Basement Tech and the Utility Death Spiral

In the mid 1990s there was an atmosphere of change in the water and sewerage sector in Sweden. EU and its water framework, debates on nitrogen removal, Local Agenda 21, urine diverting toilets and national conferences for ”closing the loop” made a huge impression on a freshly baked engineer like me. Twenty years down the road, it might look like not much changed. We have kept on expanding our city-wide infrastructures and even making them regional, with trunk sewers and bulk water supply consistently extending their reach. Expansion was largely driven by economies of scale. Larger utilities can produce more at a lower marginal cost, and become more attractive employers for scarce engineers and technicians.  Interestingly, as the systems have grown, they have also become integrated with other infrastructures, notably energy. And in that might lie a seed for disruptive change; perhaps a revolution, that may surprise us all.

Basement under the Live-In Lab at KTH

Utilities like Stockholm Water and Waste company, or Käppala WWTP, today captures the energy in the sewage flows. Heat is transferred onto the district heating grid, and organic matter is converted to biogas. But property owners are beginning to see the value in the energy and wants to use it themselves, to lower their energy bills. After all, why give away the energy for free, and then buy it back from the energy company? Two research projects at KTH are currently investigating wastewater heat reclamation. Many more initiatives seem to be coming up. At the Live-In Lab at KTH, a demo project on energy reclaiming, combined with on-property treatment and recirculation of bathroom water, is under preparation by the company Graytech. The technology, installed in the basement of new student flats, will be tested and evaluated through real-time monitoring. Similar initiatives are being pursued around the country, like the new residential development H+ in Helsingborg and the HSB Living Lab in Gothenburg.

What does this do to the large systems? Not much, at first. But as more or the value is being retained at the bottom of the pyramid – literally in the basement –  less accumulates at the top. There will be less heat to sell for the utility. If the energy saving devices are combined with water saving technology, as in KTH Live-In Lab, there will also be less sales for the water utility. Big deal!

Water is still cheap in most parts of Sweden and few consumers actually bother about the water bill. But customers care about health and reliability, and about sustainability. So they are willing to pay more for services that are not wasting precious resources, or that are percieved to be safer or more reliable. Successful providers must develop their ”value proposition” – as economists call it – to fit with the value preference of customers. This was one of the reasons why the British national water regulator OFWAT opened up for competition of water services within monopolised networks earlier this year. Exactly like what happened in electricity distribution in Sweden earlier !

The UK is different from Sweden, and maybe we will not see a similar development in water. But with water scarcity becoming a real threat in several parts of Sweden, and with threats of emerging pollutants looming, more and more customers might find local circular solutions a real option, and opt out of the large system. In energy research, there is a term for this. The American solar power researcher Wes Herche talks about this in a podcast, as the Utility Death Spiral. More and more customers are turning to increased energy self-reliance through cheaper PV panels. They remain connected to the grid but use less, mainly as backup. They become ”grid-sippers”. This leaves the utilities with fewer customers to carry the huge costs of maintaining the large-scale grid. This further alters the price-performance ratio in favour of small-scale solutions, producing even more grid-sippers. And on it goes, in a downward spiral.

Maybe we are right now seeing the beginning of a bigger change in water services,  driven from below (customers) and from the side (energy). While an imminent Utility Death is unlikely, we should prepare for greater flexibility and less hegemony. Interestingly, small-scale solutions for water and sanitation is seeing a boost in low-income regions, e.g Uganda, Kenya, or India, where we see heterogeneous infrastructure configurations emerging. There is fewer established monopolies there which creates greater flexibility and generates new viable business models. There is probably a lot to learn from these regions in the coming years. But I am saving that for another blogpost.

David Nilsson,

Historian and Engineer, Director of WaterCentre@KTH

 

4 thoughts on “Basement Tech and the Utility Death Spiral”

  1. Interesting reflections!
    I actually think we need to just Re-think in many cases and for sure be much more flexibel in order to find new solutions in different areas.

  2. Really interesting post. Your comments on customers becoming “grid-sippers” may rise several reflections on me as an economists. In some countries like Spain, the government reaction to the fact that customers “remain connected to the grid but use less, mainly as backup” is to rise an extra charge. That is the case of colloquially called the Spanish “levy to the sun” for those households producing electricity from PV panels but keeping their connection to the grid. So they benefit from using the grid for selling electricity surpluses and also using the grid for backup support. Could we find in the future a similar thing for water services? I don’t think so.

  3. Dear Miguel, that is a great comment. If the grid-sippers use the infrastructure for selling their excess energy, that’s a fair system because then the grid owner and the local producer have a symbiotic business relation. They share the benefits, therefore the costs. But the water consumers who are investing in water-saving/recycling are remaining with the connection to the grid as a backup, not for distributing a service. So no; the “levy to the sun” arrangement would just be a mark-up, an increased overhead capital charge on the users. Call it a “safety levy”.
    BUT. One thing that has been stirring in my mind is that you could theoretically see a reverse situation in the future in water scarce regions or with highly variable rainfall, were home owners use the gravity water system to FEED the grid with water. We already collect rainfall and groundwater discharge baseflows through our gutters and down into the main drainage system. Why could not all the rooftops work as collectors in a giant urban watershed management infrastructure? So instead of the utility only selling water, it could be buying water from hundreds of thousands of home owners. The water that falls on my property is my property. Only when it enters the ground and the streams does it become part of the public (state) domain. This is a type of reverse engineering that could become reality in some places within a generation. Lets write up a great project proposal on this!

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