Unleashing the power of experimentation in infrastructure investment

Experimentation has been powering scientific advancement since the Enlightenment. But when it comes to infrastructure investment, experimentation can be seen as potentially risky and costly. With techno-economic modelling, it needn’t be that way.

New infrastructure investments are inherently capital intensive, driving investors, particularly government, to maximise their return on investment and quickly deliver value for money to consumers. This typically translates into looking for opportunities to ‘sweat’ existing assets or to value engineer the design of new assets and to defer major capital expenditure for as long as practicable. 

However, this ‘just in time’ investment approach can limit the rapid scale and innovation opportunities. It also lacks the flexibility to respond to unexpected changes in demand or new challenges. In the worst case, it can result in large capital investments that don’t work as intended. Conversely, by experimenting with new design methods, planning strategies and delivery mechanisms, we step-change advancements and efficiency gains while creating certainty.

None of the now-typical approaches to infrastructure development would have come about without experimentation. Many approaches that we now consider ‘safe’ were once radical. From dedicated cycle lanes and busways to ‘green’ bridges, pedestrianised city centres and park ‘n’ ride facilities – all these now seemingly obvious ideas were once controversial innovations. They were risky for the public administrators and stakeholders that ‘gambled’ on them. In short, investors, stakeholders and the public benefit from experiments in infrastructure when the risk-averse tendency in investment is mitigated to reveal innovative developments.

Experimentation and innovation are essential given the new challenges and rapid transitions we find ourselves in. Traditional approaches to urban areas and public infrastructure are under pressure from intense disruption, as technology drives stark changes in behaviour. At the same time, urbanisation and population growth put pressure on existing infrastructure, all of which present new opportunities.

By adopting Techno-Economic Modelling (TEM), governments and the private sector can explore scenarios and design options to respond to challenges in a safe, inexpensive holistic manner and identify the most cost-effective solution, ultimately encouraging experimentation and innovation. TEM’s dynamic methodology uses a simulation engine to model business processes or systems in their movement of items, materials or people through an interconnected system. It focuses on capacity assessment, capital investment efficiency and operational improvement.

With TEM, it is possible to map each component of a complex system and its interactions with other components to simulate different scenarios. As a holistic approach incorporating uncertainty, it is underpinned by data-driven financial, infrastructure and other system component inputs that lead to high quality and robust economic and situational outputs. TEM helps decision-makers make no regrets investments.

For example, we worked with NSW Ports at Port Botany to assess over 700 individual multi-modal options, all of which represented an individual ‘experiment’ that could either find efficiency benefits and positive outcomes or inform stakeholders of likely negative outcomes. The project ultimately optimised train schedules for current and future scenarios, discovered and solved infrastructure bottlenecks, and identified potential operational improvements to unlock an additional 20% rail capacity.

We have also applied TEM techniques in a feasibility analysis of bp Australia’s proposed green hydrogen facility in Geraldton. We assessed various industrial set-ups and process configurations, enabling bp to quickly experiment with changing technology, scale and distribution pathways to fundamentally challenge the traditional design approach. We found that the production of green hydrogen and ammonia using renewable energy is technically feasible at scale in Australia, helping to step toward the Australian Government’s goal of producing clean hydrogen under $2/kg. Our study linked engineering design scenarios directly to market scenarios and financial outcomes to underpin bp’s business case for investment.

At its core, the process of TEM methodology challenges the fundamentals of infrastructure design well before committing to the investment. TEM encourages experimentation and therefore promotes efficiency improvements, innovation and risk mitigation that deliver value to investors and stakeholders. It is an efficient approach to tackling the challenges that decision-makers face. TEM is revolutionising the infrastructure investment and development landscape to the benefit of governments, the private sector and society at large.