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CMS publishes infratech report 'Connected Future'

22/11/2018

Electric vehicles, energy storage, smart mobility and digital infrastructure are promising investment propositions in the world of infratech. CMS has today published the report Connected Future which analyses key trends across infrastructure and technology globally.

The report highlights the challenges of balancing the differences between the infrastructure and tech sectors: the pace of development and deployment, the different attitudes to risk and the appetites for alternative revenue models.

The report also examines the varying degrees to which different countries are receptive to technological innovations. For example, in Europe the UK is firmly securing its role as a global hotbed of infrastructure innovation, thanks to its forward-looking regulatory framework. In Asia, Singapore is already becoming a testing ground for new technologies, given its thriving start-up ecosystem and its conducive legislation.

Kristy Duane, Partner and Co-Head of the CMS UK Infrastructure & Project Finance group, says: “A radical transformation in the infrastructure sector is already underway. Governments, organisations and investors who understand the interaction between digital, EVs, energy storage and smart mobility, will be the ones to capitalise on the opportunities presented by our connected future.”

Digital infrastructure

The report identifies four future trends within digital infrastructure:

  1. Infrastructure investors are finding increasing opportunities in alternative network providers (altnets).
  2. Scale of capital committed to altnets is likely to grow as they gain greater market share. While equity has already made moves into the area, debt providers are now beginning to follow.
  3. 5G promises to provide continued projects in which to deploy capital over the longer term.
  4. Certain markets around the world will offer particularly enticing opportunities with regards to internet penetration. For example, Singapore is at a far higher level of digital development compared with other markets.

The report highlights that given the current and predicted growth in data traffic, the rapid expansion of Internet of Things (IoT) devices, and the emergence of new technologies such as machine learning and AVs, the rapid evolution of broadband networks is inevitable. The anticipated capabilities of 5G will allow new technologies to break through and become mainstream. 5G networks are expected to bring improvements to the wireless space: lower costs of transmitting data, substantially higher data speeds, and low latency.

Cecilia van der Weijden, partner and head of the CMS Netherlands Energy team: “As much of the data created and distributed across connected devices will be stored in the cloud, the Report expects data centres to become even more important. As data and energy hub and gateway to the Northwest European market, the Netherlands will play an important role to facilitate the digitalisation of the energy sector through more flexible network operation, demand management and the integration of renewable resources.”

Electric vehicles and charging infrastructure

The leap towards full-scale adoption of electric vehicles (EVs) has increased rapidly over recent years. The Netherlands represents one of the most promising EV markets in the world. Second only to Norway for EV market share, the country boasts the highest share of publicly accessible slow chargers in Europe. The total number of charging points across the nation increased from 400 in 2010 to 113,630 in 2017. Unlike Norway, the Dutch market is characterised by a prevalence of plug-in hybrid electric vehicles (PHEVs) over battery electric vehicles (BEVs). In 2017, out of a total of 119,332 electric vehicles registered in the Netherlands, 98,217 were PHEVs, while only 21,115 were BEVs.

Based on CMS’s findings, the report identifies the following future key trends within the market:

  1. Growth in demand will be crucial for making the case for new infrastructure. Increased demand will encourage car manufacturers to dramatically ramp up production and development of EVs.
  2. Oil and gas companies are now backing EVs.
  3. Smart infrastructure models and vehicle-to-grid will be key to the success of EVs.
  4. Countries with strong regulatory support for EVs are spearheading the electric mobility revolution.

Smart mobility

Smart mobility encompasses a wide-ranging set of technology-driven transformations that are reshaping the transport sector. Digitally enabled mobility platforms such as ride-hailing and ride-sharing apps (known collectively as ‘Mobility-as-a-Service’ or MaaS) are challenging traditional transportation models.

Based on CMS’s findings the report highlights the following future key trends within the market:

  1. Infrastructure, such as vehicle-to-vehicle (V2V) and vehicle-to-infrastructure (V2I) communication systems will require big data
  2. Smart ticketing and digital railways are set to increase revenue streams
  3. The business models of car parks could be transformed and replaced by large suburban car parks catering to ride-hailing fleets
  4. The increasing use of MaaS models could represent a challenge to public transport systems. These will need a tech upgrade to stay competitive.
  5. Investment in cyber security is required, as transport infrastructure will become vulnerable to security attacks.

Petra Heemskerk (partner and head of the CMS Netherlands Mobility team): “Mobility is becoming more and more challenging. Existing infrastructure is overcrowded and is forcing us to search for new and innovative ways to use it. This necessity coincides with the need to take big steps in the field of sustainability. Smart mobility opens a range of possibilities. However, a prerequisite is that public and private parties work together intensively and in a fair way. There is still much to be gained in that respect.”

Energy storage

Storage technologies are at the forefront of the energy transition. Their ability to alleviate traditional grid balancing challenges, the intermittence of renewable energy and to foster a shift towards a more flexible and reliable decentralised energy system are some of the main reasons storage is seen as such a critical component of future power systems. The report explores the future of alternative energy storage technologies such as Compressed Air Energy Storage, heat storage and the use of blockchain as a transaction layer by which users sell or consume energy transparently.

Based on CMS’s findings the report highlights the following future key trends within the market:

  1. Co-location is an attractive proposition for both renewable and conventional energy projects.
  2. Blockchain and energy storage have the potential to transform the transactional landscape of supply and demand.
  3. Decreasing of risks such as regulatory acceptance will open the door to debt financing.
  4. There is a significant move in projects from contracted to merchant revenue streams, allowing for shorter term contracts.

Access the full publication

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Petra Heemskerk
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Cecilia van der Weijden
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