POWER September 2021 - 6

SPEAKING OF POWER
Optimism Abounds as
Infrastructure Projects
Fuel Growth
Aaron Larson
S
oon after COVID-19 first broke into
the public consciousness in early
2020, panic filled the streets. I'll
be honest, I was nervous. The U.S. stock
market plummeted roughly 35% over
the course of about a month from February
to March. Unemployment began to
skyrocket and things seemed pretty dire.
I thought the global economy could collapse
as countries all around the world
went into complete lockdown.
Of course, I was wrong. Today, the U.S.
stock market has never been higher-
more than doubling from its low in March
2020 to its recent high in August 2021-
and there seems to be no end to the money
that the U.S. government is willing to
spend. On August 10, the Senate passed
a $1.2 trillion infrastructure bill in bipartisan
fashion (69-30), and soon thereafter,
it passed a $3.5 trillion budget resolution
along party lines. The bills still require passage
by the House of Representatives before
they can be signed by the president,
but they seem closer than ever to having
the support needed for enactment.
Upgrading the U.S. Power Grid
In the Senate infrastructure bill's current
form, $73 billion has reportedly been allocated
to modernizing the nation's electricity
grid. The federal investment is said
to be the largest single outlay for power
transmission in history.
" This funding is crucial, considering
the country's seemingly endless reliance
on all things electric. Last February's
power outages in Texas and the
resulting hardships obviously resonated
with many senators, " Jocelyn Knoll, a
partner with Dorsey & Whitney LLP, told
POWER. " A reliable, updated power grid
is something you can agree on regardless
of party affiliation. In addition, the
Senate has approved $7.5 billion towards
electrifying public transportation and another
$7.5 billion to install electric-vehicle
charging apparatus across all 50 states.
These proposed investments in the power
industry show the Senate is serious
about reshaping U.S. energy policy. "
Knoll's colleague, Troy Keller, also a
6
partner with Dorsey & Whitney, said in a
statement issued to POWER: " The right
kind of infrastructure is seen as a hedge
against inflation because it reduces the
costs and timeframe for manufacturing
and moving goods. Ironically, however,
the demand for construction materials,
equipment, and operators that will result
from major infrastructure projects could
drive those same costs up over the short
to medium term. As a result, the future
effects of this bill on inflation and the
economy are not certain. "
Project Owners and Contractors
Confident
In mid-July, InEight, a project management
software company, released its outlook
for global capital projects. Its insight
was drawn from research conducted with
300 of " the world's largest capital project
owners and contractor construction professionals, "
across the Americas, Europe,
and Asia-Pacific regions.
A couple of particularly noteworthy findings
were that despite COVID-19, 95% of
respondents in the Americas region were
either fairly or very optimistic about their
company's future, and 94% considered
their organization to be resilient. Not surprisingly,
these were the highest rankings
found in any of the regions.
" What is clear is that the construction
sector-project owners and contractors
alike-see a market environment rife
with opportunity, with multiple InEight
experts pointing to promised programs
of post-pandemic spending around the
world as a key reason why, " the report
says. " Confidence and growth are in ample
supply, and a demonstrably resilient
construction sector is riding high having
endured the worst of 2020, with better
days ahead to look forward to. "
However, respondents weren't blind to
the risks that are out there either. The most
commonly cited risk factor by InEight's
survey respondents was economic stagnation/recession
(selected by 46% of owners
and 50% of contractors). The risk of
staff and skills shortages was also ranked
fairly high, especially by owners, with 31%
of them saying it was a threat to growth.
www.powermag.com
Pandemic Still a Wildcard
Daine Loh, a Singapore-based infrastructure,
power, and renewables analyst
with Fitch Solutions, told POWER that
COVID-19 continues to pose a risk to the
broad recovery seen across most markets
globally. The danger is especially
high in Asia, she said.
" Many markets
in Asia-including
markets that had previously managed
to contain the outbreak relatively well-
have seen at least one resurgence
of COVID-19 infections over recent
months, often in a more serious form
due to the Delta variant, with renewed
containment measures weighing on
broader economic activity, " said Loh.
" While we have yet to see an outright
disruption to construction projects to
the extent that we witnessed last year,
we note that recent developments
have been unfolding in a very similar
way to the initial outbreak, and will continue
to pose near-term headwinds to
the sector. "
More supply chain disruptions, work
stoppages, and strained fiscal capacities
for publicly funded projects due to
reallocation of money to things such as
healthcare all remain real possibilities.
Most markets in Asia are still cautious
about opening national borders and relaxing
restrictions, which will continue
to pose labor shortage issues for markets
that rely heavily on migrant labor
for construction.
Still, Asia dominates the current pipeline
of power projects globally. Loh said
it will remain the largest and fastest
growing region for power, underpinned
by increasing demand for new capacity,
driven by robust macroeconomic fundamentals,
and expanding industrial and
manufacturing sectors.
Fitch Solutions in late July said India,
Australia, and China have the highest
number of infrastructure projects in Asia
that are deemed as low risk. However,
Australia and China have more favorable
pipeline profiles, as India also has a large
proportion of medium-risk projects. ■
-Aaron Larson is POWER's
executive editor.
POWER| September 2021
http://www.powermag.com
POWER September 2021

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