Infrastructure: 10 Predictions for 2022

February 2022

As for the past several years, we start the new year (a bit behind schedule) by looking into our crystal ball and seeing what these twelve months are likely to bring for infrastructure operators, investors and policy-makers (see Infrastructure Ideas2018, 2019, 2020 and 2021 predictions, and here for how well the predictions tracked for 2018, 2019, 2020 and 2021).  Here are our ten infrastructure predictions for 2022.

  1. Solar and wind economics stay volatile, but remain cheap.  The well-publicized supply chain disruptions of much of 2021 caused prices for solar panels, and in some cases wind turbines, to rise for the time after over a decade of sharp declines.  The supply-chain disruptions are far from over, and developers can expect prices to remain at best uncertain and at worst above 2020 prices.  Yet the costs of solar and wind generation will continue to remain far below those of alternatives.
  2. The natural gas price rally ends.  In the last quarter of 2021, prices of natural gas reached levels unseen in decades.  In Europe, spot prices for natural gas increased six-fold from June to December, exceeding $10/mmbtu.  Gas producers have been hopeful that the economics for new gas development would remain favorable enough for investments to move forward.  Don’t plan on it: expect prices back down at the $4/mmbtu levels by the second quarter at the latest.
  3. Coal take-out picks up steam.  As predicted a year ago (see our “cash for clunkers” 2021 prediction), proposals for funding the early closure of coal-fired generation plants began to appear in 2021.  A heavyweight consortium of Citibank, Prudential, HSBC and the Asian Development Bank floated a proposal in November for an “Energy Transition Mechanism,” to raise funds in order to begin acquiring coal-fired generating plants in Asia, in order to shut them down ahead of their technical end-of-life dates.  With older coal plants closing for both technical and environmental reasons across the US and Europe, Asia now accounts for 75% of all coal generation globally, according to the IEA.  While the 2021 consortium proposal has a number of issues, we expect the topic to continue to gain urgency in 2022, more proposals to emerge, and the first announcements of successful fund raising.
  4. EV charging networks become a big investment target.  The global EV charging infrastructure reached $18 billion in 2021, according to Fortune, and will continue to be one of the fastest growing infrastructure segments.  Though China is by far and away the largest market and continues to invest, expect the US market to grow faster with $7.5 billion in funding just from the Biden infrastructure bill, continued technology advances, and the push to create “fuel corridors” to reduce drivers’ range anxiety.  Look for 2022 investment to reach between $22-25 billion and keep growing.
  5. Hydrogen investment becomes more than hot air.  Climate mitigation efforts and investments have focused to date mostly on electricity and transport.  Heavy industry also generates large amounts of GHG emissions, and many industrial processes require energy unlikely to come from electrification.  The use of hydrogen to replace fossil fuels in industry has long sounded like a well “over-the-horizon” idea, but this is rapidly changing.  Look for some of the first major announcements of investments in hydrogen-based energy in the US and Europe in 2022.
  6. “Net Zero” targets face a battle over transparency.  With corporate pronouncements of “Net Zero” targets for some future point proliferating – and yet GHG emissions continuing to grow – expect considerable pressure from observers for announcing businesses to be transparent about what they mean by “Net Zero.”  Definitions and methodologies appear to vary greatly, along with substantive action accompanying announcements.  Look for the same kind of movement that pushed for transparency on “sustainability” practices do the same on climate.
  7. First infrastructure cyber risks, now drones.  Technology is driving major improvements in infrastructure services and costs, but not all technology brings positives.  Cyber-attacks have become a major concern for utilities.  In 2021 drones, a technology which is beginning to play an interesting role in logistics (see “The Drones are Here”), have also been used in a handful of conflict and crime situations.  Look for concerns to grow in 2022 around the risk of drone attacks on infrastructure facilities.
  8. Emerging markets infrastructure remains in the doldrums.  This is a repeat of our (unfortunately correct) 2021 prediction.  The potential for emerging markets to outgrow developed markets as a destination for infrastructure investments will again remain potential.  The continued effects of COVID, supply chain disruptions, and a drive to “near-shoring” in several industries will continue to make infrastructure demand and investment very uncertain in 2022.
  9. Sea barriers continue to attract more investment.  New projections about sea level rises seem to appear every few weeks.  A new study released this past week pointed to a foot of sea level rise along the US East Coast by 2050.  Look in 2022 for announcements of large (and publicly visible) investments in marine infrastructure to become popular with politicians in many jurisdictions.  As noted by Infrastructure Ideas (“Seawalls and Emerging Markets”) a few months ago, these will not come cheaply.
  10. Water recycling in the news.  Droughts in the US West and many other places continue to drive pressure on water supplies in large markets.  Climate change and the exhaustion of aquifers point to this pressure continuing.  Look for water recycling infrastructure to begin drawing more serious attention in 2022 as part of the solution.

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