Source: GI Hub calculations based on IJGlobal data.
Despite the value of private infrastructure investment being stagnant for eight years running, the number of transactions has been trending up since 2016 and has more than doubled between 2016 to 2021. This positive trend shows that more infrastructure projects are being financed and highlights progress towards closing the infrastructure investment gap and meeting global climate goals. Despite this increase, the total value of investment is not increasing, which indicates that the average size of the additional transactions being financed is smaller than projects financed in previous years.
The upward trend in the number of transactions has largely been driven by growth in the number of solar photovoltaic (PV) projects which tripled between 2016 and 2021. Nonetheless, solar PV projects also have the lowest average transaction size among all infrastructure sector projects - around USD109 million, equating to roughly 11% of the average offshore wind project, 17% of the average non-renewable project, and 18% of the average transport project (the three largest infrastructure sectors/subsectors by transaction size). In 2021, 31% of the total number of transactions were in solar PV, more than half of which (56%) had a project size smaller than USD100 million.
On a region level, the increase in the number of transactions since 2016 has been led by Latin America, partly reflecting the Brazilian government’s increased promotion of private sector involvement and the creation of its Investment Partnership Program in 2016. Latin America saw projects almost triple between 2016 and 2021. This is largely attributable to the renewables sector (mostly solar PV and onshore wind), which represented half of all projects in the region since 2016.
This trend continues across all regions with renewable energy being the dominant sector in every region during this recent period. Renewable projects ranged from 46% (in the Middle East) to 68% (in North America) of all projects in each region. Within the renewables sector, solar PV projects led the way in every region except for Western Europe and the Middle East, where onshore wind was the leading subsector.
After renewables, the telecommunications sector has been the second largest contributor to the increase in the number of transactions since 2016. With the rise in digital connectivity during the pandemic, telecommunications projects more than tripled in number in 2021 compared with the average of the preceding five years. Non-renewable energy generation was the only sector that saw a drop in the number of projects in 2021 – an extremely positive note. In 2021 we also saw recovery in all regions that fell in 2020 – another positive note which highlights the resilience of the infrastructure sector.
Still, current levels of renewable investment are not sufficient and, according to the International Energy Agency, wind and solar capacity additions must quadruple by 2030 to reach global net zero emissions by 2050. There is also no evidence of growth in transactions in other sectors such as transport, social, and water and waste. These findings show that there is ample scope – and opportunity – to ramp up private investment in infrastructure and accelerate the closing of the global infrastructure investment gap and progressing global climate goals.