Business Sustainability Thinking
INSEAD – ASIA CAMPUS
2nd June 2017
Innovation Project – Self-sustainable off-grid housing
BUCKMAN, ANALUCIA
CHDID, MAYA
DUTTO, SIMONE
MAHESHWARI, CHAYA
REISH, OFER
SHINDO, NORIKO
1.0 Context and the Social & Environmental Challenge addressed
The innovation project is an IoT-integrated infrastructure which enables communities of households with clean, renewable, off the grid surplus energy, water management, organic food production, vertical farming and closed loop waste management.
This is basically a system where outputs from one sub-system are the inputs to another. With integration of such technologies, these self-sustaining villages have the potential to address some of the challenges of a growing population, scarcity of food and other resources.
This model does not require the need to develop new technologies. It is more about integrating the existing solutions into an integrated community design. This has the potential to not only create environmental and financial value, but also social value. People become part of a shared local eco-system reconnecting with nature and connecting consumption with production.
2.0 Traditional Way (or lack of way) of Addressing this Issue
Traditional households are characterized by low efficiencies in the use of energy and resources. Let’s consider the case of an average US household:
The electricity that powers all activities, for the most part, is not generated from clean and renewable sources, leading to emissions of 7.2 tons CO2 per house hold per year in the United States. Additionally, natural gas is directly employed for cooking and heating, leading to additional emissions of 3.6 tons CO2 per home per year.
The combined effect leads to emissions of 3.7 tons CO2 per person per year.
The CO2 footprint of food is complicated (depending on how it is produced and processed), however, Americans’ rich diet of meat is estimated to cause emissions of 2.7 tons CO2 per person per year.
The total amount of CO2 emitted per capital in the United States ranges between 18 and 20 tons per year. According to the above estimates, power and food represent almost 1/3rd of it (5).
Another very big portion (4.7 tons per person per year) comes from transportation. Even if electric vehicles promise to lower this number, it’s important that the electrical energy that powers them is generated in a clean and renewable way.
Other developed regions (such as the EU and Japan) present a similar situation, although the overall impact per capita is lower, with total CO2 emissions closer to 10 tons per person per year. Developing countries (such as India and most of South East Asian and African countries) have currently a much lower impact. This is because in many instances they lack resources and modern infrastructures (6).
But it’s not only the CO2 generated by the households that is threatening the planet: most of the resources are not recycled and therefore do not “close the loop”. For instance, 1.3 billion tons of food get wasted every year, causing direct economic costs of $750 billion annually (7).
3.0 A New Way of Addressing the Issue
New integrated solutions are being developed in order to reduce the consumption of resources and move towards a “closed loop” reality.
One element of this solution is to power houses with clean, renewable electric energy generated with on-site solar panels, replacing both the current electricity sources (bringing the houses off-grid) and natural gas.
Food waste generated by the residents can be used to feed both livestock and flies, organized in farms. The livestock can be directly consumed by the households, while the flies serve as food for the fish, which can in turn sustain aquaponic gardens. Aquaponic gardens, combined with vertical farming, can provide fish and vegetables to the residents.
The extra waste can be used in a biogas facility, which generates an additional amount of electric energy. This can power homes (complementary to solar energy) or power electric cars.
Finally, the water required can be partially collected by harvesting and filtering rainwater, reducing overall external water consumption.
To increase the viability of the idea, off-grid homes can be organized into villages, allowing pooling of infrastructure (such as the farms, water storage, and biogas facilities) in order to improve the efficiency and reduce the overall investment. Household members who are not employed full time could also work in the same.
Finally, the latest technologies (sensors to monitor energy use, farming efficiency, living patterns, and cloud to store data) can be applied in order to improve the management and connect different communities, so that villages in similar geographic regions can learn best practices from each other.
4.0 How does this address the changing Social and Environmental needs?
Current consumption behaviors have already put a strain on global resources and future population growth is only expected to further exacerbate the situation. Different research institutions have projected a 48% increase in world energy consumption by 2040 (10), a 70% increase in food production by 2050 (11), and a 50% increase in water use in emerging markets and 18% in developed markets, (12) due in large part to the growing populations and consumption habits.
This expected increased strain on natural resources not only worsens the environmental impact but it threatens to exhaust access to these resources, with the global carbon budget alone expected to be exhausted in just two decades (13).
Use of new technologies, behaviors, and monitoring have the potential to decrease CO2 emissions and use of natural resources. The specific use of closed loop sustainable communities could achieve this by introducing a new level of accountability and awareness of energy and resource usage. Households would be able to see how much energy they are generating through their solar panels or other clean energy sources and would be able to better monitor or limit the expenditure of that energy within their home. Households integrating vertical farming would also be much more prudent with food waste given that they would be directly aware of the supply available to them.
