time, usually in urban centres. Some will sell their family homes for something smaller in other parts of those same urban centres. And some will move to smaller communities, partly in order to harvest the funds tied up in their houses. What we don’t know, at this time, is how many Boomers will make which choices.
  • The costs of health care for the Boomers are going to dominate government finances, eating into funds for all other government activities. In terms of infrastructure, it means that the Government of Ontario is going to have to choose wisely which infrastructure it chooses to underwrite, find cost-effective ways of encouraging others to build infrastructure without government money, but without costing Ontario residents unreasonable amounts of money (think of highway 407). , outcome-driven planning is going to be critical.
  • What is not shown, but is implicit in the graphs above is immigration. Among large, developed countries, Canada has one of the highest immigration rates and one of the highest proportions of first generation immigrants. As immigrants overwhelmingly tend to settle in the major urban centres, this means that a disproportionate amount of Ontario’s population growth will be in and around the major urban centres, especially in the Golden Horseshoe. This implies continued sprawl, and problems with affordable housing, not only for immigrants, but also people born in Canada who are in the household formation stage of their lives.
  • Contrariwise, Aboriginal peoples have the fastest population growth among non-immigrant Canadians. As such, they should represent a steadily increasing percentage of employed citizens in Ontario society. However, that can only happen if the health, education, and living conditions of First Nations, Inuit, and Métis peoples are significantly improved. Moreover, the recent Truth and Reconciliation Commission of Canada report clearly shows a social and cultural imperative to make good on generations of mistreatment and neglect by Ontario society and government, along with the other provinces, territories, and the government of Canada. Consequently, projects related to the infrastructure needs of such groups should be placed higher on the political agenda than they would otherwise be. It’s time, and past time, that Aboriginal needs were given higher, rather than lower, priorities.

Another important aspect of demographics is where people will want to live. For more than a century, people have been leaving the rural areas of the world and moving into the urban centres. This megatrend continues unabated, and, if anything, has accelerated here because of Canada’s immigration policies.

All of this implies that there will be more demand for infrastructure in Ontario’s cities – especially in the Greater Toronto and Hamilton area (GTHA) – and less in the exurban and rural areas of the province. This is evident from the following census maps produced by Statistics Canada

Change in Population between 2001 & 2006 Census Tallies

2006 Census map

 

Change in Population between 2006 and 2011 Census Tallies

2011 census map

This movement away from exurban areas could leave a lot of towns and smaller municipalities unhappy with the way the Government of Ontario allocates infrastructure funding, especially as such funding becomes scarce. This may, if not provided for, lead to ineffective choices being made for projects that have a much higher political value than real value to the citizens of Ontario.

Consequently, an objective means of setting infrastructure investment priorities will be needed to identify the most important – as opposed to the most politically attractive – infrastructure investments. An independent assessment of the rate of return vs. the cost of each project would offer such an objective measure.

The continuing in-migration into the cities will also create steadily worsening bottlenecks. The 400-level highways, and especially those going into the major cities, are already heavily clogged with trucks bringing all the goods and products needed to support city dwellers. Train and pipeline transport, especially of hazardous substances, must grow to support urban populations, but is being widely opposed because it is perceived as being too lightly regulated, and therefore dangerous.

Urban populations are going to continue to grow, and in areas already heavily developed. As a result, the volume of truck, rail, and pipeline transport heading into, and supporting the cities will also swell. The increase in truck traffic, added to the volume of commuters heading into work, is going to make gridlock and bottlenecks worse, and, in some places, impossible. This will be particularly evident – and difficult – in the GTA, where population is projected to grow by almost 3 million people to 9.4 million by 2041.[2]

More roads are probably not the answer as there is often no room for additional, or expanded, roads. Different, often unpopular, choices will be necessary, such as congestion tolling, which is spreading among major urban centres around the world, and has been shown to work. And drivers must be given workable alternatives to encourage them to leave their cars. Here we should draw on the experiences of congested, cramped, densely populated parts of Europe, where rapid transit and bike lanes are created as parallel infrastructure systems in order to allow the largest number of people to move with the smallest possible footprint.

One partial solution will be to encourage the development and use of telecommuting by GTA businesses. As wireless and high speed Internet technologies continue to develop, and as online conferencing tools become more sophisticated, this may allow Area businesses to grow without requiring as frequent physical commuting.

