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Smart Infrastructure Finance

Creating Novel Financial Models

Public investment in infrastructure systems in the U.S. has tapered off, while demand for high-performing, high-capacity and resilient systems has grown.

Current levels of public funding are far below what is needed to maintain, improve and expand system capacity to accommodate future demand and avoid the economic costs and inefficiencies associated with underperforming systems. In order to deliver on our mission of serving the public good, we need alternative financing mechanisms. Intelligent infrastructure, data analytics based on information derived from infrastructure, and the integration of performance data with financing mechanisms offer new opportunities.

Modern infrastructure is connected and automated through sensors and computational approaches that help us better understand the performance of these smart systems. Roads and bridges, water and energy systems, buildings and industrial operations—all are being designed to become more adaptive, responsive and resilient. The data generated in this information-driven approach can bring in new investors, attracted by the information efficiencies and value of the infrastructure and the premiums they can get if the infrastructure exceeds performance targets.

Smart infrastructure financing models can also democratize access to quality systems across income disparities. Traditionally, the credit rating of a municipality determines what they (and thus the people living there) have to pay to obtain investment. This tends to disadvantage lower-income communities, which often have lower credit ratings.

Smart infrastructure financing has the potential to offset this disparity, since it does not depend on credit ratings only. Rather infrastructure performance and the value of the data derived from the infrastructure are largely uncoupled from credit ratings. With smart infrastructure financing, investors can access new cash flows and equity value from the data markets, not just fixed interest payments from the municipality. In this way, some of the debt burden is taken off the taxpayers.

These ideas are percolating in the finance world and require an understanding of the actual infrastructure. Civil and environmental engineers have a wealth of expertise to bring to the table. Our deep domain knowledge in designing smart infrastructure systems that are in harmony with natural environments, our capacity to harness data and distill information through engineering models, combined with our direct involvement with the potential applications and needs facing communities across the globe, is central to the digital revolution of smart systems. By helping to develop standards and benchmarks, civil and environmental engineers will enable the responsible and equitable integration of smart infrastructure design with efficient financing models in service to society.

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What is smart infrastructure finance?

Professor Peter Adriaens explains how civil and environmental engineers can use smart infrastructure finance to fund the infrastructure projects of the future.

  • $2 trillion

    The 10-year infrastructure investment gap in the United States is $2 trillion.

  • $1.4 trillion

    More than $5 trillion a year is available for infrastructure financing, of which $1.4 trillion can't be invested because the right financial models don't exist.

  • $4 trillion

    Infrastructure shortcomings will result in a GDP impact of $4 trillion between 2016 and 2025 in the U.S. due to lost business sales, rising costs and depressed incomes.

Our Approach

Our strategic directions have a broad impact on the way we operate, influencing our approach to research, education and outreach. Explore some examples of how we are implementing the concept of Smart Infrastructure Finance across our department.

Research

  1. Building Blocks

    Blockchain models are changing the way that we think about storing, securing and transacting data. The University of Michigan is collaborating with blockchain companies and institutional investors to allow researchers to prototype new blockchain and tokenization applications in smart cities. We explore how they can be leveraged across industries to impact payment models, track information from distributed sensors, and design smart contracts to increase transaction efficiencies and inform new data-driven financing and business models.

  2. Predicting Performance

    The University of Michigan is a leader in creating and deploying sensors in our built and natural environments, giving researchers unprecedented insight into how infrastructure systems perform under environmental demands. The data generated are being explored to inform private investment strategies by predicting future performance of infrastructure. Additional means of monetizing sensed data from infrastructure are being advanced to assist asset owners with financing infrastructure maintenance.

  3. Pricing Infrastructure

    Financing our nation’s surface transportation infrastructure has become more and more challenging. Our researchers are investigating innovative ways to properly price the surface transportation infrastructure. Based on vehicle trajectory and occupancy, the data-driven fine-grained pricing paradigm is expected to not only ensure cost recovery, but also yield efficient use of facilities and influence mobility service providers to reduce empty trips and increase vehicle occupancy.

Education

Master of Engineering in Smart Infrastructure Finance

This new program (starting in Fall 2020) is a one-year, 28-credit degree program intended for CEE students and finance professionals with expertise outside of CEE. Consisting of four required courses and four electives in finance and data science, as well as an internship course and seminar, this program is the nation’s first program on the financial impact of infrastructure digitization.

Blockchain at Michigan

The Center for Smart Infrastructure Finance at the University of Michigan supports a student club engaging students across engineering and business. This student organization focuses on peer-to-peer education and project development in blockchain and cryptocurrency coding, tools, and applications.

Outreach

Business Connections

Engaging with the business community is core to this strategic direction. Our outreach efforts with organizations such as the Fintech Consortium in Detroit aim to build out the University of Michigan as the global hub for Smart Infrastructure Finance and build a new entrepreneurial strength in Michigan.

News

Peter Adriaens receives Rackham 2021 Master’s Mentoring Award

Adriaens is recognized for his work with students from various disciplines working in FinTech.

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    Sensor technology aims to help US cities extend the life of aging pipelines

    Transformative pilot project in Detroit could help cities across U.S. deal with overdue pipeline upgrades.

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    Cryptocurrency innovation: U-M to establish FinTech Collaboratory

    New funding model will drive innovation and could help close the infrastructure finance gap.

    Read More
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    Smart infrastructure financing: Why data could be the answer

    A Q&A with the professor who is exploring new ways to finance infrastructure, with help from a blockchain company.

    Read More
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Featured Faculty

Peter Adriaens

Peter Adriaens

Online Education: Foundations of Mobility, Building Blocks, Master of Engineering in Smart Infrastructure Finance, Blockchain at Michigan, Business Connections

Contact

adriaens@umich.edu

(734) 763-8032

Branko Kerkez

Branko Kerkez

The Water Experience, How Cities Work, Resource Cycles, Information Flow, Undergraduate Focus: Smart Cities, Urban Collaboratory Projects, Predicting Performance

Contact

bkerkez@umich.edu

(734) 647-0727

Yafeng Yin

Yin Yafeng

Engineered Cementitious Composites, Connectivity & Automation, Pricing Infrastructure

Contact

yafeng@umich.edu

(734) 764-8249

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Smart Infrastructure Finance on Twitter

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