Against a background of the gathering fight against climate change, and in the teeth of the worst energy crisis in a generation, there are three major technological revolutions happening simultaneously.
The first of these is the revolution in electric vehicles, where we would seem to have reached a tipping point. The International Energy Agency estimates we need 300 million EVs to reach net-zero targets by 2030. This will require the roll-out of EV charging structures on a massive scale – a major opportunity for infrastructure investors.
Take the UK, where 25 percent of new car sales are now electric. Lauren Pamma, programme director of the Coalition for the Decarbonisation of Road Transport, calculates that around £20 billion ($24 billion; €23 billion) is required to create the public charging network in the UK, involving the installation of 300,000 public charging points versus the 35,000 that exist today.
Number of electric vehicles required by 2030 to reach the IEA’s Net Zero Scenario
Amount required in the UK to create a sufficient public charging network to support EVs
The coalition is mobilising private capital and Pamma welcomes “the publicised moves by BlackRock, Infracapital and Aviva to invest in this transformation”.
Secondly, EVs, the digitalisation mega-trend and the growing Internet of Things are driving an extraordinary increase in the demand for power, right in the middle of a global energy crisis. Smart charging, battery storage and grid upgrades are therefore an important focus for infratech providers.
Finally, we are in the middle of an agricultural revolution, driven by technology. In a white paper published in November, Invesco suggests that between now and 2050 somewhere between $20 trillion and $30 trillion will be needed to transform our food systems. One of the authors, James Matthews, tells us “food is likely to represent one of the most significant long-term investment themes of the years and decades to come”.
Developing smart mobility
Electric vehicles and the required charging infrastructure are at a tipping point
The nature of the EV opportunity is influenced by geography. “Access to safe, on-demand and green mobility is becoming critical to emerging consumers, especially in countries where urbanisation is accelerating at a pace never witnessed before,” says Nakul Zaveri, partner and co-head of climate investment strategy at LeapFrog Investments.
Investors are playing a crucial role. “What we are seeing in these markets… is that the green alternative is actually becoming the increasingly cheaper alternative thanks to the billions upon billions of dollars being invested in climate technologies,” adds Zaveri. A great example of this is the rise of two-wheeler electric vehicles across many developing markets in Africa and Asia.
In developed markets, for EV charging to be rolled out on the scale required to meet government net-zero targets also requires significant capital.
When asked whether we are at a tipping point here, Christophe Bordes, managing director in the transactions team at Infracapital, says: “Yes, I believe so. As countries set ambitious Net Zero targets, we have started to see regulation strongly align with these and trickle down to become market specific. Adoption is only moving in one direction so the opportunity for charging infrastructure is growing.”
This ties into the whole concept of the smart city itself. Chris Pateman-Jones, CEO of EV charging solutions provider Connected Kerb, argues that “smart cities are central to a net zero future”. He says: “Charging infrastructure has laid the foundations for smart living, supporting potential future Internet of Things’ technologies, such as 5G antennas, parking sensors and air monitoring systems which provide real-time data on street-by-street air quality.”
Investing in smart grids
‘Smart’ developments need power on a much greater scale
There is an increasing focus among investors in investing in smart charging and in grids. At Connected Kerb, Chris Pateman-Jones says his Agile Streets trial, a project to install 100 chargers in streets and car parks in four areas of the UK, “showcased how smart charging – the scheduling of charging to off-peak times such as overnight or when renewable energy is abundant – could save drivers hundreds of pounds a year… whilst also balancing the grid to avoid strain at peak times.”
Switzerland-based investor Partners Group is also seeing near-term investment opportunities in technologies that measure energy consumption granularly, such as smart metering/sub-metering, and technologies that are able to use this information to reduce consumption.
“Ageing transmission infrastructure, increasing penetration of intermittent renewable generation and growth in distributed energy resources are creating new challenges which will require real-time data measurement and communication amongst organisations and devices to maintain stability across a more complex grid,” says Patrick Langan, senior investment leader, infrastructure at the firm.
These technologies also enable more efficient deployment of ‘behind the meter’ generation and storage solutions. Langan adds: “We believe this represents a large collective investment opportunity of distributed infrastructure, which will be most effectively deployed via platforms that can provide holistic solutions to end customers and benefit from network effects.”
An example of this is Budderfly, a company Partners Group recently invested in. “Budderfly is a provider of energy efficiency as a service, which is providing a holistic energy efficiency offering to the commercial market using the technologies mentioned above,” says Langan.
Building smart solutions
In the agriculture sector, the stakes for tech disruption could not be higher amid food shortages
Water, waste systems, ports, air travel – all are sectors of infrastructure where smart technology’s potential to add value is beginning to be recognised. Equally exciting is the rapid maturation of agtech, which bears the hallmarks of what Invesco’s James Matthews calls a “genesis trend” – a phenomenon that occurs when the growth of a technology becomes sufficient to trigger a substantial and lasting shift. “Investors have a pivotal part to play in supporting this era-defining transformation,” he says.
Alastair Cooper, head of venture at food and agribusiness-focused investment firm Cibus Capital, certainly thinks so. “Agriculture is belatedly experiencing the disruption that has occurred in other sectors through digitalisation,” he says.
Traditionally, it was just the big corporations that invested heavily in research and development, explains Cooper, and prior to 2014 investors were hardly involved. Now, “the technological revolution is attracting significant private investment capital to the sector”.
Cooper believes the background to this has been the increasing awareness of what climate change could mean for feeding the world’s growing population. “This has been given an added sense of urgency by the current food scarcity crisis.”
“Agriculture is belatedly experiencing the disruption that has occurred in other sectors through digitalisation”
Fortunately, this goes hand in hand with the fact that the technological revolution has accelerated. Cooper says there are a range of technologies that are proving important: “Greater use of big data, artificial intelligence sensors combined with enhanced imaging, significant progress around genomics and gene mapping, robotics, and precision fermentation. There is also a growing convergence of the food and pharmaceutical industries.”
There is a big focus on disrupting the existing livestock industry, both meat and dairy. This is driven by new forms of protein – replacing meat with plant-based or even insect-based proteins, especially through precision fermentation and synthetic bio-engineering of high nutritional compounds.
“The fight against climate change is encouraging the replacement of pesticides and bio fertilisers and there is a significant focus on waste in food production, which can be as much as 30 percent,” says Cooper. “It is also encouraging novel farming systems such as vertical and indoor farming.” These allow produce to be cultivated much closer to the main centres of population, reducing “food miles” and improving food security.
Cibus finds the developments in robotics particularly interesting. “We have made significant investments in Burro in the United States, Saga Robotics in the Nordics and ISO in the Netherlands. In addition to arguments about efficiency and cost saving, the enthusiasm for robotics is in consequence of the severe labour shortages which are plaguing the farming industry at present,” says Cooper.