National Harbor

We’ve written in previous newsletters about The Chips Act and government subsidies for projects that Congress believes will change the United States for the better.  Some of these subsidies are great incentives for the private sector to act, and everything comes out exactly as intended.  That said, these are probably the exception and not the rule. 

Government officials have been pushing for solutions to shortages of affordable housing and chasing decarbonization for years now and in both cases, we’re starting to find that reality and the dream are not always well aligned. 

Take for example our neighbors in nearby Prince George’s County Maryland….

The Washington DC area struggles mightily to find housing for blue collar workers.  The hotels, restaurants, conference centers, and tourist attractions that host millions of visitors to the area every year require thousands of workers that may not make enough to live in the District.  Prince George’s County has seen tremendous growth in population and housing for years, but at the time of this writing, a lot of that activity is coming to a screeching halt.  Why?  Because they do not have room in schools, the roads are overcrowded, and the water infrastructure is lacking.  That’s not a short-term fix.  The solution?  A moratorium on building new townhomes.  Sorry investors, you’re out of luck because municipalities haven’t properly accounted for these strains.  

Similarly, the decarbonization of transportation is a project that should be about to hit the accelerator (pun intended).  One of the major roadblocks to the transition away from the internal combustion engine has always been the availability of charging stations.  Obviously the ICE has had the success that it has over the last century because fuel is ubiquitous.  EVs do not share that luxury today, and it has been a headwind to growth.  In the last several weeks however, that has started to change.  When Tesla and Ford reached a deal to gain access to Tesla charging stations, it started a trend, and other EV manufacturers have piled in.  If there is a standard, the potential for mass replication finally exists.  One roadblock down.  

However, the next one might be a lot more difficult to get around….and you guessed it….it’s the infrastructure.  The Chips act, and many other initiatives like it are fueling a boom in demand for electrical equipment of all sorts.  Renewable energy projects themselves are extremely power-hungry before they turn on, datacenters require huge amounts of power, and so too do semiconductor fabs. 

And you’ll notice, we haven’t even mentioned powering the EVs themselves.  If we were to switch every ICE to EV today, we would need a doubling of the power grid.  And we’re charging (pun still intended) toward that goal.  But of course, this is causing strains on the current grid because the supply chain for electrical parts and EV manufacturers can’t deliver. 

In fact, the entire electric supply chain is currently disrupted, and it’s causing major problems in many industries.  The big thinking that goes into these major, high visibility projects needs to work backward into the supply chains, or we will see delays in perpetuity.  Congressional leaders have said for years that an infrastructure bill was something they can agree on…let’s hope they finally figure out what would actually make that successful. 

Sources: The Wall Street Journal, Yahoo Finance, WUSA9


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