- The Covid-19 pandemic has served to exacerbate existing trends across infrastructure and power; accelerating project developments conducive to the low-carbon energy transition and stalling the progression of carbon-intensive projects globally.
- By assessing our Infrastructure Key Projects Data (KPD) as of March 2022, compared to its composition as of March 2020, this analysis captures the impact of the Covid-19 pandemic on the global infrastructure project pipeline across all regions and sectors.
- The global infrastructure project pipeline grew from 30,824 projects to 40,331 between March 2020 and March 2022, with Asia and North America & Western Europe hosting around 67% of this increase.
- Among projects at pre-construction, Our KPD shows that the hydrogen project pipeline saw a 2,622% increase over the period, alongside substantial increases in solar and offshore wind project volumes, while coal and oil infrastructure projects saw a relative decrease in their respective project pipelines.
- New airports, airport expansions, and commuter rail projects saw the highest relative decreases in their respective project pipelines, highlighting the Covid-19 pandemic's severe impact on global aviation in the short term, coupled with the long-term headwinds to airports projects posed by increasingly-stringent legislative commitments to reduce greenhouse gas emissions.
The Covid-19 pandemic has served to exacerbate existing trends across infrastructure and power; accelerating project developments conducive to the low-carbon energy transition and stalling the progression of carbon-intensive projects globally. The impact of the Covid-19 pandemic on curtailing ongoing construction activity, limiting labour availability and contributing to elevated construction input costs served to disrupt the short-term progression of projects globally. Medium-term factors, however; namely the greater consideration of sustainability in investment mandates and the proliferation of legally-binding emissions targets globally, have begun to materially impact the project financing flows and reshape the composition of the global project pipeline.
By assessing our Infrastructure Key Projects Data (KPD) as of March 2022, compared to its composition as of March 2020, we are able to analyse the impact of the Covid-19 pandemic on the global infrastructure project pipeline across all regions and sectors. Our KPD, which captures projects over USD30mn in value, indicates that the global project pipeline saw 9,507 new project additions during this period, bringing the overall number of projects to 40,331 from a previous 30,824. Asia accounted for the largest proportion of project additions; 3,285, closely followed by North America & Western Europe which added 3,047 projects. In part, this reflects the resilient overall performance of construction activity in Asia during the Covid-19 pandemic that ensured a degree of continued confidence among infrastructure developers regarding the feasibility of investment, coupled with continued commitment from authorities across the region to enact ambitious infrastructure plans. In China, efforts to develop strategic 'new infrastructure' sectors and projects in its 14th Five Year Plan (14FYP) continue to support China's transport infrastructure project pipeline, including via the realisation of 3,000km of urban railway to the Hong Kong-Macao Greater Bay Area rail transit network, the expansion and reconstruction of the congested sections of the main lines of the national expressways, and the construction of 25,000km of new roads. Similarly, Vietnam's 2021-2025 five-year plan (FYP) has sought to increase infrastructure project activity since the plan's approval in February 2021, alongside new legislation on public-private partnerships (PPP) to ease legal bottlenecks and attract investment.
Regarding the sectoral split of additions to the global infrastructure project pipeline, energy and utilities projects accounted for around 34% of new project additions, closely followed by transport infrastructure and construction projects with 33% and 27% respectively. In absolute terms, this saw 3,260 energy and utilities projects added, followed by 3,183 transport infrastructure and 2,548 construction projects over the period.
Among projects at pre-construction, Our KPD shows that the hydrogen project pipeline saw a 2,622% increase over the period, alongside substantial increases in solar and offshore wind project volumes, while coal and oil infrastructure projects saw a relative decrease in their respective project pipelines. From just 9 hydrogen projects captured in our KPD as of March 2020, its pre-construction project pipeline has since risen to 245 projects as of March 2022. The exploration of hydrogen by authorities and companies globally has seen a proliferation over this period, fuelled by its potential to complement existing efforts in non-hydro renewables and to develop nascent hydrogen capabilities across industries including transport, chemical processes, and combustible fuels. Commercial-scale blue hydrogen, derived from natural gas and carbon capture and storage (CCS) and green hydrogen, produced from renewables-based electrolysis processes, are the two main forms of low-carbon hydrogen production in widespread development. Thus far, the global hydrogen project pipeline is being led primarily by markets in North America & Western Europe and Asia; such as Australia, Germany, Spain, Japan and the United Kingdom.
