Feasibility of an Infrastructure

train infra

A huge part of infrastructure development work upfront is the feasibility study. What exactly goes into a full feasibility study and why is it so important? This article aims to explain that simply and more accessibly to people outside the industry. We’ll focus on the feasibility study rather than any documentation on projects generated prior to that (sometimes called pre-Feasibility Study – which could be considered a ‘lite’ version).

The feasibility study is like a professional evaluation of a business plan. For any infrastructure project, this is a comprehensive look into all the practical, legal, technical and commercial aspects of the project. Often, it will include social and environmental dimensions of the project in order to ensure that the lenders (ie. financial institutions providing debt to the project) is satisfied. In markets where there is significant social and environmental activism, the lenders are also on the receiving end of hate-mail, harassment and boycotts. Major project finance lenders internationally have therefore got together to be involved in The Equator Principles – a risk management framework that banks sign up to abide in assessing the environment, social risks involved in projects.

What then constitutes environment and social risks?

Infrastructure projects are physical, and will almost always require clearing of a piece of land to allow construction to take place. This would mean either resettling villages, people, farms, or redeveloping urban spaces, or even clearing swathe of rainforest. In cases of large hydropower dams, it will involve spaces not only for construction of the dam but also planned floodplains which can include multiple villages, broad swathe of forests. All of these impacts on human lives, biodiversity, alters natural landscapes.

Of course, the banks, developers, and builders care about people and rainforests. But beyond that, they are concerned about being harassed, haunted by NGOs, activist organisations trying to run them down reputationally for having been involved in projects that destroyed natural habitats for endangered species, upsetting livelihoods. These forms the environment and social risks; and the feasibility study tend to cover aspects of the social and environmental impact assessment, as well as to propose means to mitigate. Through that, the developers of the project also forms an idea how much resources they might need to expend to support resettlement, to help rebuild livelihoods destroyed.

How about practical and technical risks?

The feasibility study also goes into the technical and practical aspects of the project, including studying the possible technologies to deploy, the actual site conditions: whether the land can accommodate the infrastructure, whether there is actually sufficient demand for that infrastructure, and if the infrastructure has everything needed to service that demand – this could take the form of water supply pipe network, or an inter-connector to the national grid for a power plant.

The study needs to ensure that the proposed technical solution is able to deal with the problem statement at hand. For example, if we are using incineration for the waste, then we have to ensure that the waste stream is not too moist. If the waste is wet, the incineration system may not perform properly, which leads to potential technical breakdowns or stoppage.

And not forgetting the legal and commercial risks?

At the end of the day, the project will have to comply with the law of the land, and often, there will be a lot of permitting, licensing, government approvals that are needed for various components of the project. The feasibility study will investigate all of these and the developers will also do their best to make sure the requisite approvals and permits are obtain in advanced even often in parallel with the feasibility study just to make sure that the project is progressing in a timely fashion. These documentation will often be studied alongside the feasibility studies by the lenders.

Lots of parameters, and results from various aspects of the feasibility study would be captured into the financial model that is used to work out whether the project is commercially viable – that is, the total revenues/payments expected for the lifetime of the project is able to pay for its total cost over its lifetime. Governments may also undertake an economic cost-benefit analysis, to see if the total economic benefit of the infrastructure project is able to cover the total cost to society (more on this from a previous article I’ve written).

At the end of the day, flagging out, assessing and then measuring these risks enables the developers, lenders, and the government to have a better picture of how viable the project really is, hence its feasibility – from the various risks perspective as well as the resourcing that can be availed to the project. Doing proper feasibility studies can also help government better plan areas surrounding infrastructure, whether it is to mitigate some of the impacts of the infrastructure, but also to see if developments around the infrastructure can help improve its feasibility (eg. a larger substation might have to be built in the area to be able to accommodate a large utility scale solar park which would not have been able to feed power into the national grid).

This article is part of a series I’m working on to make topics in infrastructure a little more accessible to students and people from outside the industry who might want to get involved.

Interesting ideas for green transportation

Well, I dont intend to touch on or cover the conventional ideas people have about green transportation, but I was quite intrigued by two innovations that The Economist introduced in their Technology Quarterly this week. These are places you normally wont hunt when thinking about cost-savings and environmental-friendliness, but it reminds you that there are actually many areas to work on to do your part for the environment, not necessarily on the biggest or most radical of ideas like, say, using electric cars.

The first innovation is a collapsible shipping container. If this catches on, it could overhaul the way ports work, as well as alter how our port at Tanjong Pagar and West Coast look like. Made from “a fibreglass composite”, it is cheaper to produce than the normal steel containers. The weight and space / volume savings would significantly reduce transportation costs (such as the number of ships used to transport the crates, the amount of fossil fuels used for the ships) which would then help reduce the environmental impact of shipping and trade. Treehugger has more details regarding this innovation.

