While there are strong innovation pushes in similar directions in the water and sanitation field, we focused most of the discussion on the electricity sector for the simple reason that the pace of innovation within it has been so fast and so thoroughly transformative. It is by no means self-evident that a similar development in mass production and cost reduction can be expected, or even possible, in the WASH (water, sanitation and hygiene) sector. In fact, innovation in water and sanitation continues to be incremental rather than radical.

There are three main reasons for why the pace of innovation in WASH differs fundamentally from that in the energy sector: because drivers of demand for electricity and WASH services are substantially different; because the defining characteristics of water are fundamentally different from those of energy; and because the type of technologies needed for the provision of potable water and sanitation often require energy.

However, it is now possible to upscale previously unfeasible technologies such as off-grid desalination or water treatment, partly thanks to reduced costs of solar panels that can provide stand-alone electricity. So, the question is, will this increased access to electricity change the drivers of demand in the WASH sector? And, more importantly, is there anything that could trigger the type of radical innovation experienced in the energy sector for the provision of water and sanitation services?

Well, how about climate change combined with dinosaur infrastructure and increased demand? While the effects of climate change will play out differently in different locations, increased investment will likely be needed to adapt sewerage mains to increased flows, drinking water networks to droughts, and power lines to increased risks from storms and wildfires. At the same time, everything points to an increase in grid costs (construction plus operations plus maintenance). Why? Well, first of all, in contrast to things that can be mass-produced in global supply chains like flat-screen TVs or solar panels, dramatic fluctuations in infrastructure costs are rare. Rather, they tend to grow roughly in line with general inflation at a rate of a couple of per cent per annum. In other words, with business as usual, grid costs can be expected to increase slightly every year in coming decades.

And on top of increases in grid costs, there is the utility death spiral. What is that? The logic behind the notion goes something like this: as the costs of a grid-based service like electricity or wastewater treatment increase (as they have tended to do over time) the incentives for the consumer to reduce their consumption of the service also increases. Now, this is not much of an issue if this reduced consumption only comes in the form of marginal improvements in energy or water use efficiency. However, as technologies like rooftop solar PV become available at reasonable costs – and very often supported by government incentives – customers can begin to cover fairly large portions of their electricity consumption from electricity generated on their rooftops. This means that the amount of electricity purchased from the grid goes down quite substantially, which means less revenue is generated for the transmission and distribution operators. These operators still have a large grid to operate and maintain, so to cover these costs they will be forced to increase their rates. In turn, consumers then have an even stronger incentive to reduce their use of the grid in favour of increased consumption of solar PV. Now, the sun does not shine all the time, so households with rooftop solar PV must still rely on the grid as balance, selling excess electricity to the grid on sunny days and buying electricity from it on cloudy days and at night.

However, the cost of batteries – a technology that also happens to be based on bundling many small mass-produced units together – has come down dramatically in the last decades. This has meant that in places like California, which has good solar resources and substantial power grid problems, it might even be rational to completely defect from the grid. With even less use of the grid, transmission and distribution rates have to increase even more, and so the spiral continues downwards with fewer and fewer consumers paying higher and higher rates. The problem of grid defection and a utility death spiral is one of the more pertinent tensions arising from the upward trend in grid costs and the downward trend in costs of solutions based on mass-manufactured equipment that can be installed close to the consumer.

In this context, the issue of equity becomes increasingly important: if the grid is weak and expensive, it may be possible for well-to-do homeowners to disconnect from it for a more stable on-site solution. In contrast, lower-income households residing in multi-dwelling buildings may have neither the financial nor the practical means to set up, for example, a solar-battery-generator system.

Something similar happens in water and wastewater utilities where customer consumption has a direct link to utility revenues. As the need to prioritize water efficiency becomes a pressing issue in places with water shortages, growing consumption and limited storage opportunities, water utilities globally are facing a real financial challenge: rising infrastructure costs must be recovered from a shrinking sales base, because as customer consumption decreases so do utility revenues. In the short-term, the costs of operating a water and wastewater utility remain fixed and reductions in use do not reduce costs. At the same time, most water and wastewater utilities are facing an array of challenges taking place at an unforeseen pace – ageing infrastructure that will demand massive and rapid investments in the coming decade, demographic change, and on top of this climate and other environmental stresses.

This brings us to the next question: what happens when substantial numbers of people unplug from grids? Let’s take a look.

New tech – new narrative?

In the first part of this series, we acknowledged that most of the comforts of life in wealthy parts of the world rely on different services provided through grids. In the second part we examined why the grids are there and found a key reason to be the economies of scale of key technologies, like power stations or wastewater treatment plants. We argued that with small economies of scale – most prominently demonstrated by solar PV – the benefits of concentrating key technologies in large, centralized facilities decrease significantly. With costs of grids trending upwards, though, there is a risk of a so-called utility death spiral, as consumers or companies cover more, or all, of their needs of basic utility services through on-site solutions, at least when it comes to energy.

We have thereby highlighted some of the tensions that arise from an ongoing shift in the relationship between the costs of single large systems, which are based on grids and one or a few large processing facilities, and several small systems, with a large number of onsite stand-alone solutions that perform largely the same functions as large grids do. However, it is important to note that tensions arise when trying to integrate these two types of systems, for example by adapting small-scale and mass-produced technologies into existing technological systems and regulatory frameworks that are largely based on paradigm of extensive grids and a few large processing facilities.

