Smaller infrastructure is actually more wasteful. Since you suggested a coal plant, consider the sheer number of extra jobs it would take to hire people to drive the coal truck to the neighborhood plant and handle the offloading of coal. At the scale of per-neighborhood, you might even need someone to literally shovel coal into a furnace, I don't know if the coal conveyor lines make sense at that tiny a scale. Double that because you need to transport the resulting fly ash as well. Then there's the extra instrumentation you need, the duplicate emissions mitigation points. And this is before considering the literal better efficiency of larger boilers/blowers/etc. themselves.
In a concrete example I have familiarity with: I worked for a large water treatment plant that supplied water for about a million people. It required 2 engineers being present 24/7/365 to keep it running. Replace it with a water treatment plant that is 1/100th the size, and you still need 2 engineers present 24/7/365. Go much smaller than that, and the inability to economically provide on-site permanent engineer oversight leads to the idea of controlling the water treatment plant remotely via the public internet, with all of the increased risks that entails.