Alternatively, planners could find ways of encouraging a greater decentralization of activity, spreading the commuting load around the major centres rather than continuing to find ways to funnel more people into relatively concentrated areas. This might mean promoting UK-style “new towns” supported by low-cost, high-speed transport, and offering more affordable housing outside of core areas. The intra-regional transit plans in place in the GTHA are an important step in that direction, but more would need to be done.

What will almost certainly break down in the next 10 years and beyond are the attempts to shoehorn ever more workers into the GTA’s downtown core, which has already created costly and exasperating gridlock. If that pattern is unworkable now, with approximately 6 million people in the GTA, it will be impossible as the region exceeds 9 million. New solutions have to be found through a variety of means.


 

Technology

Technology will be both a blessing and a curse for infrastructure planners. On the one hand, it will offer the possibility of new, more cost-effective solutions. Among these might be:

  • Remote, smart sensors may mean that visits by seniors (and others) to doctors or hospitals, or visits by nurses to those needing health care in the home, may be significantly reduced. Indeed, I would contend that future advances in health care technology should be seriously studied as an alternative to new hospitals.
  • Autonomous vehicles (self-driving cars & trucks) may – over time – significantly reduce the number of additional roads required to support population growth in the urban centres. Moreover, self-driving trucks may become more widely used late at night, arriving to make deliveries before commuters seek the roads.
    Driveless cars may also be much more efficient at moving through traffic. They could be able to consult with other cars, and a region’s traffic computer about the best route from A to B, diffusing congestion, and lowering the amount of time – and hence number of cars – on the road at any given time.
    Autonomous vehicles may also significantly lower traffic collisions, injuries, and fatalities. This would lower the number of emergency vehicles and crews required, and reduce medical expenditures. And such vehicles may also significantly reduce traffic violations – and revenues.
    But I keep saying “may” and “would” rather than “will” because AVs require a major changeover, both in the way we do things, and in the infrastructure necessary to support these new ways. As well, the mix of AVs and human-driven cars on the highways will significantly affect how much savings there will be. A roadway completely devoted to self-driving cars will have a substantially greater capacity than one that has 10% human-driven cars, because those driven by people will require all vehicles to allow more space and affect the rates of speed and acceleration. A complete changeover is unlikely to happen quickly.
  • As mentioned above, telecommunications continues to grow and expand, and its importance will grow apace. Indeed, it is no longer a frill for early adopters, but is now an absolute necessity for almost everyone engaged in the economy, as well as for most people in society.To date, Internet access has been provided almost exclusively by private sector suppliers. However, the importance of widespread, fast Internet service is too important to be left only to a private sector oligopoly. They will almost certainly remain the backbone of Internet service, but other alternatives are emerging that should be considered, and which may provide a spur to private sector offerings.
    Chattanooga, Tennessee created an Internet infrastructure through their municipal electric power utility almost as an afterthought in the construction of a smart power grid. “The Gig”, as it’s called, offers residents and businesses Internet speeds of 1 Gigabyte per second, or about 50 times faster than the U.S. national average. As a result, “Chattanooga has gone from close to zero venture capital in 2009 to more than five organized funds with investable capital over $50m in 2014 – not bad for a city of 171,000 people.”[3] And, predictably, cable and telecom Internet service providers are petitioning the U.S. Federal Communications Commission to block such developments.
    Elected officials in Ontario’s exurban areas are anxious to see broadband extended to their communities. “Building broadband is as important as paving roads and building bridges” one leader was cited as saying.[4] And the $170 million Eastern Ontario Warden’s 4G broadband initiative, which is a P3 project involving federal, provincial, and local governments, is one example of how such services might evolve.Fast Internet service can provide important tools in a wide variety of applications, and many sectors of the economy. Telecommuting has been mentioned. Distance education will be discussed below. Telehealth is a rapidly expanding field that can help stretch scarce resources in the health care system. Moreover, new applications always emerge from more powerful communications tools that can add significant value to Ontario’s economy, and make it more attractive as a place to do business – just as has happened in Chattanooga.
  • Computer monitoring systems, notably Fog computing[5], may allow us to identify pipeline breaks almost immediately, and dispatch crews to fix them before they cause significant damage. This could not only allow leaks in oil pipelines to be identified early, but also in water, storm water, and sewage pipes. At the moment, an unknown, but significant, percentage of the water piped to Ontario residents is lost due to leaking underground pipes.
  • Three-dimensional printing[6] is a commonly used phrase to describe a range of different technologies that will be as revolutionary in the real world as the Internet is in the virtual world. These technologies will have some obvious effects, such as changing some parts of the manufacturing industries from mass production to mass customization, or eliminating some mass production in distant locations in favour of local production. But it will also have more subtle effects, such as changing distribution industries, like shipping, trucking, rail transport, and last-mile delivery services. Hence, the plans for an object might be bought for what amounts to a royalty payment to the originator, but produced locally, either at home, or at a local store like a Canadian Tire or Home Depot, rather than shipping it from, say, China to Ottawa.
    But 3D printing has even broader implications, notably in printing organic materials. It may, for instance, be possible to print food directly from constituent compounds, leading to the development of steaks without steers, or food without farms. This has longer-term implications for food transportation, safety, and nutrition that will – over time – affect public services.
    Of course, we don’t know yet whether producing food without farms is financially attractive; it’s too early to tell. And there is also the consumer acceptance issue: Will consumers buy food that is identical in almost all measurable ways to farm-grown food – or will such food be thought of as undesirable, like GMO ? Ironically, printed foods may have unexpected allies: PETA, People for the Ethical Treatment of Animals, believes that meat produced in this way is ethically preferable to raising steers for slaughter.
  • In the biosciences, we are now developing the ability to grow replacement organs, like hearts, lungs, kidneys, livers, and so on, from a recipient’s own stem cells. We are also developing the knowledge that will gradually enable us to “turn off” cancers and some chronic diseases, and lock out infectious diseases. Such developments will further extend life expectancies, with significant consequences for both individuals and society. These developments will discussed in more detail later.
  • Alternative energy sources combined with steadily improving energy storage (“battery”) technology will create significant challenges to traditional electric power generation and grids, and may destroy their economic feasibility.[7] Rooftop solar power, in particular, threatens to be a game changer, as the price per kilowatt of capacity is dropping at speeds approaching those of Moore’s Law. In places, rooftop solar prices per kilowatt-hour are already lower than conventional electricity generation, even without including transmission or other costs.These changes threaten to disrupt the business plan of Ontario Power Generation within the next five years, before smoothly functioning alternatives are widely in place. This threatens to create power disruptions.
    OPG, as well as other electric power utilities, should take this developing trend seriously, and find ways to turn it to advantage. If they try to ignore it or block it, it could well destroy them as time and economics are on the side of the disruptive technologies.