The second innovation focuses on the wheels of vehicles and how they can be made more in more environmentally-friendly means as well as make driving more environmentally-friendly. The material used to make the tyres are now being modified to either increase fuel economy of the vehicles they are mounted on or to make the production of tyres greener.

Small improvements and advancements in terms of technology, but we need all these little contributions to “business as usual” by the private sector if governments are unwilling or unable to carry out the sweeping reforms necessary.

Planned Obsolescence

Buy and throw away?

If you watched The Story of Stuff, which I introduced to this site several weeks back, it introduces several ideas that are perhaps unfamiliar to most laymen or locals for the matter. One such idea is planned obsolescence. Planned obsolescence can be defined as “the process of a product becoming obsolete and/or non-functional after a certain period or amount of use in a way that is planned or designed by the manufacturer”. In other words, when product engineers design your product, they purposely design it such that it will physically or psychologically become obsolete (i.e. useless) after a while.

This sounds like a very disturbing idea, but it makes sense to the producer of the good for the consumer to keep purchasing “updated and improved” goods from them as their old ones break down. Planned obsolescence may even be described as an art; it would take much ingenuity, in fact, to design a product such that it does not break down too obviously as a result of inferior quality but consumers still want to buy this product and its future “upgrades”.

If you wonder how planned obsolescence affects us, this article from The Daily Green is useful in highlighting some occurrences of planned obsolescence in products we use in our daily lives. So have you unintentionally succumbed to this phenomena?

A unique way of conservation

How do you take me out of the equation?

The Green.view column in The Economist has plenty of environmental-themed articles that provoke deeper thought about what we know about the environment and our assumptions about the environment. In their latest article, they present an effective but controversial method of biodiversity conservation: to remove humans “from the equation”.

The conventional thing to do is to “fence off large areas of parkland” to create nature reserves that, without much disturbance of man, would perhaps help protect the biodiversity inside it. This would be quite inhumane of course, considering that original residents of the reserve would have to be “booted out”. Hence conservationists “try to manage nature with humans in situ”, i.e. conserve without having to remove humans from the equation.

However, “involuntary parks” seem to be the most effective in conserving biodiversity. Where humans have vacated or have not trampled upon, wildlife flourishes, for instance in many parts of Papua New Guinea. Places that have seen conflict have also unintentionally become nature reserves, for instance in the demilitarised zone (DMZ) between North & South Korea. So in this case, would peace between the North & the South lead to the disappearance of this nature reserve and all its “residents”? Sounds perverted, that war might be necessary to protect and conserve the lifes of lesser beings (animals and plants) while human lives are lost.

In another example, Somali pirates off the coast of Somalia and Kenya have led to “a profusion of fish” in the waters as commercial trawlers are scared away from the region. And this has benefitted the local Kenyan fishermen who fish for a living, as this article from The Scotsman testifies. Given that the state of the world’s fisheries and fish population are not looking good, to allow fish populations to recover from the state of being overfished would certainly be beneficial for its conservation even if biodiversity might not have expanded.

The article concludes that it is “depopulation” that makes the difference between conservation / protection and extinction. Sadly but truly, humans may sometimes have to remove themselves from the equation if nature and the environment is to recover and thrive. Would this be possible? Would this be humane? Would this be fair? I suspect this method of conservation would probably never be broached seriously.

Putting a price on nature

Leaf
60 cents for the droplet...

For something that combines thoroughly both concepts of economics and the environment. A question that occasionally pops up when we ask about how we can internalise the external costs and benefits of nature, how we can monetise and valuate what is deemed free or priceless and how can we account for environmental protection and conservation in our equations of governance and environmental management.

The trigger for these questions came about when I read The Economist’s Green.view column online and saw an article about “price fixing”: not so much price fixing in terms of what we learn in Economics about monopolistic behaviour, but about how we can fix a pricetag on nature.

There’s plenty of debate with regard to putting a price on nature, as witnessed from the tremendous number of articles that can be found on this issue. The plausibility of this recommendation, with a detailed discussion on how it can work, has been discussed on Earthbeat on Australia’s Radio National, while in very recent history there has been a flurry of writings from Planet Green, The New York Times and BBC News. LiveScience has a more concrete and specific suggestion: a “market-driven approach to habitat preservation”.

Anyway, let me just try to summarise and highlight some of the pros and cons of putting a pricetag on nature. You should read the articles above for much more detailed discussions however.

Why would / should we put a price on nature?

