The infrastructure industry needs technology to improve value and outcomes but is a long way from realising the many potential benefits of InfraTech. To scale up adoption of InfraTech through investment, two key changes are needed:
- At the asset level, invest more to help InfraTech solutions break into the infrastructure market. At the moment, almost half of the technologies required to achieve transition goals are still at the demonstration or prototype stage. But, it is a monumental challenge for technologies to cross the ‘valley of death’ to their first commercial operation. They need access to mentoring and pilot programs, as well as networks and partnerships, to break into the infrastructure sector on a viable scale. These types of programs require investment, but they pay off – including by providing reporting on the performance of InfraTech solutions that helps others de-risk and develop business cases.
- At the portfolio level, shift from ad-hoc project funding to strategic investment at the state or national level. Infrastructure is the second-least digitally transformed sector of the economy. Much infrastructure operates almost exactly as it did 50 or even 100 years ago because of systemic barriers to technology adoption, often related to the perception and management of risk. A vital solution is to shift from ad-hoc funding of InfraTech at the project level to strategic investment at the national or subnational level, which also drives investment across the lifecycle (see the figure below). This can include the development of national or sectoral InfraTech strategies.
A strategic investment approach can ensure InfraTech solutions are integrated across the lifecycle. Currently, the majority of InfraTech is applied (and possibly ‘retrofitted’) to infrastructure at the operations and maintenance stage. There is a massive opportunity to benefit from InfraTech at other lifecycle stages.
Approaches to scale up adoption of InfraTech through investment
The GI Hub has identified a number of approaches to scale up adoption in InfraTech through investment. Our most recent research, conducted in collaboration with the Asian Infrastructure Investment Bank (AIIB), identified 19 approaches, which can be categorised as policy, commercial, technology, or finance approaches. In an examination of case studies provided by governments, the G20 Infrastructure Working Group, and private sector participants, we found significant variance in how frequently these are applied to projects (see the figure below).
Approaches to scaling up adoption of InfraTech through investment, based on how commonly the approach was applied, in a recent analysis of case studies from G20 countries.
These approaches are detailed in a report we developed for the G20, G20 Blueprint of for Scaling Up InfraTech Financing and Development. Below, we provide examples of these approaches and preview related case studies.
Policy approaches to scale up InfraTech
Approach: Develop a national, regional, or sectoral InfraTech strategy
Our recent work on sustainable infrastructure provided strong evidence that the availability of national long-term strategies was a key driver for scaling up private sector participation and investment into sustainable infrastructure. The same can be said of scaling up investment into InfraTech. These strategy documents make governments’ plans more transparent to private investors, technology providers, and consultants that may be looking for better certainty that they will not be investing in stranded assets technology.
Transparency enables private stakeholders to plan their participation and manage their risk, encouraging them to invest in and adopt technology. Our research has found that all G20 countries have national or sectoral strategies for InfraTech, and more than half of the national plans we analysed identified the adoption and scaling up of InfraTech as a transition pathway to reach net-zero emissions. Overall, the infrastructure sectors that G20 countries are prioritising for investment will encompass investment in InfraTech. By simply linking together these elements into a national scaling and investment strategy for InfraTech, governments can realise the benefits of InfraTech and attract private investment in InfraTech.
UAE’s Arab Roadmap Towards a Zero-Emission, Efficient, and Resilient Buildings and Construction Sector aims to decarbonise the sector and achieve Paris Agreement goals by 2050. It addresses the diverse conditions of Arab countries to support initiation of national roadmaps.
Approach: Adopt progressive and innovative procurement tools and policies
Progressive and innovative procurement tools and policies have clear potential to drive investment into InfraTech, but can be challenging to implement. On the one hand, policies need to keep pace with rapid technological advances; on the other hand, it takes time to understand the costs and potential risks of applying new technology.
Policymakers need evidence that will enable them to develop and implement innovative procurement methods that effectively incentivise InfraTech. The adoption of innovative procurement tools and policies would also benefit from having clear national or sectoral InfraTech strategies. Governments can also use InfraTech as an innovative procurement tool, as is the case with the example below.
AreA is an online platform that can change the way renewable energy is procured in developing economies. It is a novel solution to design and conduct the entire Renewable Energy Procurement Program (REPP) online.
Commercial approaches to scale up InfraTech
Adopt innovative delivery models for better risk sharing
Successfully delivering InfraTech projects can rely on the process of choosing the delivery model and subsequently structuring the project at the early stage. New approaches are emerging for managing interfaces, securing efficient solutions, building local delivery capacity and capability, managing technology integration risk, and managing uncertainties about utilities or ground conditions. Sharing best practice about delivery models can help practitioners make more informed decisions on effective solutions and how to implement them.
Create an international InfraTech ecosystem platform
The InfraTech landscape can be categorised into three layers: at the core is investment in InfraTech development, which includes the activities of start-ups, small and medium enterprises (SMEs), and venture capital investors in developing the technological solutions for infrastructure. In the outer layer is investment in infrastructure projects, which includes the procurement and implementation of technologies within infrastructure projects. The interface between the two is what we call the InfraTech ecosystem.
Image courtesy Asian Infrastructure Investment Bank
Currently, the InfraTech ecosystem – which involves the two-way collaboration and communication between technology developers and investors/financiers of infrastructure projects – is in its infancy and is not operating in an effective way. A new platform that enables better collaboration between the public and private sector through better access to data, knowledge, and insights, could help enable and grow the InfraTech ecosystem.
AIIB is developing a holistic platform to scale up InfraTech investments in Asia. The platform enables identification of technology, stakeholder matchmaking, capacity building, and identification of debt/equity financing.
