Season 6, Post 30: Hot times
Your author has, sadly, yet to take a summer vacation. Regardless, he has enjoyed endured temperatures of over 30 degrees Celsius for much of the last week in central London. The UK’s capital is not unique in seeing the mercury elevated. Late July saw the warmest days on record globally since at least 1940, per the Copernicus Climate Change Service. That’s not all. The past 13 months have posted consecutive new highs for warmth on land. In the oceans, the record extends 15 months. The world needs to worry.
Warmer temperatures have clear implications for energy, transportation, food systems and more. We have written in the past about all these topics. Recent events have reminded us in particular about the urgent need for electricity grid infrastructure upgrades. Grid modernisation should be front and centre for policymakers globally since it is critical to support economic growth and digitalisation. Grids and their potential compromise are also a matter of national security.
When the infrastructure of the largest economy in the world is awarded a C- by the American Society of Civil Engineers (ASCE), you know there is a problem. The ASCE reports that 92% of all recent grid outages have been as a result of extreme weather conditions. Its report states boldly that “all three major components of the electric grid have an investment gap.” The body’s projection suggests that almost $200bn will need to be spent on upgrading electricity generation, transmission and distribution in the US by the end of this decade.
The problem is far from US-specific. A report shared with us by one of our research providers highlights that the world’s transmission cable network must double in length by 2050. For context, this is nearly the distance between the Earth and the Sun. Where the money will come from to fund this, of course, remains to be seen. If you’re a business involved in grid maintenance and upgrades, then you will at least be smiling (perhaps while sweating too, in the heat). Quanta Services reported last week a record order backlog of over $31bn.
7 August 2024
The above does not constitute investment advice and is the sole opinion of the author at the time of publication. Heptagon Capital is an investor in Quanta Services. The author of this piece has no personal direct investment in the business. Past performance is no guide to future performance and the value of investments and income from them can fall as well as rise.
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Alex Gunz, Fund Manager
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