Disruptive technology to alter infra business models

Fast-paced innovation could make projects obsolete even before they are complete, a KPMG paper argues.

Technological breakthroughs should be embedded in infrastructure planning before they make projects obsolete, suggests a paper jointly produced by Chartered Accountants Australia and New Zealand (CAANZ) and the global infrastructure practice of KPMG.

The report points out that technological changes threaten to disrupt the business and regulatory models of entire sectors, most evidently water and power. For example, a solar energy storage facility that fully integrates into the grid – if proven scalable – could move the goal posts for the rest of a country's electricity generation and transmission infrastructure. 

“Disruptive technology innovation in infrastructure has the potential to alter both demand and supply dynamics. It has the potential to drive efficiencies and in some cases make existing infrastructure obsolete,” the paper said.

As the cost of installing solar panels drops, consumers may also be able to use their own solar facilities to charge battery packs and go completely off-grid.

Technological advances will alter the balance between supply and demand for energy, the nature of related services and costs, as well as cause monopoly service providers to re-access their business models, the report noted.

Driverless cars on the road could create another challenge. According to Google, while the average car sits idle 96 percent of the time, the adoption of shared, self-driving taxis could boost utilisation rates to more than 75 percent. 

Should the technology develop, a far lower number of vehicles would thus be needed. This would impact the demand for constantly increasing capacity on specific routes, making some road projects obsolete.  

Lee White, chief executive of CAANZ, pointed out that the possibility of technological change would also make valuing assets much more difficult. 

Taking hospitals as an example, he argued that the generalisation of home diagnosis could make it difficult to predict the number of patients visiting healthcare facilities. 

“In the future, people may be able to carry out medical diagnosis with the right equipment at their homes. They don’t have to visit hospitals anymore,” he said in an interview with Infrastructure Investor

As the paper noted, “We are at risk of planning and building infrastructure that is outdated before it is even operational.”

New technologies may also disrupt regulatory paradigms.

“Technology constructs the future while the regulatory framework is based on the past,” explained White. “The regulations for infrastructure services have not been designed to address, either planned or unexpected, service or infrastructure obsolescence.”

White believes it will be crucial for governments to take the lead by providing regulatory frameworks that encourage businesses to upgrade and redevelop their assets while also reviewing business models.