Low-Carbon Infrastructure: Canada and the U.S

DECARBONIZATION LEVER

Infrastructure Investment Primed in Canada and the U.S.

By Barbara Carss

PROSPECTIVE PROJECT proponents in the United States are looking to Canadian models for facilitating publicprivate partnerships (P3s) as they contemplate the infrastructure investment that two recently enacted spending bills are designed to trigger.

Speaking during the Bloomberg online Canadian finance conference earlier this fall, Mac Bell, Director of Infrastructure Investments with Fengate Asset Management, identified Infrastructure BC and Infrastructure Ontario as frameworks that could help U.S. state and local governments take advantage of the vast new pots of funding.

“In Canada, these agencies work on behalf of governments everywhere to procure infrastructure. They have the documents. They have the process. They have the expertise to manage execution of the project and the procurement to pick a private sector partner through the P3 model,” he said. “The U.S., I think, is still at a very early stage. It would be very helpful if there was a SWAT team of experts, perhaps domiciled in a federal agency or a state agency somewhere, where states, counties and cities have access to expertise and best practices around procurements.”

An onslaught of transportation, telecommunications, energy, utility, facilities and decarbonization projects are foreseen in the months and years ahead as state and local governments and a range of broader public sector and communitybased players tap into capital grants and tax incentives conveyed through the U.S. Infrastructure Investment and Jobs Act and the Inflation Reduction Act. Bell and fellow panellist Anthony Phillips, Co-head of Public-Private Partnerships and Projects with the P3 investor and manager, John Laing Group, predict that P3s will be central to the rollout of many of those projects.

For public partners, P3s are a means to transfer capital and ongoing operational risk. For the private sector, infrastructure’s recession-proof profile dovetails with expectations for a prolonged building spree.

Clean energy, grid capacity to enable the electrification of transportation and space heating/cooling, and broadband for realtime smart control of almost every element of the transmission and distribution system are chief among the required components to achieve the ambitious targets for curbing greenhouse gas (GHG) emissions that both the Canadian and U.S. governments have embraced. As well, massive amounts of investment is needed in facilities and civil engineering to rein in carbon footprints and improve climate change resilience.

“The asset class is highly attractive both to industrial and financial investors given its core characteristics — given the sector tower winds, the strong ESG profile and attractive investment characteristics,” Phillips submitted.

“Infrastructure is a good long-term investment for those contemplating the

class and this is why: public policy; fiscal policy; and a secular growth story,” Dave Wahl, a Director and Portfolio Specialist with ClearBridge Investments, reiterated during a recent webinar sponsored by the NEO Exchange.

EV CHARGING PRIORITIZED In the U.S., Bell and Phillips cite opportunities in education facilities and campus energy systems, transportation hubs including airports, rural broadband and electric vehicle (EV) charging infrastructure. In the near term, the majority of states now have federally approved EV deployment plans, giving them access to a share of the USD $5 billion allocation for 2022-23 earmarked for charging networks.

“We’ve started to see that money rolling out to support that infrastructure,” Phillips reported. “There needs to be a robust charging network and this is where we think P3 can play a role supported by the federal funding.”

EV charging is also on the Canada Infrastructure Bank’s (CIB) wish list for joint investments with private sector partners. The 2022 federal budget affirmed that $500 million of “existing resources” in the CIB’s green infrastructure envelope would be dedicated to “large-scale urban and commercial zero-emission vehicle charging and refuelling infrastructure”, while the government commits an additional $400 million over five years (2022-23 to 2026-27) to its zeroemissions vehicle infrastructure program (ZEVIP) to subsidize installations in less densely populated areas of the country.

Speaking during the Bloomberg online finance conference, CIB Chief Executive Officer, Ehren Cory, summarized the bank’s five priorities — clean energy; green infrastructure; transit systems; trade and transportation; and broadband — and mandate to leverage CAD $35 billion to stimulate further investment. He characterized the fund as a lubricant.

“What we are really trying to find is those good projects that deliver public value that are stuck. They might be stuck because they are too risky or uncertain or have really long paybacks,” Cory noted. “Those are the sorts of things that government money can help solve — patient capital, long-term capital, risktaking capital — to pair with that private sector money in those five sectors.”