1. Solve misallocation of resources: what we learn in economics in terms of the external costs of, say, water pollution on marine biodiversity, would thus be accounted for when firms do cost-benefit analysis because there’s a explicit price tag attached to it (The Economist uses a slightly different line of argument, I’m just phrasing what I understand in my own words)

2. Allows for developing and some especially-impoverished but nature-rich countries to tap into the money-spinning potential for the natural resources and at the same time enable economic development

3. On the Earthbeat link, it quotes a paper written in the Nature journal 4 years earlier on the value of “ecosystem services”, valued at US$33tr. Compared to the GDP of Earth at US$18tr, it seems like there is plenty of value in these “ecosystem services” waiting to be tapped, of which these services could be invaluable to humans (for example, clean air)

Why cant / shouldnt we put a price on nature?

1. Insult to the concept of the beauty of nature or reducing everything intangible in the environment to a dollar value or ignoring the greater benefits that ecosystems and nature provides. Like the sense of serenity and peace when one walks in a park: that cannot exactly be quantified in a monetary sense, and that may not be reflected even if a pricetag were to be placed on the park

2. How do we put a value to animals that might be of little utility but of much value to conservation and beauty? The article in The Economist compares the panda, which “humans are fond of”, with the dung bettle, which “provide the greatest utility”. How then do you price the two vis-a-vis each other?

The articles themselves cover much more details and examples. Again, this is some more food for thought for those who have always found themselves fighting a moral battle in their minds between economic development and environmental conservation.

Flame retardants or fertility retardants?

Flame
This, or your baby?

If you watched The Story of Stuff, you might have been aware of the example of the tremendous amount of chemicals in many, if not all, of the consumer products we use. Brominated flame retardants (BFRs) in pillows were featured as an example of the excessive chemical pollution in our lives. The Economist last month featured an article about flame retardants that twins nicely with what The Story of Stuff has covered.

In the article, polybrominated diphenylethers (PBDEs), a form of brominated flame retardants, are used to reduce “the risk of ignition” but it is now so widespread that 97% of Americans have traces of it in their bodies. And it is suggested that these chemicals have effects on our health, such as in terms of fertility. In a study done in California, it appears that with each tenfold increase in PBDE concentration in the body one’s probability of becoming pregant decreases.

More studies are now underway to determine their effects, and these studies, once verified, would be important and may be perhaps groundbreaking, just like how DDT transformed overnight from being an ally in fighting pests to being a pest in itself. Will we be able to do away with BFRs? Will BFRs, whose concentrations have been doubling in our bodies every 4-6 years since the 1970s, do irreversible damage to our health? Unfortunately, only time will tell.

Meanwhile, some contrasting arguments coming from the environmentalists and the industrial experts. Greenpeace makes arguments for the phasing out of BFRs from our lives but will it be this easy? On the other hand Bromine Science and Environment Forum (BSEF) claims that BFRs are not as dangerous as the environmentalists make them out to be. So are the industrial experts, consisting of BFR manufacturers, telling the truth or are they themselves unaware of the full impact of their products?

The Story of Stuff

For something animated but no less thought-provoking for the Chinese New Year, a video clip produced by Annie Leonard about how our “stuff” (i.e. consumer goods) are produced and the dangers that have come associated with the production and consumption of these goods. I was first introduced to this video in Junior College by my Geography teacher, and I found it rather animating, enlightening and inspirational, as well as rather easy to digest yet still sufficiently thought-provoking.

The Story of Stuff is a 20 minute video that can be watched on YouTube as well as downloaded from the website for future broadcasts, as I did. Do watch because it alerts you about the behind-the-scenes situation which you have never really thought about when you do shopping. While her perspective is that of government-bashing and firm-bashing, it is still worthy of considering. It is suitable for the kids though they will probably need to be guided along to fully understand the video considering that she uses quite a bit of jargon that might be slightly inaccessible to the young.

This video probably comes too late to remind you about what you buy for Chinese New Year, but still, better late than never. Happy Lunar New Year!

Gardening in School – Education or Distraction?

Garden
Homework: Watering the plants

I chanced upon a very interesting article by Gloria Dawson on The Daily Green. This phenomenon is not so much seen in Singapore than in the United States, where gardening in schools was introduced and encouraged, in particular by US First Lady Michelle Obama, to raise students’ interests in gardening, nurture green thumbs as well as environmentalism and encourage healthy eating.

I thought such initiatives were pretty self-explanatory in terms of benefits, are pretty much non-political and non-debatable. Dawson had however found an article by a Caitlin Flanagan that expressed much disdain for school gardens, with the argument that “schools are taking kids out of the classroom” when they need to spend more time in the classroom to learn and be educated on the basics, and then eventually climb the educational system. It was something I never really thought about given Singapore’s higher-quality educational system, but in America where educational standards are dropping and schools struggle to keep students interested, school gardens may backfire in their intentions as well.

