South Africa is becoming a living example of how to become a failed state in two-decades. In the middle east there is no shortage of South Africans and many of the are acutely aware of the infrastructure problems of their motherland. Many of them will tell you that with the right precautions the crime issues can be managed, but that the infrastructure failures are becoming the more insurmountable problem. Some locations are without energy for an average of 8-hours a day, but this can also extend for days. In other areas their fresh water and wastewater infrastructure systems are starting to fail and are challenging their healthcare system with issues like cholera outbreaks. In the North, their publicly owned rail transport system has shut down and forced critical goods to be delivered by road, unfortunately, this makes it easier to deliver and sell these goods to Mozambique instead of back into South Africa. When refrigeration, drinking water, sewage treatment and logistics transportation are all challenged; the cost of doing business doesn’t go up incrementally, it goes up exponentially and the productive members of the society leave.
Infrastructure Problems Have Exponential Outcomes
I do not think that many US cities are anywhere near the same category as South Africa, but I do think that is very hard for an average person to fully understand the priority that needs to be placed on infrastructure. Many educated people are trained on how to think linearly, but very few of us have an intuitive feel for how to think exponentially. This is often displayed in thought exercise questions like, “Would it be better to be given a million dollars or a penny that doubled each day for a month?” or “If an NFL stadium was sealed and a drop of water was doubled every minute, how long would it take to swim out of the top seats?”. Most of us don’t have a natural feel for answers to exponential questions like these without a calculator. I could not have told you that a penny doubled for 31 days would be worth $10.7 million or that we could swim out of the sky boxes in 45 minutes. Unfortunately, it is this kind of thinking that is required to understand the impact of infrastructure failures as they cause compounding problems. It is for partially these reasons that I believe the people in city leadership positions may be underestimating the priority of infrastructure upkeep in reference to the cost of doing business in the US. Other contributing factors are that the city decision management structure is almost designed against infrastructure upkeep.
The People Problems Behind the Problem
Many challenges ultimately boil down to issues related to people. In the context of city infrastructure, it typically involves three key groups: the city engineering office, the mayor's office, and the city council. Engineers tend to grasp the technical aspects of the problem but may not fully comprehend its impact on business in the city. The mayor's office, while potentially understanding both the technical and business aspects, must also focus on reelection every four years. On the other hand, the average city council member often lacks a comprehensive understanding of either the technical or business impact sides of the issue and must also prioritize reelection. This means that in the typical team responsible for managing the infrastructure budget in a city, fewer than half of the individuals have a holistic grasp of the challenges they need to address, despite having to allocate a mammoth portion of their annual budget towards it. To complicate matters further, two-thirds of the team are motivated to use pieces of that budget for high-visibility projects with substantial newspaper appeal to support their reelection.
How Do We Compare?
The US spends an average of 1.5% to 2.5% of it’s GDP, or $382b to $627b / yr., on Infrastructure. In comparison to the European union this is a very small spend that equates to approximately half of what the European Union spends. If we look at the big three infrastructure costs, Electricity, Drinking/Wastewater and Transport; the picture becomes very damning very quickly, as we are behind. The following is a back-of-the-envelope calculation on what we would need to spend tomorrow to put our infrastructure back on track across the US.
Note: These numbers are similar to the numbers I was asked to calculate while working on an infrastructure project in 2011, but they seem to be growing. If you are not interested in infrastructure information and calculations, skip to “Totals.”
US Energy Generation
The average age of the 10,000+ US power plant fleet in 2018 was 29 years old, but in a 2023 report it had shifted up to 30 years old, meaning that US power generating equipment now has an average age equal to the average service life of these assets. Which means that if you assume 100% replacement and a 14.4 hour/day run-rate on plant equipment, the US would need 771,000 MW of gas turbine power production facilities to handle our annual 4,050-terawatt hours of energy requirements (excluding peak loading). Or, if we wanted to replace 100% with solar (not possible) and an average daily run rate in the US for solar of 5.75 hours/day it would require 1,930,000 MW of power production infrastructure. If you assume that both natural gas turbines and solar have plant investment costs of $1,000 / kW, the respective prices are $771b and $1.9t to completely replace our power generating infrastructure. An 80/20 GT/Solar combination would cost $1.0t. Or, if governments felt like investing more upfront and no longer dealing with the hassles of the politics of fossil fuels, $3.9t would probably cover the bill for nuclear.