Thus far, the CIB has invested in nearly 40 projects, of which about 20 are now under construction. That includes a number of deals for commercial building retrofits and municipal transit fleets, which Cory called “almost the base load” of agreements to date, but low-carbon fuel and EV charging projects are expected to come on soon.

The latter could epitomize the “stuck” project, presenting a scenario in which prospective investors look for assurance of demand for chargers, while prospective EV purchasers hesitate to buy before they have assurance of an easily accessible charging network.

“To me, this is like a perfect use case for the CIB,” Cory maintained. “There’s a real chicken-egg problem in that investment case, but in the long run, there’s a great business.” INFLATION COMPLICATIONS Inflation and rising interest rates have also emerged to complicate investment in ways not felt when the CIB was launched in 2018.

“The role of the CIB gets even bigger in periods like we’re in right now of high market uncertainty and risk because that’s what we can help manage. We can help insulate to some extent, or share in that risk,” Cory asserted.

“Investment in infrastructure is really important in times like these,” he added “It is one of the few truly cycle-proof kinds of asset classes. Infrastructure helps bring us through economic downturn and recessionary periods because it grows our competitiveness. It grows our economy.”

From a P3 perspective, Phillips commended the trend to inflation riders in Canadian contracts so private and public partners share the impact of rising material and equipment costs, and argued the practice would also serve U.S. proponents well.

“The alternative is that our contractors will just choose to focus on other projects and away from what they consider to be a position that’s just got too much risk for them,” he said. “It goes to market appetite and the mechanisms that clients can provide to ensure that they have the world’s best turning up to their projects.”

“There are mechanisms that have been developed elsewhere to allow contractors to address that risk and it’s for the benefit of the public sector also because it allows for more competitive pricing from contractors to deliver these projects,” Bell concurred. zz

A FOCUS ON ELECTRICITY GRID CAPACITY

Thirteen electricity utilities and system operators across Canada have agreed to share experiences and learnings around expanding grid capacity for decarbonization through renewable power sources, energy storage and smart technologies. The Canadian Renewable Energy Association (CanREA) is coordinating the collaborative effort through a newly established electricity transition hub, launched with a $1.6 million funding injection from the Canadian government.

“CanREA is uniquely positioned to gather global knowledge on wind energy, solar energy and energy storage integration, and then to translate these resources effectively to be relevant in all of Canada’s different regions and electricity systems,” says Phil McKay, who will serve as Senior Director of the electricity transition hub.

CanREA has also contributed $300,000 to the initiative with the aim of building a repository of transferrable knowledge related to decarbonizing the electricity grid and delivering sufficient and reliable supply for the electrification of transportation and space heating/cooling. The hub will provide a forum for utilities and system operators to connect through quarterly meetings and an annual summit, and will also publish quarterly reports.

Founding partners include: Alberta Electric System Operator; BC Hydro; City of Medicine Hat; EPCOR; Essex Power Corporation; Fortis Inc.; Manitoba Hydro; NB Power; Ontario Power Generation; Qulliq Energy Corporation; SaskPower; Toronto Hydro; and Utilities Kingston.

“The renewable energy industry has a critical role to play in helping Canada meet its net-zero commitments, and we must build new wind energy, solar energy and energy storage projects at an unprecedented pace,” observes Robert Hornung, CanREA’s President and Chief Executive Officer. “Now is the right time to bring together Canada’s electricity utilities, system operators and the renewable energy industry for capacity-building activities related to the deployment and integration of these technologies within electricity grids. There is not a moment to waste.”

WINTERIZING

Your COMMERCIAL PROPERTY

Even the toughest commercial buildings can fall prey to Canadian winters. Harsh storms, heavy snow, and heightened water damage risks can jeopardize critical systems and infrastructure while putting occupants and visitors at risk. Still, as is always true in property management, being proactive pays.

“Every winter introduces a host of potential hazards, all of which can affect the safety and structure of your properties. And if winter-related damage isn’t prevented or detected until spring, you could be looking at additional issues and costly repairs,” says Craig Smith, Director of Commercial Business Development with FIRST ONSITE.

Surely, by identifying and addressing potential winter risks, commercial property managers and owners can take preventative measures to protect their assets and keep tenants safe and comfortable.

