- January 1, 2022: Vol. 9, Number 1

Staying in the driver’s seat: Investors buckle up for the transport transition

by Kali Persall

While much attention has been paid to the “energy transition,” other sectors, such as transportation, are experiencing their own transformation. With the recent passage of the historic $1 trillion infrastructure bill, which dedicates billions of dollars to roads and bridges, public transit, electric vehicles (EVs), and airports, the sector appears to have the ammunition it needs to make long-awaited strides, bringing about new opportunities for infrastructure investors.

The transportation sector can be counted as a key part of the larger energy-transition story. After all, transportation is the largest source of climate-disrupting pollution in the United States. According to Nick Cleary, partner at Vantage Infrastructure, the transport sector has the potential to add at least 25 percent to global electricity demand by 2050 under the current trajectory, and up to 40 percent if net-zero emissions can be achieved.

Researchers say the transport industry will be shaped by three “revolutions”: vehicle electrification, driverless cars and ride sharing. It is possible we may even see a combination of those, given carbon-reduction targets.

Cleary says the shift to new developments such as EVs and associated charging infrastructure can be compared to the adoption of renewable energies a decade ago.

With the transport evolution still in its early stages, Cleary believes, much like renewables, it will likely take another decade before new technology is sufficiently integrated into the market, and costs are reduced enough to enable EVs to shift from a luxury item to a widespread transport solution. Still, he says it is simply a question of when, not if, EVs become the dominant transport mechanism.

Brice Masselot, an investment director at Cube Infrastructure Managers, describes the shift to EVs as “quite massive.” In 2019, just before the COVID-19 pandemic, 1,700 electric buses were introduced in the firm’s European markets, more than during the whole period of 2012–2018.

The second “revolution” pertains to self-driving cars, which are bucking stereotypes of high-energy guzzlers. It was previously suggested that the increased power needs of autonomous cars would make it impossible for them to be electric. However, a paper published by Carnegie Mellon University researchers in July 2020 determined that electric power can supply enough energy for an autonomous vehicle without a significant decrease in range.

Rideshare services such as Uber and Lyft are also undergoing their own green transformation. Transportation network companies, which operate these rideshare services, represent the fastest-growing sector relative to other categories of commercial passenger vehicle fleets regulated by the California Public Utilities Commission. They also stand to have a noticeable impact on emissions. A recent study by the California Air Resources Board found that the potential emission reductions from these fleets are about three times higher for electric vehicles in ride-hailing fleets compared with a conventional vehicle in California.

“There are literally trillions of dollars of institutional investment waiting on the sidelines to invest in U.S. infrastructure,” says Rick Geddes, a professor in the department of policy analysis and management at Cornell University. “There is also a colossal need for dollars to be invested in U.S. transportation infrastructure systems. The key is to develop improved policies and regulations that will facilitate the flow of funds into the facilities where it is most needed.”


Kali Persall is a reporter with Institutional Real Estate, Inc. Read the complete version of this story at this link:

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