Infrastructure conundrums: Investment and urban sustainability

Abstract This paper examines the case of electrical capacity for New York City as an example of the relationship between infrastructure, investment, and urban sustainability under conditions of de-regulation. The electrical system is one example of network infrastructures, traditionally regulated or state-owned, that have been subject to recent trends towards de-regulation and privatization. Power system deregulation introduces new investment market dynamics into the development of electrical resources. A game theoretic perspective provides an explanatory model for observed behavior in the New York metropolitan area power market, suggesting that large project development is constrained by uncertainties about other, competing projects and that, as a result, investment decisions may not occur in necessary timeframes to avoid severe capacity shortfalls. Such infrastructure shortfalls can greatly impact the sustainability of a city that competes in regional and global markets. The potential of smaller, demand-side investments is noted for avoiding the investment-decision uncertainties of large supply-side projects; however, the cost-effectiveness of such projects depends on their connection to an established network infrastructure. Reduced ability to control power plant investment in a deregulated market makes the mobilization of demand-side resources a more critical part of market performance in sustaining services over time.