Tania Tsoneva, Senior Director – Infrastructure Research, CBRE Investment Management
Next-generation infrastructure as a catalyst for sustainable future societies
Next-generation infrastructure assets will play an essential role in creating the sustainable societies of the future that alleviate decades-long rising environmental and social inequality concerns.
Infrastructure 2.0 leverages technology to create smarter, cleaner and more efficient essential services while addressing the digital divide and improving energy affordability and efficiency.
G20 governments announced $3.2 trillion of infrastructure spending between February 2020 and August 2021. Of this amount, 30% is earmarked to enable the low-carbon transition. However, after decades of under-investment in public infrastructure, governments will struggle to fund the investment needed. This creates an opportunity for private investment to make up the shortfall.
Governments can optimize private and public capital investment through effective legislation to support next-generation infrastructure to accelerate the transition to low-carbon economies. Encouragingly, we are seeing some signs of such symbiosis around the world. Consider the following two industries.
Clean transport
Transportation is the largest contributor to greenhouse gas emissions. The decarbonization of transportation networks will require infrastructure investments in power generation, power transmission, smart grids and electric vehicle (EV) chargers to support the shift from fossil fuels to zero-emission alternatives.
Governments in the EU, UK, Canada, California and New York have banned the sale of new petrol and diesel cars from 2035 and announced subsidies and tax credits to help lower the total cost of EV ownership. To alleviate EV range anxiety, significant investment in charging infrastructure is required. In the US, the Biden administration has declared a goal of installing 500,000 public chargers nationwide by 2030. In the EU, an estimated €280 billion is required. These policies and incentives will spur private investment by vehicle manufacturers, utilities and EV charging infrastructure companies to help build the necessary manufacturing and supply chain capabilities to make EVs and charging infrastructure costs competitive.
Collectively, the government funding, grants, tax credits and loans are helpful but likely still insufficient, creating an environment for private capital to invest in this burgeoning industry of the future.
Digital infrastructure
Digital infrastructure enables economic activity and social benefits, enhancing resilience, operational continuity and meeting sustainability requirements. The level of digitalization, however, varies significantly between countries and regions.
This “digital divide” exacerbates existing social inequalities. According to the FCC, over 30 million Americans live in areas without access to high-speed internet. The Infrastructure Investment and Jobs Act of 2021 is expected to help address this challenge by investing $65 billion to improve broadband infrastructure throughout the US. Similarly, the EU committed €1.5 billion in funding over the last seven years to narrow the digital divide.
Scaled government investment is vital to provide updated infrastructure in remote locations (e.g., data centers, mobile towers, smart meters and fiber optic networks). Sourcing and acquiring appropriate locations with a secure power supply and compliance with relevant regulations are critical factors to achieving success. Those with specialist expertise in developing and operating digital infrastructure assets will benefit from the push to bridge the digital divide.
Transportation and digital infrastructure are two examples of many. Those able to source next-generation infrastructure assets and manage them to add value and generate stable income stand to benefit from the new low-carbon economies the world is building.
Not in the original article, but true.
https://www.reuters.com/business/autos-transportation/eu-lawmakers-approve-effective-2035-ban-new-fossil-fuel-cars-2023-02-14/
Source: European Automobile Manufacturers’ Association
https://www.acea.auto/publication/european-electric-vehicle-charging-infrastructure-masterplan/
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