Low carbon infrastructure investment: extending business models for sustainability

Foxon, Timothy J, Bale, Catherine S E, Busch, Jonathan, Bush, Ruth, Hall, Stephen and Roelich, Katy (2015) Low carbon infrastructure investment: extending business models for sustainability. Infrastructure Complexity, 2 (4). ISSN 2196-3258

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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.

Item Type: Article
Keywords: Valuation; Business models; Low carbon; Sustainability; Smart grids; Heat networks; Complex systems
Schools and Departments: School of Business, Management and Economics > SPRU - Science Policy Research Unit
Subjects: G Geography. Anthropology. Recreation > GE Environmental Sciences > GE300 Environmental management
H Social Sciences > HD Industries. Land use. Labour > HD0072 Economic development. Development economics. Economic growth
H Social Sciences > HF Commerce > HF1021 Commercial geography. Economic geography
Depositing User: Timothy Foxon
Date Deposited: 06 Oct 2015 10:08
Last Modified: 06 Oct 2015 10:08
URI: http://srodev.sussex.ac.uk/id/eprint/57016

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