Keeping the lights on: Global infrastructure investment must jump by two-thirds to $64 trillion by 2050, new Aberdeen modelling suggests

The world’s largest economies will need to spend around $64 trillion on physical infrastructure by 2050² if they want to keep the lights on and the wheels turning, new modelling from Aberdeen Investments, the specialist asset manager, suggests.  See notes to editors for methodology.

This is equivalent to 1.7% of global GDP per year and is almost two-thirds higher than the $39tn spent on infrastructure investment between 2000 and 2024.

Aberdeen looked at 47 countries ³, modelling how their economies’ infrastructure needs would change by 2050 based on a range of factors including productivity, demographic change and urbanisation. It then calculated the cost of meeting those infrastructure needs.⁴

Robert Gilhooly, Senior Emerging Markets Economist at Aberdeen, said:

“Physical infrastructure - such as road and rail, power generation and utilities - is a ‘keystone’ within the building blocks of growth. Good infrastructure cuts the cost of doing business, for example by lowering the cost of producing goods and moving them around the country.

But the sums needed just to ‘keep the lights on and wheels turning’ are enormous. We expect that the private sector will be increasingly required to help finance these infrastructure needs, as governments are squeezed by high debt levels and geopolitical pressures to spend more on defence.”

Emerging markets (EMs) account for $43 trillion of the total required spend, reflecting their greater development needs and faster economic growth. Developed markets (DMs) need to spend $21 trillion. Transportation and power generation make up the bulk of physical investment needs.

Investment in global road networks, which need to expand by 7 million kilometres, remains the single largest infrastructure expense. This expansion, alongside substantial maintenance costs of existing roads, is likely to total $28 trillion, little changed vs the prior 25 years (only $1.7 trillion more).

Power is the area requiring the next biggest new investment injection. Rising power needs, the electrification of transport, and the pivot towards renewable energy, mean that global power generation capacity will need to rise from 8,000 Gigawatts (GW) to over 21,000 GW (+165%) by the middle of this century, at a cost of $27 trillion. This is almost $20 trillion more than the cost over the prior 25 years and could be pushed higher still by power-hungry new technologies, such as artificial intelligence data centres. 

Around two-thirds of this rise in power generation capacity is due to the pivot towards renewables – which require larger infrastructure investment costs upfront to replace an equivalent amount of thermal power capacity.

China’s $12 trillion expenditure on power generation is set to be the largest single infrastructure investment undertaken by any country, equivalent to almost a fifth of total global infrastructure spending.

Robert Gilhooly added: “The limited window of sunshine per day and the vagaries of wind mean a larger renewable capacity is needed to collect and store energy. Our latest modelling shows that the pivot to renewables almost doubles the amount of capacity that needs to be installed to meet demand for many major economies. But once built, substantial operating savings come from not having to obtain coal or gas to burn, suggesting renewable roll out costs will not deter governments.”

Sameer Amin, Managing Partner in Aberdeen’s Concession Infrastructure team, said: “The role and necessity for private sector capital to address this funding gap is undoubted. Now we need clarity from policymakers on how they want to work with private investors such as ourselves. Private investors can and should have a net positive effect on infrastructure. They can bring efficiency, capital discipline, innovation and – counter to some pre-conceptions – a long-term view removed from election cycles.”

Dominic Helmsley, Head of Economic Infrastructure at Aberdeen, said: “The challenge for society is enormous, focusing on supporting efficient operations of economies and energy transitions. Over the last decade, on behalf of our pension, insurance and family office clients, we have been successfully investing into these themes. We see mid-market infrastructure companies playing a key role in supporting infrastructure development across themes such as renewables, reliable energy distribution and clean transportation, such as railway.”

Josh Duitz, Portfolio Manager, abrdn Global Infrastructure Equity Fund, said: “The $64 trillion infrastructure gap highlights the immense and accelerating need for capital to support global economic resilience, energy transition, and digital transformation. Listed infrastructure companies will play a key role in filling this investment gap. They offer scale, proven operational expertise, and access to public capital markets to help fund the world’s most critical assets.

We see growing investor interest in listed infrastructure as governments face rising debt burdens and look increasingly to the private sector for solutions. Whether it’s expanding renewable energy grids, modernising transport links, or digitising networks, listed infrastructure companies are essential actors in delivering this $64 trillion investment. We believe this presents a compelling, long-term opportunity for our investors.”

1. Infrastructure needs by country and type of physical infrastructure

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Notes to editors

Methodology:

We follow and build upon the methodology set out in the Asian Development Bank’s “Meeting Asia's Infrastructure Needs” (2017) report, adapting the modelling techniques in some instances to account for key features of the data, while also explicitly building in the pivot to renewable energy within our electricity generation capacity figures, rather than considering mitigation and climate proofing as additional costs as the ADB do.

Our estimates of infrastructure spending needs are modelled from Aberdeen’s long-term growth forecasts and then combined with other key explanatory variables such as stage of development (GDP per worker), population trends, urbanisation rates, and current economic structures (for example the shares of industry and agriculture).

Panel regressions are run after scaling infrastructure data relative to population (air passengers, container traffic, utilities, power) or land mass (road, rail). Total costs are calculated based on the change in the projected infrastructure stock, and the cost of maintaining existing infrastructure at any given point in time.

Plausible projections for the share of renewables are assessed on a country-by-country basis, with input from Aberdeen’s Sustainability Group. We judge that Net Zero aims will generally fall short of stated government policies, but believe that the falling cost of renewable energy will nonetheless raise the share of renewables within global electricity generation capacity from around 45% currently to 75% by 2050.

A key difference in assessing the costs of electricity generation capacity compared to other types of infrastructure is that replacing thermal power with renewables capacity does not happen one-for-one. Renewables have a lower ‘Capacity Factor’ – in part reflecting variable daylight and weather patterns – hence, additional renewable capacity is required to replace non-renewable capacity.

Electricity capacity models are first run to ascertain baseline power needs relative to GDP growth and structural changes . But we then assume that renewables require 2.5 times more capacity to be installed per unit of baseline power needs, and build this assumption into our energy projections. Finally, we assume that renewable costs continue to decline, albeit at a more modest pace than recent experience.

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