Soon 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 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.
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.