The future of infrastructure

Infrastructure projects are typically long-term, capital-intensive, and slow to embrace change. When it comes to innovation, these complex projects are not necessarily at the forefront.

But a combination of factors is likely to change that: digital innovation, climate resilience, and alternative financing. These mega trends are driving the much-needed change – call it constructive disruption – to the way infrastructure projects are being conceived, designed and delivered, said Sharad Somani, Partner and Head of Infrastructure Advisory, KPMG in Singapore.

“The efficiency and productivity of infrastructure have not necessarily been on top of the agenda for a number of years. Much of the focus was on creating new infrastructure, while improving productivity and efficiency took a back seat,” noted Somani. “As we navigate climate change in a resource-constrained world, we now need to start thinking about extracting greater value out of infrastructure assets, both greenfield and brownfield.”

Steps have already been taken towards transformation, but maximising these opportunities for change would require leveraging technology, greater collaboration, innovative funding mechanisms, and broader skill sets.

To be certain, there has already been progress when it comes to technological advancements in the infrastructure sector. The steady uptake of infrastructure technology, or infratech, in recent years demonstrates the industry’s desire and capacity to advance.

“Developing countries have a great opportunity to leapfrog to the next generation of technology,” said Somani.

Leveraging data and AI to drive smart cities growth is not just about connected infrastructure. These cities can bring governments, businesses, and people seamlessly together in an intelligent, collaborative ecosystem to reimagine city planning, decision-making and how we deliver sustainable and smart infrastructure.

Making more data points available to policymakers – such as population growth, consumption patterns, and buying behaviour – will enhance urban planning efforts.

The predictive capabilities of AI will also enable developers and other stakeholders to foresee six to 12 months ahead, allowing them to anticipate global events that might impact project execution. For instance, AI can advise organisations to procure critical materials and components earlier, if geopolitical tensions are anticipated.

New technologies can also aid the industry in the green transition.

Digital twins, for example, allow developers to effectively visualise the design and operation of a building on a computer. This will not only help identify design flaws before construction, but also optimise energy efficiency through the use of natural lighting and strategic air-conditioning. Running scenarios and developing predictive maintenance programmes will help to optimise operations and maintenance costs while ensuring strong resilience and increased availability.

As the world moves towards a clean energy future, infrastructure will play a critical role in ensuring a country’s climate resilience by building the necessary facilities like charging stations for electric vehicles and a robust public transport system.

But when it comes to the energy sector, there needs to be a mindset change. Somani explained: “Greening the energy sector is not only about creating new capacities in solar and wind, but also about removing fossil fuels from the system.”

According to the 2024 edition of the Statistical Review of World Energy by KPMG and Energy Institute, solar and wind energy capacity grew rapidly in 2023, up 67 per cent from the previous year. However, coal and oil production hit record highs too last year.

The next step in decarbonisation requires the infrastructure sector to answer these important questions: How can we retire traditional power plants earlier? How do we proactively replace them with equivalent clean green energy solutions?

Technology adoption and hitting these energy milestones can push Singapore and the region to be more climate-resilient. But additional, concerted efforts need to be put in place to accelerate the process.

Organisational capacity development is key to ensuring the transition remains just, fair, and equitable for all. Reskilling opportunities must be prioritised to preserve the jobs of those working in traditional sectors such as coal mining and fossil fuel power plants.

Those in the infrastructure industry should also be trained in emerging technologies for the sector’s collective advancement. KPMG’s Future of Work report found that a company’s investment in upskilling influences 62 per cent of employees’ decision to join, leave or stay with an organisation.

These workers will be the driving force behind industry transformation with their support for and comfort with new technologies.

It is also important to recognise that unlike sticking to the status quo, “accepting something new means you have to work harder. It requires a lot of effort from all levels, (from the board to operations)”, said Somani. “They need to each have buy-in.”

That is where public-private partnerships can make a difference. Policymakers are crucial to the implementation of new technology. With industry consultations and collective stakeholder involvements, they can establish forward-looking regulatory frameworks and design incentives like grants and concessions to catalyse innovation.

Additionally, given the capital-intensive nature of the industry, it may not be prudent to rely on governments to finance infrastructure requirements amid other essential needs like education, poverty reduction, and healthcare.

New and innovative ways to mobilise capital, such as blended finance, are necessary to fill funding gaps. The use of both philanthropic and commercial capital lowers the cost and risks for each stakeholder and makes previously commercially unviable projects possible.

The inclusion of philanthropic capital – provided by charitable foundations and individuals supporting social and environmental causes – will enable the development of more pilot projects and new technologies such as green hydrogen.

This includes developing the appropriate matrices to measure the impact of such capital and creating frameworks that can quantify the social benefits being accrued due to blended finance and impact capital. All these would be critical in unlocking this hugely important source of capital that could move the needle in the quest for smarter and more sustainable infrastructure solutions.

The key to this multifaceted approach, Somani concluded, is enhancing collaboration between stakeholders, including the government, multilaterals, academia and the private sector.

For instance, through the KPMG ASEAN Decarbonisation Hub, KPMG has partnered with leading organisations to help businesses in the region achieve their decarbonisation goals.

The Hub will help companies incorporate new technology for implementing innovative solutions, raise green financing by tapping various alternative sources, drive for credible accreditations and certifications across projects to develop trust, and leverage digital tools for cost-effective growth.

Somani said: “Nobody has to reinvent the wheel. We should build on each other’s successes.”