Closed loop sustainable communities have the potential to impact not only affluent communities in developed markets but there is significant potential to bring these communities to developing markets and communities that are off the grid and cut off from traditional access to resources. Setting up these closed loop sustainable communities in off the grid markets would allow them to leapfrog directly to sustainable methods of consuming energy avoiding the introduction of less efficient and more unsustainable energy practices now widely used in developed markets.
5.0 How does the Financial Growth of this model and the Socio-Environmental Impact form a Feedback Loop?
There is a strong feedback loop between the environmental impact and financial growth in this model, in the sense that scaling up would be necessary to render it viable and capitalize on its potential advantages. On the others hand, there seems to be a tipping point beyond which further scaling might be detrimental to the purpose.
At the first stage, scaling would drive increased demand from the community, which would encourage the involvement of large players and enable economies of scale. This would drive down costs, perhaps the most formidable obstacle for the viability of this model.
An additional upside of financial growth would be the expansion of the variety of services and occupations that the model would support. Production of non-essentials, for example, would only exist if there were a large enough number of people to generate constant demand. Otherwise, such demand would go unmet, which might result in the exclusion of people with such demand from participating in this model.
However, while scaling to a certain point is imperative for the model to be viable and impactful, some of the benefits of the model may be compromised in the event of excessive scaling. One example is accountability of the community for its environmental impact, which would erode if the effects weren’t visible to those creating them and if those affected couldn’t recognize and communicate with the causers. In order to maintain its main advantages, then, we believe that scaling should be done to a certain point, limiting the community to a certain size.
6.0 Why is this Game Changing from a Demand and Supply point of view?
When you look at this model, it is evident that from both a demand and supply perspective, it is game-changing for the agricultural industry.
The first, short-term impact is on the supply-side. Businesses in third-world countries and rural areas of developed countries that rely on income through exporting their produce will be negatively impacted. There will be resistance from countries such as Indonesia, Thailand and USA – to name a few – whose reliance on a single crop or produce is relatively high. To put it in context, USA exports 50.1% of global exports in corn (worth $9.1 billion) as well as 50.5% of soybean (worth $16.5 billion). Indonesia exports 51% of palm oil (worth $10.4 billion) while Thailand exports 34.5% of rice (worth $6 billion) (8). Such businesses which are usually backed and supported by the corresponding countries will be reluctant with the emergence of closed-loop models.
However, one could argue that this dependency on exporting large bulks of a certain crop is the cause of malnourishment in the local communities these farms belong to – especially in developing countries. In many developing countries, agriculture is still the main source of employment, livelihood and income for around 50-90% of the population (depending on the country) as of 2001. Of this, small farms make up 75-90% of the farming population in these countries (9) However, as the ever-increasing demand of exports on single commodity harvests climb, only the farms who can industrialize their farming methods efficiently over large areas of land can survive the price-squeeze caused by lower prices due to volume increase of specific crops. Small farms are thrown into a negative spiral where their margins are squeezed and profits diminished so that they stay poor – so much to the point that they cannot invest in industrialized methods of farming such as high-yield seeds or farming machines. This is turn, leads to poverty and malnourishment in these local areas and countries where most of the population rely on the income from their small-scale farms.
7.0 What are the Potential Costs and Risks?
One of the major risks foreseen for this system is in the variability of outputs. For one, the sources of power in the community are dependent on solar energy for which the input source varies throughout the day and on weather conditions; however, technological advancements in energy storage may be able to mitigate this risk.
Variability in weather does not only affect the source of power in this system, it can also heavily affect the availability of rainwater and crop yield. Farming opportunities in different regions may differ and may not be able to meet the nutritional needs of the community. Advancements in vertical farming which help create an artificial environment, conducive to growth of non-local plants can help mitigate this risk. Additionally, in a closed loop and self-sustained community, reallocation of resources may become challenging. Current regulatory environment in certain regions allow the use of natural pesticides in organic farming leading to a risk of crop contamination (1).
Perhaps, one of the biggest risks facing developers is the current regulatory environment. With unclear rules and unpredictable governments, it might seem an expensive risk for developers as they might become uncompetitive in their quest for a sustainable world if not all players are playing by the same rules.
These neighborhoods are definitely bound to be expensive, especially when most of the technologies used have not yet reached economies of scale (although in the long-term, the benefits exceed the initial material and installation costs); however, the opportunity costs might be what deter the population and developers from implementing these systems on a larger scale.
For developers, the biggest opportunity foregone is allocating the resources available in retrofitting the current buildings with smart technology. For example, it is estimated that the building energy efficiency retrofits in the US could lead to USD 279 Billion in investment opportunities, USD 1 Trillion in energy savings over 10 years, 600 Million MT of CO2 emissions reduction and create more than 3.3 Million jobs (4)
For residents, the opportunity cost could be the additional time that will now be allocated to farming, the variety and consistency in food they might be used to, and possibly more comfortable and controllable living conditions.