Offshore wind saw a substantial 81% increase in the number of projects entering pre-construction between March 2020 and March 2022, with over 350 projects currently at pre-construction. This includes Denmark's agreement to construct an artificial energy island to host close to 5GW of wind capacity, South Korea's 8.2GW Sinan Offshore Wind Power Complex, and Finland's 5GW Noatun Offshore Wind Project. Onshore wind also saw a relative increase, albeit a moderate 14% increase in the number of projects entering pre-construction over the period. Such onshore wind projects include Australia's 2.1GW Fortescue Wind Power Project, which Fortescue intends to power its iron ore operations in the market, and Chile's 1.7GW HNH Onshore Wind Farm Project which will also feature electrolysers, an ammonia plant and a port facility for the export of around 1mn tonnes of green ammonia per annum.
In contrast to this broad-based increase in the global low-carbon project pipeline, the number of carbon-intensive power projects at pre-construction saw a decline during the Covid-19 pandemic. The global gas infrastructure pre-construction project pipeline grew by just 1.4%. coal projects saw a 7.3% decline, and oil infrastructure projects a 36% decline. This is reflective of the worsening project risk profile of these power sources globally, particularly for coal, given that these large, often technically complex projects are increasingly developed solely in emerging markets with elevated risk profiles, poor project development history and limited financial security with poor access to capital.
New airports, airport expansions, and commuter rail projects saw the highest relative decreases in their respective project pipelines, highlighting the Covid-19 pandemic's severe impact on global aviation in the short-term, coupled with the long-term headwinds to airports projects posed by increasingly-stringent legislative commitments to reduce greenhouse gas emissions. Between March 2020 and March 2022, the number of airport expansion or new airport projects at pre-construction globally reduced from 651 to 610 as some projects saw works suspended or subsequently cancelled. We highlighted following the initial onset of the Covid-19 pandemic that its severe initial impact on global aviation would weigh on the prospects for infrastructure activity amid the uncertainty regarding a return to pre-Covid-19 pandemic passenger volumes and airport operators willingness to invest during this recovery. Beyond the Covid-19 pandemic, however, we continue to highlight the long-term headwinds for investment in airport developments in light of increasingly stringent environmental targets, both for public and private investment, owing to the increase in emissions that such developments would facilitate. Particularly in Western Europe, we expect greater pushback against efforts to develop fresh airports wgucg would raise the cost of capital for potential projects to compensate for the heightened risk of climate litigation. Already during the Covid-19 pandemic, the UK's London City Airport Expansion Project, which originally envisaged a 2022 completion, currently remains suspended after works were paused indefinitely in December 2020, while the project timeframe for Singapore's Changi Airport - Terminal 5 Project remains under review due to the Covid-19 pandemic's impact after its construction was halted in June 2020.
Commuter rail, meanwhile, saw its global pre-construction project pipeline reduce from 273 in March 2020 to 258 in March 2022. As with airports projects, the relative decline in commuter rail projects stems from the Covid-19 pandemic's prolonged impact on passenger volumes and its subsequent impact on the feasibility of investment. In London, we have highlighted the Covid-19 pandemic's impact on reducing the outlook for public transport infrastructure investment, amid a 66% y-o-y fall in passenger fares gross income between FY 2019/20 and FY 2020/21. Transport for London's (TfL) reliance on government funding to offset reduced fares income, at a time when the UK Government is aiming to tilt its investment focus away from London and the South East of England, will compound the pressure of reduced fares income and limit TfL's ability to pursue major transport infrastructure projects in the medium-term. This has already led to a reappraisal of TfL's immediate project activity, with development of the GBP41bn Crossrail 2 project suspended as of late-2020 and preliminary development of the Bakerloo line extension paused indefinitely. Though New York suffered the same uncertainty regarding the outlook for public transport usage, New York’s Metropolitan Transportation Authority (MTA) faces a relatively better outlook for investment, given federal funding via the Bipartisan Infrastructure Framework (BIF) and the MTA's prevailing USD54.8bn 2020-2024 Capital Program.
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