Technology approaches to scale up InfraTech
Integrate data platforms and digital twins
InfraTech is an important contributor to, and element of, the digital economy. Big data sets contribute to economic efficiencies, and advanced data analytics can facilitate informed decisions and help track and maximise the social and environmental effects of projects for sustainable development. With the digitalisation of infrastructure and the movement to Infrastructure 4.0, a foundational activity for the infrastructure sector is the effective capture and management of large pools of data in data platforms, in compliance with relevant laws and regulations.
One ‘big data’ technology application that is increasingly used in the infrastructure sector is digital twins. A digital twin is a virtual replica of a physical object or system. Digital twins are compiled of several layers of real-world data related to the object or system and can produce predictions or simulations of how that object or system will be affected or influenced by certain operational inputs. Digital twins have potential to attract private investment into infrastructure by helping to reduce upfront costs and/or operational and maintenance expenditure throughout the life of the asset.
Allego's automated digital platform for electric vehicle charging ensures high availability of their charging infrastructure and allows for scalability of user onboarding, billing, and sourcing of green energy.
Safeguard cybersecurity and privacy
With the increased connectivity of infrastructure and data collection comes an increased risk of cybersecurity vulnerabilities. Increased digitalisation, data-sharing, and data-driven decisionmaking must be supported by appropriate policies, governance, and regulation. These should safeguard privacy, protect against new and emerging risks, and also incentivise innovation.
e-Nabiz was developed by the Ministry of Health, Türkiye to create an integrated system for the electronic collection of citizens' health data. Citizens can access all their health information digitally using e-Nabiz.
Finance approaches to scale up InfraTech
Direct public investment toward InfraTech
Governments are leveraging technology and mandating the use of standards and processes (such as Building Information Management) to improve the productivity, efficiency, value-for-money, and affordability of infrastructure projects with respect to lifecycle costs and efficiency. To meet key challenges, such as net zero targets and pandemic response, governments are also directly funding development, trials, and deployment of novel InfraTech solutions.
Analysis from Deloitte found that use of new technology is expected to deliver 5–10% cost savings on project delivery and maintenance. Reforming government internal procurement processes is essential to achieving these potential savings. Procurement approaches should be technology-neutral and solution-agnostic, focusing on standards and outcomes.
Governments can employ collaborative procurement and contracting approaches that involve close work with technology experts to encourage innovation. Evaluation models based on outcomes and a focus on lifecycle costs in determining overall value-for-money will allow greater adoption of InfraTech during the procurement process.
The Madrid 360 Environmental Strategy is an overarching strategy to drive the development and deployment of InfraTech to support Madrid’s path to climate neutrality by 2050.
Increase access to innovative funds, platforms, and de-risking mechanisms
The availability and accessibility of more diverse financial and risk mitigation instruments for InfraTech helps to grow a pipeline of bankable projects and increases the affordability of these investments.
Here again, national or sectoral strategies and policies that signpost a government commitment to InfraTech can be helpful, as can strategic and financial investments into InfraTech start-ups and InfraTech adoption programs. Similar initiatives like ADB Ventures, IFC Venture Capital, EBRD – Venture Capital Investment Programme, and Engie New Ventures have been shown to fast-track development and adoption. Applying these kinds of initiatives to infrastructure could deliver similar outcomes. This can include innovation sandboxes or embedding innovation through government procurement processes.
The Trial Reservoir accelerates technology adoption in the water sector through loans for trials, which minimises the risk of piloting new water technology solutions. Isle Utilities operates the program and provides technical support.
InfraTech poses specific risks that must be managed
InfraTech poses risks, including technology-specific risks, that must be managed. They include the following:
- Implementation risks: Given the complexity of the underlying technologies, there can be potential for unintended adverse impacts on safety and reliability. Nascent technologies also carry additional risks due to greater technological uncertainty. Existing policy approaches and institutions may not yet be ready to manage the complexity of procurement and roll-out of new technologies.
- Economic and labour force risks: As demonstrated by the impact of automation in manufacturing, the adoption of new technologies in infrastructure sectors may result in labour/skill mismatches and job market disruption. In addition, new skills are needed to effectively use new technologies and manage InfraTech operations.
- Social risks: Uneven rollout of InfraTech may exacerbate inequality in access to technologies and infrastructure services. In addition, the exponential increase in data generated through InfraTech poses societal and technical challenges, including heightened cybersecurity risks and issues related to data privacy, protection, and confidentiality.
- Environmental risks: The increased data storage requirements of many InfraTech solutions will result in increased energy consumption (e.g. for data centres and cooling). In addition, some InfraTech solutions currently rely on scarce natural resources (e.g. lithium), and there may be environmental and social issues in the supply chain.
- Obsolescence risk: The rapid and constant evolution of technology often runs counter to the long-term investment horizons of capital projects and can lock investors into InfraTech projects that become outdated or no longer fit-for-purpose. Replacement or upgrading of assets may significantly disrupt project parameters or result in large capital expenditures.
Explore the full blueprint for scaling up Infratech
The infrastructure industry needs to break down barriers that have historically blocked the investment needed to enable technology adoption at scale in the infrastructure industry. This is a complex challenge that involves all players – from the policymakers who decide priority outcomes for infrastructure through to government project procurement teams, private consultants and delivery partners, technology developers and start-up companies, venture capitalists, and other investors.
In 2022 we partnered with the Indonesian G20 Presidency and the Asian Infrastructure Investment Bank (AIIB) to create the G20 Blueprint for Scaling Up InfraTech Financing and Development. The Blueprint sets out actions to advance the elements in the G20 Riyadh InfraTech Agenda and enable the public and private sectors to collaborate and scale up investment in InfraTech. It is complemented by a Stocktake of Approaches for Scaling Up InfraTech, also developed with AIIB.
For more on the approaches to scaling up InfraTech, beyond the examples listed here, explore the full blueprint below and the case studies from the stocktake.