IT BEGINS WITH A PLAN

The fi rst step in winterizing a commercial property is to create a game plan. Collaborate with your facilities team and disaster prevention specialists to design a winter-preparedness plan that your teams can follow throughout the winter to ensure your building and its occupants stay protected.

Key components of a commercial property winter plan include: • Building assessments & routine inspections: Knowing where your building is most vulnerable to winter damage is the fi rst step in cold-weather preparedness. Walk the property with your facilities teams and specialists to size up potential structural issues and maintenance needs that need addressing before the snow, sleet, and cold set in.

And don’t just stop at one. Continue conducting building inspections throughout the cold months to keep track of your building’s condition. This is especially important after a storm or during extreme temperature dips when even the slightest damage (e.g., cracks, tears, water leakage, etc.) can evolve into costly and unsafe issues. • Prevent fl ooding and water damage: Water from melting snow and ice can damage commercial properties if given a chance to seep in. Seal, repair, or address any defi ciencies on your roof, building envelope, or foundation that may facilitate water infi ltration (e.g., cracks, holes, weaknesses, etc.), and remove snow piles on the roof or near the foundation that may thaw and pose additional water issues.

Remember: when a water emergency happens, you need to catch it quickly. For this reason, many multifamily property managers/owners have found it benefi cial to install water monitoring and leak detection technology that alerts the appropriate responders to potential water events the moment they begin to occur. • Control exterior water access: Turn off water access to outside faucets to avoid pipes from freezing and bursting, which could lead to fl ooding. Similarly, shut down irrigation systems to preserve them through the winter and avoid problems in the spring.

• Protect your pipes: Seal or block drafty areas in a building where pipes may be exposed to freezing temperatures, and wrap pipes to insulate them from freezing or cracking.

Doing so will keep heating systems in working order and will go a long way toward preventing the aforementioned risks of water damage. • Install backwater valves: Melting snow or ice can push municipal water systems to their limit, sending dirty, unsafe water back into a building’s system and necessitating a property restoration team and sophisticated cleaning methods. Avoid backwater by installing a mainline sewer backup valve that makes sure sewage travels on a one-way path out of the building. • Prevent snow and ice build-up: Prevent snow from piling up on roofs and supporting structures. Heavy snow loads can lead to structural damage or collapse, leading to costly repairs and - more importantly - putting building users at risk. Similarly, excessive ice build-up on roofs can jeopardize the integrity of the building and pose safety risks for residents below.

On the topic of ice, inspect meters, door locks, and door handles on the ground level, as they may freeze due to melting water from higher surfaces dripping down and reforming as ice. • Keep entrances and exits clear: Make sure all points of entry and exit are continually cleared of snow and ice so they can be used safely in the case of an emergency. This can be done by placing sand, salt, and shovels in an accessible area or hiring a snow removal company ahead of time to clear sidewalks, parking lots, and roads when needed. • Don’t forget about fi res: The risks of a fi re are always a concern. Collaborate with your fi re department to mark the hydrants close to your business property above the snow line so they’re easier to locate. Also remember to clear space around hydrants after a snowstorm and check that all building extinguishers are full and working properly. • Crack a door: While it may seem common sense to keep doors closed in a commercial building to keep the area warm, it is advisable to leave them open in areas prone to condensation and precipitation, as the continuous air fl ow will minimize cold spots and help prevent moisture build-up.

READY TO REACT

Even the most prepared commercial property may experience an emergency. Herein, one of the most important things to consider as winter approaches is that an emergency plan is in place.

Emergency preparedness plans include considerations for evacuation plans and routes, ensuring life safety systems are working (e.g., alarms and sprinklers), and that people are assigned to close off water, gas, and electricity to avoid property damage from fi res or fl ooding. They should also include contacts for emergency services (fi re, ambulatory, and police), insurance reps, and a trusted property restoration partner.

“There are a lot of steps you can take to prevent a winter disaster, but when an unpredictable winter event occurs, it is also imperative to have an emergency preparedness plan for your business,” adds Smith.

Craig Smith is Director of Commercial Business Development with FIRST ONSITE, and can be contacted at craig.smith@firstonsite.ca. FIRST ONSITE is a leader in emergency response planning, disaster remediation, property restoration, and reconstruction services, helping clients restore, rebuild, and rise after catastrophic events of every kind. Learn more at www.firstonsite.ca.