8.0 Is Anyone in the World Implementing this?
Regen villages, a start-up, which stands for Tech-integrated and Regenerative Residential Real Estate Development, is expected to complete its first closed-loop sustainable community in the Netherlands in 2018 (see Appendix 1) with plans to develop further communities across Northern Europe. It integrates various technologies including renewable energy, vertical farming, waste water management and recycling systems to create an easy way to live sustainably, with each community consisting of 100 houses across 50 acres of land (3) (2).
Sources:
- Hom, Louis, About Organic Produce; Retrieved from: https://www.ocf.berkeley.edu/~lhom/organictext.html
- Regen Villages Home Page, Retrieved from:http://www.regenvillages.com/#
- Varinsky, Dana (2016, Sep. 28), The ‘Tesla of eco-villages’ is developing off-grid villages that grow their own food and generate their own power , Retrieved from: http://www.businessinsider.sg/self-sufficient-village-regen-2016-9/
- MIT (2012), United States Building Efficiency Retrofits, Retrieved from: http://web.mit.edu/cron/project/EESPCambridge/Articles/Finance/Rockefeller%20and%20DB%20-%20March%202012%20-%20Energy%20Efficiency%20Market%20Size%20and%20Finance%20Models.pdf
- Synte Peacock, CO2 emitted by American households, Retrieved from: http://www.earthontheedge.com/how-much-co2-are-you-emitting/
- The World Bank (2013), CO2 emissions (metric tons per capita), Retrieved from: http://data.worldbank.org/indicator/EN.ATM.CO2E.PC?view=map
- FAO report (2013), Food waste harms climate, water, land and biodiversity, Retrieved from: http://www.fao.org/news/story/en/item/196220/icode/
- “Top Agricultural Producing Countries”, 2010 data, Investopedia, http://www.investopedia.com/financial-edge/0712/top-agricultural-producing-countries.aspx
- Paper on “Agriculture in Developing Countries – Which Way Forward?”, 2001, https://focusweb.org/publications/2001/agriculture_which_way_forward.html
- https://www.eia.gov/todayinenergy/detail.php?id=26212
- http://www.fao.org/fileadmin/templates/wsfs/docs/Issues_papers/HLEF2050_Global_Agriculture.pdf
- http://www.reuters.com/article/us-population-water-idUSTRE79O3WO20111025.
- http://www.wri.org/blog/2014/11/past-present-and-future-carbon-emissions
Appendix 1: Regen Villages
Images Source: http://www.effekt.dk/regenvillages/
Images Source: http://www.effekt.dk/regenvillages/
Images Source: http://www.effekt.dk/regenvillages/
This is a great model. A perfect example of what communities can achieve if they stand together!
It has huge gains to offer in developing countries, especially in remote areas that may not be connected to the grids. People use traditional sources of power such as kerosene and wood, adding to pollution and ruining their health.
In the blog, you have presented an example from Netherlands. What would be interesting is to know if this model is replicable and scalable.
From a practical standpoint, I see difficulties in replicating this in developing countries: a) most people in remote areas are illiterate, so using technology to provide them shared services or adopting high tech solutions such as vertical farming may be difficult. Also, from a financial point of view, I am not sue how viable this model might be, considering that most of the activities would be performed and technology will be used for self consumption and not commercial activities.
That said, I have read about models in developing countries where the community takes ownership of solar mini grids, and livestock farms that can be used for collective use. However they are very few in number yet, for reasons mentioned above.
Agree with Nidhika about the difficulties replicating this in developing countries. That being said developed countries (at least now) consume far more energy / resources that developing countries, so it is still a good initiative to start.
I definitely see the high capital investment / costs being a problem in making this scalable. However, what arguments could one make to get governments behind this? If the regulatory environment supported initiatives like this they could certainly gain more traction.
I really like the variety of options available for the houses. When I first started reading, I thought about whether or not I would buy a house like this and one of the things that occurred to me was the lack of ability to customize the houses, but after looking at the pictures in your exhibits it seems as though there are at least 8 different layouts to choose from and customization is not impossible.
This is a really interesting article. One aspect mentioned here is among the research topics of Prof Smith (P1 Business Ethics in Singapore). He is working on a large EU funded project to analyze how public acceptance of small community biogas devices could be improved and what sustainability improvements this could have on rural regions in Europe.
Very interesting model with a huge potential towards achiecing environmental sustainability. I agree that scaling up is ciritical, not only to to become financially sustainable but also to manage to close the loop from a technological standpoint. As long as the technology infrastructure is provided from external sources, the loop will always be open to external disruptions. Internalizing reaserch and development of the required infrastructure will allow these communities to become autonomous and manage their loop in a sustaibnable way. In order to achieve that though it is key that they have a critical scale.
I love the idea, and I think it would be cool to live in such a community. I do wonder about it’s applicability and expansion. Most people in the world are moving away from the countryside into large cities. Cities not only offer access to specialized jobs, but to networks, social and cultural events, etc. I wonder if this model could be transformed in a way that instead of small villages you could do the same with large city buildings.