Resilience is not just about weathering climate change

Infrastructure needs to be built taking into account shifts in demographics, lifestyle, technology and geopolitics, warns Australia's QIC.

Resilience and infrastructure are two words that increasingly appear side by side as the science surrounding climate change has become more definitive and more widely accepted. But building stronger infrastructure to withstand natural disasters is only one part of the equation, QIC reckons.

Fresh research by the Brisbane-based asset manager finds that population growth, shifting demographics, technological advances and urbanisation are forces at play today that will determine how people live in the future.

Given infrastructure’s critical social role, these same themes also affect investment in the asset class. In an effort to study these trends as part of its planning process, QIC released a paper earlier this week identifying five mega-trends, charting their course, gauging their impact and providing guidance for infrastructure investors.

“It’s a collection of themes that we really think make obvious sense to keep in mind and look at every now and again,” Ross Israel, QIC’s head of global infrastructure, told Infrastructure Investor in an interview.

The five megatrends QIC explores in “Reimagining infrastructure amid transformative change” are population growth straining natural resources, digital disruption which encompasses technological change more broadly, high public debt, the shift of global economic power from West to East and urbanisation.

The five trends, while distinct in some respects, overlap in others. For example, urbanisation cuts across a number of the other four, according to Israel.

“This increasing focus of many, many more people in cities, using cars, mass transit, rail to move around while also desiring clean living, elevates the standard for energy and water supply,” Israel commented. “And a lot of the challenges are around the renewal of aging infrastructure for vastly more people.”

According to the QIC report, around 680 million people will be living in 41 megacities (cities with a population of 100 million or more) by 2030, compared to 453 million who lived in 28 megacities last year.

“These people will need to have access to food, water and other goods that will be transported through existing ports, airports and roads,” Israel said. “That, in and of itself, is a major opportunity set for infrastructure investors because we’re going to have to adapt and develop ways to do that better.”

In addition to transportation, urbanisation particularly affects the essential service side of water and energy. This will in turn drive demand management.


“How do we efficiently use the water supply to a city if we’ve got more people requiring potable water? Do we then look more critically at what can be used as gray water? Have we got enough supply sources for 10 million people?”, Israel said, illustrating the types of challenges that lie ahead.

He reckons energy is a great example of how a sector can be disrupted by technological change.

In its report, QIC showcases Tesla’s new battery technology. The company, which is known for its electric cars, is developing and commercialising smaller and cheaper batteries for utilities, companies and households. Coupled with photovoltaic solar panels or used with the grid to charge at off-peak rates, they can reduce peak electricity demand.

“Energy storage has the potential to significantly disrupt the electricity value chain. We have built electricity infrastructure for peak usage, which in Australia accounts for about 40 hours or about one percent of overall consumption,” Israel noted. “Energy storage has the potential to be an über-disruptor for the power sector.”

As if on cue, the UK’s National Grid was forced to ask power-intensive industries to either use back-up generators or reduce demand due to outages at some of its power plants the day QIC released its white paper.

Prices surged, with the grid paying £2,500 [€3,495; $3,803] per megawatt-hour to one operator, Severn Power, as it looked to secure emergency supplies. The Financial Times reported then that the usual going rate hovers around £60.


Energy storage can either be a threat – for example to owners of transmission and distribution networks/systems – or an advantage, in the case of renewables developers, owners and operators. It can accelerate decarbonisation and can lead to geopolitical power shifts.

“But if you own key assets you want to know about these changes,” Israel stressed.

Public debt and strained government budgets is another widespread trend that has become even more prevalent in the aftermath of the Global Financial Crisis.

“Demographics and aging populations will increase health care and pension liabilities, which will not help improve government balance sheets for government to once again become the promoter and funder of major infrastructure. So there’s a deep desire there for alternative financing,” Israel said, citing market-led proposals and unsolicited bid structures as ways to bring in private capital to help build out the required infrastructure.

“The medium to long-term is quite positive for the asset class. More investment will be required, which will underpin good opportunities for both asset creation and reinvestment in the asset class.”