So, it’s clear that the potential gains in using alternatives to today’s infrastructure systems will be remarkable.

However, cost is also a major issue, and for two distinct reasons. First, new technologies always start out being expensive before they come down in price, sometimes at startling speeds. This actually is solvable as long as planners are willing to wait for a technology to prove itself, and to become affordable. There aren’t usually a lot of prizes for being the first adopter of a new technology.

The second, and more difficult, cost problem is the cost of switching from the techniques we use now to the new techniques that are emerging. Hence, while autonomous vehicles may lead to massive cost savings over the long run, they would require hefty up-front investments for them to achieve those savings.

There will be other ripple effects relating to technology that I’ll deal with later – notably its effects on labour markets.

To be continued…

© Copyright, IF Research, September 2015.


 

Footnotes

[1] Swedlove, Frank, “Government alone can’t fix Canada’s infrastructure deficit”, Globe & Mail, 5 Dec. 2014, http://www.theglobeandmail.com/globe-debate/government-alone-cant-fix-canadas-infrastructure-deficit/article21966661/

[2] Ontario Ministry of Finance website, “Ontario Population Projections”, http://www.fin.gov.on.ca/en/economy/demographics/projections/

[3] Rushe, Dominic, The Guardian website, 30 Aug. 2014, http://www.theguardian.com/world/2014/aug/30/chattanooga-gig-high-speed-internet-tech-boom

[4] Van Brenk, London Free Press, 2 Feb. 2015, http://www.standard-freeholder.com/2015/02/02/rural-ontario-is-taking-speedy-internet-service-into-its-own-hands

[5]Worzel, Richard, FutureSearch blog post, “Fog: What’s Next in Computing”, http://www.futuresearch.com/futureblog/2015/05/19/fog-whats-next-in-computing/

[6] Worzel, Kit, FutureSearch blog post, “Printing the Future: The Implications of 3D Printing”, http://www.futuresearch.com/futureblog/2014/11/03/printing-the-future-the-implications-of-3d-printing/

[7] Worzel, Richard, FutureSearch blog post, “Deadly Shock: The Coming Devastation of Power Utilities”, http://www.futuresearch.com/futureblog/2014/08/31/deadly-shock-the-coming-devastation-of-power-utilities/

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