Low carbon infrastructure investment: extending business models for sustainability

Abstract

Investment in infrastructure is recognized as a key enabler of economic prosperity, but it is also important for addressing social and environmental challenges, including climate change mitigation and addressing fuel poverty. The UK Government Strategy Investing in Britain’s Future argues that significant investment in “resilient, cost effective and sustainable energy supplies” is needed to meet these challenges. However, current methods of assessing the costs and benefits of infrastructure investment, and the subsequent design of business models needed to deliver this investment, often prioritise partial economic gains over social and environmental objectives. This paper extends the business model canvas approach to allow designing business models and evaluation methods that can incorporate social and environmental value streams and propositions as well as economic values in order to facilitate genuinely sustainable infrastructure investment. It demonstrates the usefulness of this extension through two case studies of the development of smart grids for electricity distribution and local heat delivery networks in the UK. Smart grids are essential for maintaining the security and reliability of electricity systems whilst incorporating increasing amounts of low carbon generation in distribution networks. District heat networks can facilitate the efficient supply of low carbon heat. However, both will require significant levels of investment, co-ordination between public, private and regulatory actors, and will deliver a range of economic, social and environmental costs and benefits to these actors. Drawing on empirical interviews with local actors involved in smart grid and heat network developments, and recent work on valuation and business model canvas analysis, the paper challenges the traditional view of a business model as only creating one form of value. Accounting for multiple types of value helps to identify business models that are more likely to achieve the environmental and social goals of infrastructure transformation and opens the door for new actors. Finally, the paper introduces an approach to complex systems modelling of infrastructure investment decisions to take into account the range of actors and the diversity of motivations of these actors.

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Cite this paper

@inproceedings{Foxon2015LowCI, title={Low carbon infrastructure investment: extending business models for sustainability}, author={Timothy J. Foxon and Catherine S. E. Bale and Jonathan Busch and Ruth Ter Bush and Stephen Hall and Katy Roelich}, year={2015} }