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GIIA's market spotlights May 2024

GIIA's Policy and Public Affairs team round up on our global advocacy work throughout May

Market spotlights

U.S. news

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

GIIA’s leadership team was in Washington, D.C. and New York City for this year's Infrastructure Week. Taking place between 13 and 17 May, GIIA played an active role in participating and hosting events to highlight the role of private capital in U.S. infrastructure.

The week started with the launch of the American Society of Civil Engineers' (ASCE) new economic study, 'Bridging the Gap'. The study analyses the impact new investments from the Infrastructure Investments and Jobs Act (IIJA) have had on America's infrastructure funding gap, what happens if this funding goes away, and the need for state and local governments and the private sector to close the difference between what is needed and what is funded. GIIA’s U.S. Senior Advisor, David Quam, participated on one of the panels speaking about the importance of involving the private sector to address infrastructure needs. David highlighted GIIA’s latest Pulse survey results for the U.S., which show that the country remains the top destination for infrastructure investors and how this presents an opportunity for the public and private sectors to develop and modernize infrastructure across the U.S.

GIIA attended 'Invest. Permit. Build', Accelerator for America Action’s penultimate event at the U.S. Chamber of Commerce. The series of speakers featured federal and state officials as well as private sector CEOs highlighting successes of the IIJA, calling for improvements to project permitting, developing apprenticeship readiness programs, and discussing how to improve infrastructure project resilience in the context of climate change.

Wednesday featured a broad roundtable discussion with leading infrastructure associations talking about priorities for reauthorization of the IIJA. Hosted by GIIA and moderated by CEO Jon Phillips at Sullivan & Cromwell's office, the meeting demonstrated the commonalities between industry and government associations in prioritizing the need for continued investment, permitting reform, and the need to highlight the successes of public and private investment in improving U.S. infrastructure. This meeting as followed by a rooftop reception which offered GIIA and its members an opportunity to network with industry leaders and federal, state and local officials.

GIIA capped the week by co-hosting a site visit to the new Terminal One at JFK with GIIA member Ferrovial Airports. The event included GIIA members as well as state infrastructure coordinators from the Northeast. The invitation-only event featured discussions of how Ferrovial Airports is working with numerous public entities to fund, build and manage the massive project.  Although the project was begun before the passage of the IIJA, like the improvements at neighboring airports in New York and New Jersey, Terminal One will be an example of what is possible when private capital is involved in transforming public infrastructure.

The Federal Energy Regulatory Commission (FERC) released two orders in May to address the growing demand for electricity by speeding up the planning and permitting of long-distance transmission lines.  The first rule calls on transmission operators to conduct and update long-term transmission planning over a 20-year horizon and consider additional benefits of transmission in funding decisions. The second rule reaffirms the Commission’s backstop authority over transmission lines designated in the national interest.

In mid-May, the Biden administration announced the raising of tariffs across a set of Chinese imports, including key energy transition and infrastructure components such as solar cells, electric vehicles and batteries. This is part of the ongoing effort to combat what are seen by the administration as unfair trade practices.

UK news

By Nick Elliott, Policy & Public Affairs Manager

The Prime Minister this month fired the starting gun on what promises to be a fiery campaign period ahead of the election on 4 July.

Many of the key policy topics we have been working on are now in a holding pattern within various government departments. This means that when the next government, regardless of its composition, settles into their positions in Whitehall, there will be crucial decisions to make regarding which policies to advance, revise, or discard.

In the energy sector, one of the most pressing unfinished policy processes on ministers' desks will be the Review of Electricity Market Arrangements (REMA). With the second consultation period now completed, the next government will face significant decisions regarding the potential introduction of Locational Marginal Pricing (LMP) and reform of the Contracts-for-Difference (CfD) mechanism. Our message to the government has been clear: implementing LMP would increase the cost of capital, negating consumer savings as this cost is passed on to customer bills. We have been calling for existing challenges, such as planning delays and grid access issues, to be resolved before introducing wide-scale market reform.

In the water sector, Ofwat’s draft PR24 determinations will be delayed from their originally planned release in mid-June. This delay could impact the overall PR24 process timeline, and we are actively monitoring this issue on behalf of our members.

Despite an element of uncertainty, this month has also brought several positive developments, indicating that the UK is beginning to address the challenge of delivering the most ambitious infrastructure investment programme in its history. The Department for Business & Trade released a new White Paper, which includes several reforms aimed at making the UK’s regulatory regime more investment-friendly. This demonstrates that our contributions to the smarter regulation process have been recognised, and that meaningful reforms are forthcoming. Additionally, the permanent introduction of the Growth Duty to Ofgem, Ofwat, and Ofcom this month suggests a steady upward trend in the importance of attracting investment within the UK’s regulatory agenda.

As highlighted in the National Infrastructure Commission’s Infrastructure Progress Review released earlier this month, the window of opportunity for the UK to establish practical delivery plans for infrastructure is closing. Following July’s election, it is imperative that the next government prioritises creating a stable and attractive policy framework. GIIA will continue to play our part in ensuring this objective is achieved.

EU news

By Harvey Chandler, Head of Policy & Public Affairs

GIIA met with DG Connect (DG CNCT) in May on its digital infrastructure white paper, which forms a core part of the Commission’s suite of consultative tools ahead of the election helping to inform the policy agenda of the next Commission. Members of the EU Working Group are also being given the opportunity to have a wider discussion with CNCT’s B.5 unit, who is leading the consultation, offering opportunities to help shape the future investment environment linked to investments in sub-sectors including fibre, data centres and other telecoms infrastructure such as towers and masts. The white paper closes for consultation on 30 June 2024 for those considering a submission.

New rules outlined as part of the EU's electricity market reforms are set to come into effect in June after sign off in May. Under the rules, member states will have up to six months to adapt their national legislation to the provisions of the electricity market directive. This includes putting measures in place to promote the uptake of Power Purchase Agreements (PPAs) and cut unnecessary red tape and charges. Two-way CfDs or equivalent schemes will also be used in direct price support schemes for investments in electricity generaton as a way of addressing price volatility concerns. We'll be continuing to engage the Commission and Member States in the coming months on issues linked to the reforms on behalf of members, to provide investors with the necessary conditions conducive to investments in infrastructure linked to the energy transition.

 May also saw the adoption of a new regulatory package establishing common market rules for renewable gas, natural gas and hydrogen. The new regulation establishes common market rules for renewable gases and hydrogen, mandates national network plans for electricity, gas, and hydrogen, and facilitates access to the existing gas grid. It aims to boost renewable and low-carbon gases by ensuring consistent emissions assessment, aiding member states in their energy mix decisions. It also includes measures to phase out fossil fuels, ending long-term contracts for unabated fossil gas by 2049. The adoption of the regulation establishes much-needed clarity in areas such as hydrogen, where many investments remain dependent on frameworks being established alongside other de-risking tools.

For information on how you or your company can get involved in our advocacy work, get in touch with our Membership Officer Sophia Taylor.