What if there are no such systems in place to begin with?

This is a situation that is all too familiar to many people in the world today. Close to a billion people lack access to electricity altogether and many more have unreliable connections and suffer from frequent outages. More than half the world’s population lack access to safely managed sanitation and around two billion people have no access to properly managed drinking water. One of the main reasons for this is that even in rich stable democracies it is difficult enough to build, operate and maintain large-scale grid-based infrastructure systems that provide electricity and water and sanitation services. It is even more so in countries with weak institutions, especially if these infrastructure systems are based on designs adapted to, for example, European conditions.

Infrastructure, like power transmission cables, is very capital-intensive. In places with fragile institutions and/or difficult geographical conditions there may be little hope that large grid-based solutions can contribute to improved access to proper energy and WASH services any time soon. From this perspective, then, the fast and accelerating pace of innovation in standardized and modular solutions, which can be rapidly deployed close to the consumer and in the form of small individual projects, is promising.

Solar home systems, typically consisting of a solar panel, a cellphone charger and a couple of solar lanterns, are already bringing substantial improvements to the daily lives of many millions of people. There is also a rapidly growing market for efficient refrigerators, fans and televisions specifically designed to be operated using stand-alone solar PV systems. As solutions that can function in situations without available grid infrastructure become cheaper, they are spurring new innovation in specific settings as an alternative to relying on painstakingly adapting solutions designed for a conventional grid-based setting.

This entails a substantial change in how energy and WASH services are provided, from having been based on a top-down infrastructure model to what increasingly resembles a model for consumer goods and household appliances. So, it seems the path is clear and laid out towards a future where sustainability problems stemming from lack of access to energy and WASH services are a thing of the past. But is it as straightforward as that?

Accelerating access to energy and WASH services – the SEI Gridless Solutions Initiative

There seem to be very large opportunities that arise in the wake of the rapid pace of innovation in what we call “gridless solutions”. These are technologies that are based on standardized designs that can be modularly deployed at the level of individual households or small communities and provide stand-alone access to energy and WASH services in settings with little or no available grid infrastructure.

However, while such technologies certainly appear to be characterized by more rapid innovation than those based on the “large grid plus large centralized plant” model discussed in the first part of this series, technological innovation by itself does not solve sustainability problems. Rapid innovation needs to be leveraged and translated into equally rapid service provision and uptake.

Here, there is still much work to be done. Getting alignment between business model development, financing mechanisms, regulatory frameworks and institutional configurations and ensuring they keep up with technological developments will be quite challenging. These are some of the issues addressed by SEI’s Gridless Solutions Initiative, which aims to identify and help mitigate the key obstacles that stand in the way of gridless solutions realizing their potential.

In this series of perspectives, we’ve discussed developments in both the energy and WASH sectors, and this cross-sectoral approach is something that also runs through the initiative. We think that there is a lot of cross-sector learning to be done when it comes to things like financing, business-model development and adaptation of basic technological designs to different use cases. In addition, we explore the potential for synergies that can emerge when gridless technologies for energy and WASH are combined, perhaps most notably in the way that gridless solar PV solutions can be used for things like water desalination or purification in off-grid settings.

The initiative also takes a holistic view on the issue in terms of understanding, for example, how and why a particular technology can be successfully deployed using a particular business model in one setting but not in another. We believe that taking a broad approach that cuts across many different fields of expertise is necessary for us to make a meaningful contribution. But it is also very challenging, so we try to link up and engage in partnerships and joint projects with actors who have deep expertise in different subfields. One early example of this is the sWASH & grow project, led by RISE (Research Institutes of Sweden), where we are collaborating with innovators and humanitarian organizations to find ways to accelerate deployment and uptake of innovative, sustainable and inclusive WASH solutions in humanitarian aid settings.

It is important to emphasize that we do not believe that gridless solutions are by themselves a panacea. Electricity and WASH systems based on large centralized units and extensive grid networks currently play and will continue to play an essential part in providing vital basic services to billions of people around the world. There is a lot of ongoing innovation within monitoring and operations of water and wastewater utilities, such as digital twins, the use and provision of data for smarter services and increased consumer participation. In addition, innovation in governance will most likely lead to increased efficiency so that the lifetime of a utility can be extended. Also, some argue that the next big thing in utilities is the use and sharing of data that will enable the decentralization of services around a utility (e.g. different entrepreneurs being responsible for different parts of the wastewater treatment process) and this might decrease the operating costs of utility providers. These kinds of innovations could help shift the upward trend in grid costs, which would be highly desirable because it would further strengthen the portfolio of technologies that enable sustainability.

In other words, the Gridless Solutions Initiative is not based on an ideological preference for small-scale solutions. For example, while solar PV can be deployed at a small scale, what has been central to its success is the ability to draw on automated mass-manufacturing and globally integrated supply chains. Instead, the underlying thinking behind the initiative rests on a pragmatic recognition of how techno-economic megatrends are working in favour of solutions that are based on mass-manufacturing rather than on-site construction; standardization rather than bespoke design; and granular deployment rather than megaprojects.

We’re looking forward to getting to work.