Infrastructure: 2018 in Review

In January 2018, Infrastructure Ideas made 10 predictions for 2018. With the year closed, it’s time to take a look at how things unfolded in the world of infrastructure. And twelve months later, that world looks a lot like we expected it to: of the 10 predictions for 2018, 7 hit the mark, one came close, and for the other two it’s too early to tell. The 7 predictions on target?

1. “Less for longer:” solar PV plus storage costs fell below the average cost of power from new coal-fired plants — $0.08/KwH or eight cents a kilowatt hour.
2. “China will be even bigger:” China’s lead in EV market share has continued to grow, most visibly in electric buses.
3. “But the only thing bigger in the US will be noise:” the much-touted US “trillion-dollar infrastructure plan” amounted to… nothing.  Noise has been plentiful.
4. “EM reformers won’t budge the numbers:” emerging economies with potential and expectations for large new private infrastructure markets did not deliver. The private infrastructure markets in Indonesia, Vietnam, Argentina, and Nigeria continue to be far smaller relative to the size of their economies than the rest of the world, in spite of much talk of infrastructure reform. Only India continued to deliver growth, and there only in renewables – expansion into sectors remained little more than an idea.
5. “Maximizing Finance for Development won’t budge the numbers either:” the much-touted World-Bank led focus on private financing of infrastructure has not gotten off the ground.
6. “Cities are where it’s at:” urban infrastructure has been where much of the action was in 2018, especially around new mobility technologies, and where the money is flowing.
7. “Climate adaptation climbs the priority list:” the impact of natural disasters widened in 2018, with wildfires and inland flooding joining superstorms in exposing infrastructure shortfalls across the world. This is not yet translating into significant additional capital outlays (as opposed to repair and recovery costs), but the former is only a matter of time.

One prediction — “More of the Same for Less,” on continued declines in the prices of wind and solar energy – was directionally on target, but didn’t get quite as far as we predicted. We expected to see the first ever solar tariff below two cents a kilowatt hour ($0.02/KwH), and the lowest new tariff came in at about $0.023/KwH (in Dubai). That’s still less than a 1/3 of the cost of electricity from the average new greenfield coal-fired plant. The two predictions which didn’t materialize in 2018? A major increase in re-powering and abrogation of PPAs in the power sector, and less stability in infrastructure assets. Look for those in the 2019 predictions…

The last few years have seen unprecedented change in infrastructure markets (related columns here and here, among others). That’s been mostly good news, given how long addressing infrastructure gaps has been at the top of government agendas, and how little change there seemed to be for decades. That change, however, has not materialized in the way that traditional infrastructure experts might have expected. Infrastructure Ideas has covered extensively how new technologies in particular have changed delivery mechanisms and costs for several infrastructure services. Yet the 7 (or 7 ½) out of 10 accuracy registered in our 2018 predictions also implies that while different than traditional infrastructure models, the changes unfolding across infrastructure are creating trends which can be relatively well forecast. This is good news for infrastructure investors, for whom change means opportunities, but for whom unpredictable change also means intolerable risk levels. And all these trends will continue to be in the news, and covered by Infrastructure Ideas, as we go forward.

Coming up next: our ten infrastructure predictions for 2019.

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