Note: I have assumed a 100% plant replacement costs which is high, but there has been no cost taken into account of the remediation or demolition of existing plants & lands, which could also be high.
US Energy Grid
As of 2020, 70% of the grid transmission lines and transformers that move large energy loads around the grid were 25 years old, but much of the remaining 30% was older and had been built in the 50’s and 60’s with most of the distribution lines that bring the power from the transformers to the houses and buildings. The problem is that transmission assets and distribution lines have a 30 to 50-year service life, which means that many of these lines and assets need to be replaced. The US has 642,000 miles of high voltage transmission lines and 6.3m miles of low voltage distribution lines. If you assume that 128,000 miles (15%) of transmission lines need to be replaced at $3.9m per mile and that 5m miles (70%) of distribution lines need to be replaced at $175,000/mile, the grid needs a $1.15t dollar upgrade.
Drinking and Wastewater Infrastructure
14-18% of all treated water in the US is lost to leaks, according to a 2021 Mckinsey report. This number becomes a bit more tangible with the knowledge that every two minutes in the US a water main breaks and those leaks alone equate to the loss of 6 billion gallons of treated water a day, which is equal to 10,000 Olympic swimming pools or $9.8 billion in lost annual municipal water sales. As a result, it should come as no surprise that we use more than twice the amount of water per capita as other industrialized nations such as Germany, Japan and the UK; it also may not be a surprise that we pay 1/2 to 1/6 the rates of these countries for water when we seem to be comfortable with the current status quo.
US Water and Wastewater Plants
In the US there are over 153,000 publicly owned fresh water treatment plants and over 16,000 publicly owned waste water plants. Unlike the energy infrastructure, only 15% of these plants are past their design life. The drinking water plants and the wastewater plants can likely be replaced for $4m and $20m a plant respectively, or $92b and $48b in project costs for a total of $140b in plant replacement costs.
Note: Plant replacement costs were harder to come by, so more conservative numbers were used in these calculations.
US Water and Wastewater Grid
There are 2.2m miles of drinking water lines and 800,000 miles of sewer lines. The average age of liquid infrastructure pipes in the US are 40 years old, with 22% being over the 50-year service life age. The average drinking water line in the US can be replaced for $792,000/mile, and the average wastewater line for $845,000/mile. Replacing 22% of the liquid line infrastructure would cost $383b and $149b respectively, for a total of $531b in grid replacement.
Lead in the Drinking Water
On top of the mechanical degradation issues there are other concerning issues, such as lead in the water. The American Water Works Association has stated that over $1.0t is needed for replacing drinking water lines that are made of lead pipe. If we assume an 80% overlap between old drinking water lines and lead lines, the corrected total for drinking water grid replacement would be $1.23t.
Roads, Bridges, etc.
According to a 2021 American Society of Civil Engineers report, America’s road infrastructure is a “D.” The average age of the 614,000 bridges in the US is 46-years-old and 10% “are severely compromised,” with Americans driving more than 178,000 trips across these compromised bridges each day. The average age of the roads themselves are a little better, at 29-years old, but all of these structures are expensive to maintain. One study estimated that the US spent between $50-$80b in road maintenance in 2021, where another estimated that number to be $204b. No matter what the number is, scholars seem to agree that there is a significant spending gap. A 2019 Transportation for America study concluded that $231b for a six year period could get us back on track, with $62b/yr. for 6-years assigned to cover that gap. However, the $231b/yr. did not include any new road costs, and a 2011 report showed that the US was investing as much in road repair as they were in road construction. Most politicians are recognized for creating new roads, but none are recognized to committing the $24,000/mile in annual repair funds that are needed to keep those new roads in good shape. As a result, from 2009 to 2017 the US road infrastructure grew by 223,494 miles, providing enough new pavement to drive across the US 83 times. These statistics bring me confidence in the assumption that the US is still at least $300b short in spending of what needs to be spent to get back on track with its roadways.
River Travel - Dams and Levees
The average age of a Dam in the US is 57 years old and the average age of a levee is 50 years old, with respective design lives of 75 years and 50 years according to The Army Corp of Engineers. According to a 2021 American Society of Civil Engineers report, the US needs to invest $115b to bring all US dams and levees back up to functioning levels of service by 2030. This section had the least available reports, but a 2020 EPA report stated that their best estimate was that the sector was facing a $7b/yr. to $10b/yr. funding gap. The report also stated that they felt that this estimate was conservative and that this gap was only going to grow if unaddressed. With the above information I have made an assumption that the sector is at least 5 years behind where they need to be, and that a minimum investment of $50b would be needed to bring this part of our infrastructure back up to speed.
