Posted by Macquarie Asset Management
21 Mar 2019
Peter Durante: The electrification and automation of vehicles will require a significant investment in infrastructure – such as the installation of charging points and upgrades to the local electricity grid. Some estimates suggest that electrifying passenger cars and other vehicles may increase the electricity demand of a country by 10% to 30%1 . This is likely to require greater investment – particularly in renewable energy production.
Fortunately, that creates a virtuous circle because electric vehicles have a greater incentive to use that clean, efficient electricity as it becomes more cost-effective.
In our view, the growth of the electric vehicle market is also driving down the price of battery storage, further increasing the potential share of electricity that can come from green energy sources.
Leigh Harrison: The data revolution is already playing a role in household energy through technologies such as smart meters. By providing enhanced visibility over energy prices, smart meters can help consumers make more informed decisions around their usage – for example shifting electricity demand to times when prices or emissions are lower.
Smart meter businesses in some countries are highly desirable. For example, in Germany there are some large metering businesses that are part of that ecosystem. But it does depend on the country, the regulatory environment and the nature of those businesses.
Peter Durante: We manage a number of assets that integrate these technologies. Sensors and internet of things applications can, for example, assess in real-time the health and performance of infrastructure. Instead of sending a crew of technicians to climb a wind turbine or dig up a pipe buried underground, you can now use sensors to more reliably inform you about the condition of materials and what is impacting their performance.
Sensors also have a wide range of applications beyond maintenance – monitoring everything from physical data, to transactions and even movement. For example, sensors are being used to track footfall, traffic and flow through an airport. They can also be used on bridges and roads, allowing operators to switch lanes and make them bi-directional, depending on the time of day and traffic patterns.
Leigh Harrison: We are seeing infrastructure managers increasingly using technologies like this to enhance performance. In addition to the efficiencies they should generate for operators, they can also improve outcomes for communities as assets are less likely to break down unexpectedly and require repair.
Ultimately, we think the end-user is the winner.
Leigh Harrison: We are seeing more companies using drones today and we expect that to continue. They can be very effective as a means of reducing the labour time and the cost of certain activities, such as maintenance and inspection.
Drones can also make some activities safer, reducing the need to physically inspect assets like telecommunications towers and large offshore wind farms. A drone can be a far safer way of doing the same inspection, and so can be more efficient and better for employees.
Peter Durante: Drones can also allow for more regular inspection, because the cost is driven down. The more you inspect something, the quicker you can identify and fix a problem before it happens.
They are also generating a lot of new data - we see integration and analysis of this data is key. We are starting to see providers’ back-end platforms improve to allow this technology to become more useful across lots of different industries, ranging from energy, to agriculture and transport.
Leigh Harrison: We believe that data collection and analysis is making technology better, both in operation and during the R&D phase.
By helping researchers better understand how technology operates, data can be used to fix design faults. This is reducing the long-term cost of technologies, from solar photovoltaic cells to battery storage.
We see this as an exciting trend and it gives us confidence that the infrastructure sector can help make economies more sustainable.
These technologies are already making infrastructure assets much more efficient for end-users, safer for employees and better for the environment.
Leigh Harrison: Traditionally, these types of businesses have not focused on the collection or analysis of data. We are starting to see that change, however we believe data collection is only the starting point.
As the amount of data grows, we expect infrastructure operators will need to invest in their analysis capability. Using machine learning and smart algorithms, insights from data can be better understood and integrated into decisions that improve the performance of assets.
Leigh Harrison: We also need to remain vigilant to cybersecurity risks.
These assets are relied on by the communities in which they operate and can often be strategically important nationally too. Therefore, cybersecurity vigilance needs to remain at the forefront of infrastructure management.
Overall, we believe these technologies are already making infrastructure assets much more efficient for end-users, safer for employees and better for the environment.
As they advance further and become even more embedded in the infrastructure we rely on every day, we’re excited to see the increasingly positive impact they’ll make for communities and economies around the world.
This market commentary has been prepared for general informational purposes by the authors who are part of Macquarie Infrastructure and Real Assets (MIRA), a business division of Macquarie Group (Macquarie), and is not a product of the Macquarie Research Department. This market commentary reflects the views of the authors and statements in it may differ from the views of others in MIRA or of other Macquarie divisions or groups, including Macquarie Research. This market commentary has not been prepared to comply with requirements designed to promote the independence of investment research and is accordingly not subject to any prohibition on dealing ahead of the dissemination of investment research. Nothing in this market commentary shall be construed as a solicitation to buy or sell any security or other product, or to engage in or refrain from engaging in any transaction. Macquarie conducts a global full-service, integrated investment banking, asset management, and brokerage business. Macquarie may do, and seek to do, business with any of the companies covered in this market commentary. Macquarie has investment banking and other business relationships with a significant number of companies, which may include companies that are discussed in this commentary, and may have positions in financial instruments or other financial interests in the subject matter of this market commentary. As a result, investors should be aware that Macquarie may have a conflict of interest that could affect the objectivity of this market commentary. In preparing this market commentary, we did not take into account the investment objectives, financial situation or needs of any particular client. You should not make an investment decision on the basis of this market commentary. Before making an investment decision you need to consider, with or without the assistance of an adviser, whether the investment is appropriate in light of your particular investment needs, objectives and financial circumstances. Macquarie salespeople, traders and other professionals may provide oral or written market commentary, analysis, trading strategies or research products to Macquarie’s clients that reflect opinions which are different from or contrary to the opinions expressed in this market commentary. Macquarie’s asset management business (including MIRA), principal trading desks and investing businesses may make investment decisions that are inconsistent with the views expressed in this commentary. There are risks involved in investing. The price of securities and other financial products can and does fluctuate, and an individual security or financial product may even become valueless. International investors are reminded of the additional risks inherent in international investments, such as currency fluctuations and international or local financial, market, economic, tax or regulatory conditions, which may adversely affect the value of the investment. This market commentary is based on information obtained from sources believed to be reliable, but we do not make any representation or warranty that it is accurate, complete or up to date. We accept no obligation to correct or update the information or opinions in this market commentary. Opinions, information, and data in this market commentary are as of the date indicated on the cover and subject to change without notice. No member of the Macquarie Group accepts any liability whatsoever for any direct, indirect, consequential or other loss arising from any use of this market commentary and/or further communication in relation to this market commentary. Some of the data in this market commentary may be sourced from information and materials published by government or industry bodies or agencies, however this market commentary is neither endorsed or certified by any such bodies or agencies. This market commentary does not constitute legal, tax accounting or investment advice. Recipients should independently evaluate any specific investment in consultation with their legal, tax, accounting, and investment advisors. Past performance is not indicative of future results.
This market commentary may include forward-looking statements, forecasts, estimates, projections, opinions and investment theses, which may be identified by the use of terminology such as “anticipate”, “believe”, “estimate”, “expect”, “intend”, “may”, “can”, “plan”, “will”, “would”, “should”, “seek”, “project”, “continue”, “target” and similar expressions. No representation is made or will be made that any forward-looking statements will be achieved or will prove to be correct or that any assumptions on which such statements may be based are reasonable. A number of factors could cause actual future results and operations to vary materially and adversely from the forward-looking statements. Qualitative statements regarding political, regulatory, market and economic environments and opportunities are based on the authors opinion, belief and judgment.
Other than Macquarie Bank Limited ABN 46 008 583 542 (MBL), none of the entities noted in this document is an authorized deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia) or banking legislation in other jurisdictions. The obligations of these entities do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities.