GIIA's market spotlights August 2024

U.S. news

By David Quam, Senior U.S. Advisor and Alessandro Pecorari, Policy & Public Affairs Manager

August began with news of Governor Tim Walz being announced as Vice President Kamala Harris’ running mate for the upcoming presidential election. As acting Governor of Minnesota since 2019, he has focused his messaging on his long-time support for issues important to rural Americans and middle-class families, including renewed, modernised and sustainable infrastructure. Since taking office, his infrastructure policies have centred on several key areas: transportation, broadband, climate change and sustainability through streamlined permitting. Notably, he has shown support for large-scale P3 projects, endorsing the Minnesota Department of Transportation P3 project for the I-494/I-94 interchange in the Twin Cities. Most recently, he proposed a $982m package aimed at modernising Minnesota’s infrastructure. 

In early August, GIIA attended the National Conference of State Legislators’ Legislative Summit in Louisville, Kentucky. This event brought together public policy experts to network and prepare for the next cycle of policy challenges that lie ahead in various domains, from transportation and infrastructure to energy and AI. A particular focus of the transportation panel was the viability of the gas tax to fund future infrastructure investments. All panelists agreed that the rise of electric vehicles, increased fuel efficiency of gas-powered vehicles, and an increasing need for infrastructure investment will require the U.S. to find an alternative funding source for future infrastructure projects and maintenance.

At the federal level, the Department of Energy (DOE) announced $2.2 billion in federal funding to strengthen the U.S. electrical grid in response to twin pressures of extreme weather caused by climate change, as well as the increased energy demands due to the digital and green transition. The funding will support eight projects under the second instalment of the Grid Resilience and Innovation Partnership program. The first included the allocation of $10.5 billion and was funded through the Bipartisan Infrastructure Law. These projects will build 600 miles of new transmission lines, support public-private partnerships working on strengthening grid resilience, and renewable interconnection, and according to the DOE, will benefit 56 million homes and businesses who will be able to enjoy more affordable and reliable electricity. The states to benefit from this second round of funding include California, Montana, North Dakota, New York, and Virginia, with the latter receiving $85 million for two data centres to develop clean battery energy storage.

UK news

By Nick Elliott, Policy & Public Affairs Manager

Infrastructure has maintained a prominent position in the government’s post-election agenda, reflecting its critical importance.

Earlier this month, we had the pleasure of hosting an ‘Infrastructure Investment Teach-In’ in collaboration with the Department for Business & Trade. The event attracted around 60 civil servants from HM Treasury, the Department for Energy Security & Net Zero, the Department for Environment, Food and Rural Affairs, and other key departments. The session provided an invaluable platform to update civil servants on current infrastructure investor sentiment, as captured in our Pulse survey, and to offer an ‘Infrastructure Investment 101’ – an essential overview to help them understand how investors make decisions and the pivotal role of policy in this asset class.

This month has also seen the revival and initiation of several important policy processes. We are encouraged that the government is now considering next steps following the most recent Review of Electricity Market Arrangements consultation. Our continued advocacy will focus on addressing existing challenges, such as planning delays and grid access issues, before moving forward with any major market reforms. We also welcome the new consultations on long-promised planning reform, and we are currently preparing GIIA’s response. As the government seeks to increase pension investment in infrastructure, we look forward to engaging with HM Treasury as part of their ongoing review of the UK pensions system. This review’s outcome could significantly impact both private and public sector pensions, and we will keep you updated as the situation evolves.

In the water sector, the consultation period for Ofwat’s draft determinations has recently concluded. In our response, we expressed significant concerns over several aspects of the proposals, particularly the substantial cuts in enhancement spending, which could severely hinder the sector’s ability to tackle critical challenges like sewage spill reduction and infrastructure resilience. We also highlighted concerns about increased regulatory constraints, such as restrictions on executive compensation and dividend payments, which could limit companies' operational flexibility and financial strategies. These issues, coupled with underfunding, may lead to difficulties in meeting elevated performance targets, potentially eroding public trust and investor confidence. We have strongly urged Ofwat to reconsider its approach in the final determinations to ensure the UK water sector remains sustainable, resilient, and capable of attracting the investment needed to meet future challenges. We look forward to a roundtable with the secretary of state, Steve Reed, in the coming weeks on these issues. 

EU news

By Harvey Chandler, Head of Policy & Public Affairs

Brussels is set to return from the summer break, meaning institutions will move back into gear, starting with the nomination and approvals by the parliament of new Commissioner candidates.

Ursula Von Der Leyen and her new college of commissioners, once appointed, will need to work out how to deliver the priorities of EU council leaders, from strengthening the EU's long-term competitiveness to accelerating the green and digital transitions. One item set to guide the path, is the long-delayed Draghi report on competitiveness commissioned by Von Der Leyen which will feed into the wider debate on what the EU needs to do over the new legislative term. Right now we expect that it will be published in mid-September.

As the Commission and Parliament determine their priorities through the remainder of 2024 and into 2025, many items carried over from the last parliamentary term will also need to be factored in.

On energy, member states will be considering the Commission's 2040 interim net zero target to reduce emissions across the EU by 90%, up from the 55% target in place for 2030. An agreement between member states is expected in the first quarter of 2025 at the earliest, as governments consider the balance between ambitious climate objectives against concerns regarding competitiveness and the resilience of industry. 

On FDI, the EU's delayed decision to Autumn 2025 on whether to introduce a screening mechanism for outbound investments by EU businesses into other jurisdictions will need to be carefully considered. This is an area GIIA is increasing its focus, given the need for any forthcoming changes to account for the impact delays will have on dealmaking due to the longer timetables an expansion of the screening regime would have.

In transport, 2025 will see the last year of the transitional regime for the Carbon Border Adjustment Mechanism (CBAM) before the EU's definitive regime comes into effect in 2026. Changes will have implications for infrastructure construction costs, and will support investments in renewable and low-carbon technologies in the EU, and in third markets that export into the EU. GIIA's work in areas surrounding the Green Deal have helped to feed into CBAM and the wider Fitfor55 package, finalised earlier this year.

GIIA has convened members in the digital space to contribute to DG CNECT's white paper on 'How to master Europe's digital infrastructure needs?', and we expect further details to be published later this year. We expect to learn how the EU's legislative programme will support many of the measures raised through the paper.

For information on how you or your company can get involved in our advocacy work, get in touch with our Membership Officer Sophia Taylor, or email any of our Policy & Public Affairs team via the links above.