Statistics so far appear to indicate that school gardens have somehow helped boost grades and “understanding of lessons”, probably indirect effects of being involved in a garden. It might perhaps create interest in staying in school, or create opportunities to pick up skills such as organisation, leadership and responsibility which would be useful both in lessons and outside of lessons. Unfortunately, the school gardens initiative has caught on with political posturing and people are lambasting the educational system and those who implement the initiative. At least Flanagan’s arguments were not exactly without merit, but it appears that Dawson is implicitly pointing fingers at politicians who are blaming the school gardens initiative to their advantage.

There’s really plenty to learn from school gardens, in terms of skills and knowledge. Where your food comes from, how to eat healthily; children need to know given that they now live in a very much urban society where food is convenient and global and they do not know where their food comes from, what they should eat, how much they should eat and so on. Again, I am reminded of the book ‘The End of Food’ by Paul Roberts that I am currently reading about and will review in due time. Links to other articles about the school gardens argument are in The Daily Green article.

China’s Green Revolution

Green Leaf
Green Power

China, as an emerging superpower, is also said to be emerging as one of the biggest polluters of the environment. The industrialisation and modernisation of China in particular is of great concern for climate change / global warming, as China looks scheduled to overtake the United States as “the world’s biggest emitter of carbon dioxide”. Gary Dirks and David G Victor, in Newsweek’s Special Edition – Issues 2010, suggests that China is making attempts to go green, not just to allay global concerns but to allay domestic concerns as well.

China is concerned about its growth, not so much because it is bothered by how other countries (both developing and developed) perceive it. It is more because of the environmental problems that have plagued its growth that makes it realise the importance of being green. “Severe pollution and worries over dependence on fossil fuels” are just some problems of national security that concern the Chinese government, and it is doing what it can by enhancing energy-efficiency and attempting to move away from fossil fuels. It cannot probably move away entirely from coal because of its abundance and cheap price, but China is making efforts to make coal “less polluting”.

China is also investing in new technologies, such as clean renewable energy research, that could potentially open up a new market for such products as well as cement China’s position as an industrial leader in a new field that is yet untapped fully in most other countries. The Telegraph in an earlier article in May observes some changes to what China is doing in this new field. However, China would require the help of other developed countries in the West in managing its research and development.

All these will add up to “a massive impact on greenhouse-gas pollution”, and such efforts are certainly laudable and commendable. It is, however, important, for China to lead not just locally but globally. As a rising superpower, it is “ready to lead when it starts playing offense in climate talks as well as defense”, and China needs to prove that “it can cut emissions”, which will then assuage global concerns as well as debunk the West’s “excuse for doing nothing” because of “Chinese inaction”.

Other writers and newspapers have weighed it on China’s “Green Revolution”. The Guardian details some targets set by Chinese officials on adoption of renewable energy sources, while Thomas Friedman in The New York Times writes about how “red China” is becoming “green China”. There appears to be much regarding what China is doing for the environment, even if it might seem miniscule, so the United States should certainly do its part and contribute more than “business as usual”, given its current superpower status (which it might soon lose to China if it does nothing to stem the decline).

Your oil comes from… Venezuela?

Oil Pipes
Pipe Source Unknown...

Following up from my write-up on why petrol is expensive in oil-producing Alaska, another article written by The Green Conservative Jim DiPeso in The Daily Green argues that pumps should feature where their oil comes from. And the reason for such features are not just for the geography student like me keen to know where my products come from.

“Country of origin labels on gas pumps” are being advocated in the USA, the land where federal regulations dictate that agricultural products be labeled for their country-of-origin and customers like to demand for the right to knowledge about the products they consume. It helps people choose which country’s oil they want to use, and hence avoid supporting “despots” like Hugo Chavez of Venezuela or Vladimir Putin of Russia. But it will be too complicated, as much as it sounds like a really cool idea. As mentioned in my previous write-up, all that oil from different countries are pooled together then sold, so chances are the gas / petrol in your tank comes from all over the world literally. An alternative he suggests is the proportion of oil coming from which country, so consumers get to know.

And perhaps choose to boycott petrol stations that buy oil from “evil” countries to sell. (Venezuela, Iran & Russia for starters…) Not that they would have much of an option, considering that coincidentally many oil producing countries happen to be rather undesirable in aspects ranging from democracy and freedom of expression to living standards, so if you wish to make a statement you’d probably have to stop driving to stop using petrol.