Industrial Automation 31st August 2021

Biden’s Infrastructure Bill Will Accelerate Growth In Key Areas Of The US Low Voltage Drives Market

Blake Griffin
Blake Griffin

Blake is an expert in automation systems, industrial digitalization, and off highway-electrification. Since joining Interact Analysis in 2017, he has written in-depth reports on the markets for low voltage AC motor drives, predictive maintenance, and mobile hydraulics.

As the LV drives market continues to climb out of a down year, a vote passed in the US Senate indicates brighter times are around the corner. In a bi-partisan effort, the Infrastructure Investment & Jobs Act passed the Senate on August 10th. While the bill is still facing battles in the House of Representatives, all indicators point to an infrastructure bill being approved to some degree in the near future. The LV drives market, like all other markets, dealt with a turbulent 2020 brought on by the COVID-19 pandemic. As 2021 has brought a new set of problems (semiconductor shortages, high shipping costs, etc.), this announcement should be a welcomed opportunity for drives vendors as the market continues to crawl out of pandemic lows.

While the bill is 2,700 pages long, we are going to focus on allocations to just 4 sectors. At a high-level, the rough allocations to these four sectors is as follows: 

  • $17 billion to port infrastructure
  • $25 billion to airports
  • $65 billion to rebuilding the electric grid
  • $55 billion to water systems

Airports, Seaports, & Terminals 

In the upcoming edition of our Low Voltage AC Motor Drive market report (due to publish at the end of September) we have added several new industries to the analysis one of which being Airports, Seaports, & Terminals. Outlined in the bill is $42 bn of government funding to the sector. Within the airport terminal program section (sec. 2636), the projects to which funding will be allocated are explicitly described. Amongst these projects are ‘projects which improve energy efficiency’. Drives, being an inherently energy saving device, are set to benefit from this allocation of funding. Further, the bill allocates funds disproportionately favoring ‘large hub airports’ indicating that any project won as a result of this initiative will be of larger scale. Of the allocated funds, 55% are reserved for ‘large hub airports’.

Intralogistics applications feature heavily across airport terminals and represent a large opportunity for two of the fastest growing product types within the motor drive market. Decentralized and motor mounted drives are found often in intralogistics applications such as baggage handling within airports.

Decentralized & Motor Mount - a higher share of the product mix compared to other industries

Historically, the US has lagged behind in adopting these two product types when compared to other countries. However, there has been a recent surge in adoption as customers are beginning to utilize these solutions over their wall-mounted counter parts. As new airport infrastructure projects begin to roll out, we expect the products to gain even greater momentum as they support the progress of many trends in the airport automation sector including increasingly decentralized baggage handling systems. Expect decentralized and motor mounted drive vendors to benefit greatly from initiatives aimed at modernizing airport infrastructure

Water & Power 

Far and away, the largest allocation of funds from the infrastructure bill is towards improving water and power sectors. A staggering 120 billion dollars is allocated towards these sectors. Some key allocations as they pertain to potential drive sales are as follows:

  • 15 bn to ground water storage and conveyance projects (sec. 40901)
  • 1 bn for rural water projects (sec. 40901)
  • 1 bn for water recycling & reuse projects (sec. 40901)
  • 250 mn for water desalination projects (sec. 40901)
  • 3 bn for projects to enhance grid flexibility (sec. 40107)
  • 75 mn reserved for hydroelectric efficiency improvement incentives (sec. 40332)

There are dozens more examples we could cite from the 2,700-page document but these should give an indication for the scale of investment to be seen.

Water and Power are two of the largest end-user sectors of motor drives and we estimate sales of drives to the water sector alone to make up nearly 14% of sales to end-users in the Americas.

Water is the single largest end-user sector of drives in the Americas region.

With this in mind, it becomes clear why the impact of an infrastructure bill is so profound for drive suppliers. Projects which result in the upgrade or addition of drives to an already booming sector represent ripe opportunity over the next 5 – 10 years. However, it should be noted that all of this comes with one major caveat: SEC 70921.

SEC. 70921: Regulations Relating to Buy American Act

In order to receive federal funding outlined in the bill, there is a stringent requirement for manufactured goods used in a project to be made in the United States. This is an effort by US law makers to ensure that the US tax dollars spent on this project stimulate the US economy. Originally limited to iron and steel products, the bill’s language is expanding the requirement to include all manufactured goods. According to an article written by Global Water Intelligence, this threatens to undermine the historic injection of funds by adding cost, complexity, and time to the projects in question. From a drive supplier’s perspective, it puts added emphasis on having a US manufacturing base. Without it, it will be difficult to be considered as a potential vendor for these projects.

4th Edition of our Low Voltage AC Motor Drive Market Report to Publish Soon

Our new report covering the market for low voltage AC motor drives will be publishing near the end of September. This report represents the highest-caliber data and insight available on the topic and continues to raise the bar of quality for market intelligence reports. If you are interested in discussing the topic or purchasing the report, please contact info@interactanalysis.com. The report is available for a 15% discount ahead of publication.

 

 

 

 

 

 

 

 

 

Posted in: Industrial Automation.