The US has over 300 ports that contributed to 26% of the GDP in 2018. The infrastructure requirements of these ports are extensive and are managed in large part by the US Port Authority. Of all the infrastructure sectors graded by the American Society of Civil Engineers in the 2021 reports, ports received the highest grade, a “B-“,. The report overview seemed to suggest that the ports may only be suffering from an annual $12b funding gap. I am going to make an assumption that this means that we are at least $50b down today, a remarkably low number for the amount of infrastructure covered by the sector.
- Our Energy Infrastructure needs $1.9t to $5.8t in upgrades to bring the sector up to date.
- Our Liquid Infrastructure needs $1.76t in upgrades to bring the sector up to date.
- Our Transport Infrastructure needs $0.4t in upgrades to bring the sector up to date.
- These three critical sectors require a minimum investment of $4.1t to come up to speed, and
- The annual infrastructure spend needs to be increased by an additional $200b/yr. to $400b/yr. to stay on top of maintaining our existing assets.
Some Good News
In 2021, Congress passed The Bipartisan Infrastructure Law, which provides $1.2 trillion over five years for all US infrastructure, including the many infrastructure sectors not discussed above. This is by far the largest federal commitment towards infrastructure in the last 40 years and credit should be given to this administration for this commitment.
Unfortunately, unless this is renewed regularly, the money will be spread too thin. An example of this is that $50b was allotted to the EPA for the water & wastewater sector to manage the $1t problem of our lead piped drinking water grid. Like a roof leak, if only a patch is applied to this problem, it will likely result in significant rot down the road.
Efficient Infrastructure Is a Force Multiplier
Clean water, effective waste management and efficient supply logistics were largely responsible for the 25% to 35% increase in human life expectancy during the times of the Roman empire. Years later electricity brought the work of a hundred men into homes and factories at the flip of a switch. These basics that we take for granted, represent thousands of hours of work a year that we save for minimal costs and “10’s” of years that have been added to our lives. However, when these basic services are taken away, an unimaginable additional load is added to the requirements of businesses to achieve success when operating in an affected area. The difference in workload is now comparable to the difference in making a car and having to make both the car and the road for it at the same time. So where are modern day cities’ priorities?
The Question All Cities Need to Focus On
We believe that all city management questions need to be distilled into a single query: "What can we do to enhance our city's density of highly productive and creative individuals?" These individuals require several key elements: high-quality education for their youth, elder care for their aging population, a healthy environment for social activities across all age groups, effective policing, fire services, emergency response, access to excellent healthcare, green spaces, well laid out roads and even the occasional dog park. By addressing these kinds of needs, a city can attract and concentrate these talented individuals and the companies they bring with them, as these kinds of people have the freedom to choose where they live. These individuals, in turn, attract others like them, resulting in the growth of tax revenues, an educated electorate, and well-informed city leaders. On the opposite side, any of the above efforts can be completely negated with a single press release on frequent power outages, inadequate water treatment, or a failed road system. Such news can deter individuals with options from considering a city as their home. No city wishes to find itself in a situation like Flint, Michigan, but the current state of our nation's infrastructure indicates that many cities are headed in that direction.
No matter how you cut it, infrastructure is the backbone of the future productivity of a city. When a city fails to stay on top of it, its fate has already been cast for coming years. I know some US cities will fall due to poor business bets that have caused them to lose their tax base, but for all the cities that are to remain vibrant in the coming years the quality of the city’s infrastructure is at the heart of its competitiveness. Both Italy and Japan are in the process of trying to sell old cities that have already been abandoned due to loss of tax base and failed infrastructure. If US cities are to remain relevant, the US has to maintain its infrastructure edge over many other countries around the world and bring more manufacturing home. I am sure that the $4.1t dollar estimate will grow to nearly double this number when other infrastructure sectors are taken into account, but I hope the US finds a way to prioritize these costs in the coming years. It may be wishful thinking, but this is city and state government, and a boy can dream can’t he! My fear is that these looming city / state expenses will be converted into looming federal expenses and will become the next driving force behind another round of money printing.
The Keyboard Chimp