The accelerating pace of technological disruption today poses growing challenges for institutional owners and managers of long-term infrastructure assets, even as it opens up opportunities as well.
The risks facing owners and managers of infrastructure portfolios in the coming five to eight years "will be greater than the risks … seen in the last 20 years," necessitating a much more active approach in constructing and managing those portfolios, said Ross Israel, head of Brisbane-based Queensland Investment Corp. Ltd.'s A$11.3 billion ($7.8 billion) global infrastructure business.
Industry veterans cite advances in solar power and battery storage, which could leave a growing army of household and corporate customers positioned to sell electricity back to the grid, and the inevitable rise of electric and autonomous vehicles as examples of the kind of developments that could upend long-held assumptions about opportunities to invest in infrastructure.
Investors in the electricity sector have historically been looking at "centralized generation of electricity, moving to high voltage transmission to low voltage distribution, and then to a retail customer," often with different owners of each of those four components, said Mr. Israel. Today, generation is becoming more decentralized with the rise of renewables, while coming advances in battery technology will take disruption to the next level, he said.
With a likely move toward distributed power grids and more localized energy generation, marked by households and companies with solar installations selling electricity back to the grid, "how are you going to manage those flows, who owns the transmission grid, how is that business model going to work in the future?" asked Neil Johnson, a Hong Kong-based managing director and head of infrastructure, China, with Macquarie Infrastructure and Real Assets. MIRA oversees roughly A$178 billion in infrastructure assets through public and private funds, co-investments, partnerships and separately managed accounts.
Still, disruption always brings opportunities and "I would expect there'll be some very interesting angles to play," Mr. Johnson said.
With that looming change, asset owners will need to be more mindful of technological disruption than before, said Bruce Crane, managing director for OMERS Infrastructure in Singapore — the first office in Asia opened, last year, by the C$97 billion ($72.1 billion) Ontario Municipal Employees' Retirement System, Toronto.
OMERS Infrastructure reported C$20.3 billion in unlisted infrastructure equity assets as of Dec. 31.