From energy transition to digital infrastructure: how private infrastructure is reshaping the playing field of risk, appreciation and opportunities for institutional investors.
Infrastructure is developing faster than ever. The boundaries between traditional and new infrastructure assets are shifting due to the energy transition, digital connectivity and changing regulation. What once seemed like a relatively stable, contract-driven asset class today requires a much more dynamic and future-oriented approach.
For institutional investors, this raises fundamental questions. How do you value infrastructure assets under uncertainty, structure deals that can withstand political and technological changes, and balance risk, return and impact across greenfield and brownfield strategies? And where exactly are the most convincing opportunities today?
Here, we reflect on the structural shifts that are changing the infrastructure landscape, the pitfalls that can derail deals, the tools investors now need, and why even seemingly safe regulated utility companies require a fresh look.
How energy transition and data are redrawing the infrastructure landscape
Infrastructure was traditionally mainly associated with long-term utility assets under stable contracts. That picture is now incomplete. The biggest structural shifts in private infrastructure are the scale and speed of change. The asset class is developing in a way that makes it almost unrecognizable compared to ten years ago. That brings new challenges, but also interesting opportunities.
For most infrastructure investors, discussions today are dominated by two themes: the energy transition and the digital economy. In the energy transition, investors used to focus mainly on transmission, distribution and renewables. Today, the landscape is much wider and more interconnected. Storage, grid flexibility, smart meters, charging infrastructure for electric vehicles and demand-control technologies all become critical parts of the system.
Infrastructure is no longer just about capacity expansion, but increasingly about enabling system stability.
A similar shift is visible in the digital economy where we see enormous interest in data-driven assets, and rightly so. These assets have in fact become essential infrastructure. Economically, they behave like traditional utility companies, with high fixed costs and relatively stable cash flows. But the extra dimension of technologically-driven aging and rapid demand growth makes them more dynamic and operationally intensive than what we used to label ‘infrastructure’.
This changing reality also requires a different mindset among investors from the traditional one of owning long-lived assets under stable contracts. That model is now tipping over. The most successful investors have moved from passive capital providers to long-term managers of complex enterprises, with the aim of providing high-quality services to their customers.
Beyond the narrative ‘infrastructure is equivalent to stability’
Infrastructure investments often combine a long horizon with political risk and technical complexity. The most common pitfalls in the way investors assess or structure infrastructure deals include leaning too much on the idea of ‘infrastructure equals stability’. Even contracted assets can have significant exposure to demand shifts, counterparty risk, volatility in input prices and political recalibration. Stability must be demonstrated with evidence, not assumed.
That works in both directions. Investors can create a lot of value if they are able to manage or even create stability for the asset. But equally, a lot of value can disappear if the investor does not sufficiently realize that these are large, complex assets.
A second pitfall is treating risk as something static. Many models rely on linear forecasts, while the underlying drivers, political policy frameworks, technologies and consumer behavior can change significantly over a horizon of twenty or thirty years. A good investor must recognize that and manage the assets in such a way that the value is maximized when new risks arise.
Finally, investors often underestimate operational complexity. Large European utilities, for example, are incredibly complex to run, but in the past investors have paid a premium for that and then lost their money. What distinguishes the best investors is a deep understanding of governance, incentives and operational capabilities.
Bridge between theory and practice: tools for today’s investors
Building a bridge between conceptual understanding and practical execution is essential. Properly valuing infrastructure assets under uncertainty requires going beyond simple DCF models to integrate regulatory trajectories, technological change and downward scenarios into cash flow models. That is especially important today, as markets now struggle with themes such as cannibalisation in renewables or changing regulatory incentives in utility sectors.
In deal structuring, understanding how governance rights, shareholder agreements and risk-sharing mechanisms influence outcomes is just as important as valuation. A clear grasp of the fund economy, incentives and the relationship between GP and LP further strengthens the ability to assess opportunities with more confidence.
Finally, whether considering a greenfield offshore wind project or the acquisition of an existing regulated utility, it needs to be clear how operational, regulatory and financial factors interact. This perspective supports a more disciplined, evidence-based approach to infrastructure investment, encouraging better questions and challenging assumptions.
Where opportunities lie today: renewables, digital and utilities
The most convincing opportunities today are to be found in both greenfield and brownfield markets and are currently determined by macroeconomic conditions, policy direction and the changing role of infrastructure in the real economy. With renewables, the main challenge is no longer just building capacity, but dealing with cannibalisation, the effect where periods of very high production from renewable sources, such as on very sunny or windy days, reduce electricity prices, sometimes even to negative levels. As more capacity is added, each additional megawatt can reduce the realized price for all existing producers.
In that light, co-location and flexibility become crucial. That is why co-location with storage is becoming increasingly important. By combining renewables with batteries or other flexibility solutions, projects can shift their production from periods of low prices to times of higher system value. We believe greenfield opportunities combining renewables and storage as integrated flexibility assets, rather than stand-alone production, are among the most attractive areas for new investment.
On the digital side, we see a related story. In digital infrastructure, the demand for data, connectivity and low latency continue to support investments in data centers and fiber optics. But these assets are becoming more operationally intensive, with energy, cooling and technology cycles all carefully included in the underwriting.
In regulated utilities, higher inflation and the energy transition still create significant investment needs, but the focus of regulators is shifting. Regulators are increasingly focusing on affordability. This increases the value of efficient operators and regulatory frameworks that balance consumer protection with credible long-term investment signals.
Balancing risk, return and impact therefore requires a system approach. The most convincing opportunities often lie where investors help solve system bottlenecks, such as flexibility in electricity markets or bottlenecks in digital networks, rather than simply adding more of the same capacity.
Lessons from regulation: assumptions about ‘safe’ utilities revised
In our position at the intersection of research and practice in infrastructure investments, a recent development has sharpened our thinking, that of the impact of rising living costs on utility regulation in Europe. For years, regulated networks were seen as relatively stable because allowed returns were predictable and supported long-term investments. But now that energy and utility bills have become a politically sensitive topic, regulators in multiple EU markets have begun to reduce permitted returns and put much more emphasis on affordability for households.
This is more than a temporary adjustment. Even well-regulated utilities are now exposed to a new form of regime risk that is not primarily driven by ideology, but by social pressure. It underlines that stability in this sector is conditional: regulatory frameworks that once protected returns can quickly adjust when consumer affordability becomes a priority.
For investors, the lesson is clear. We need to stress-test valuations on scenarios where allowed returns fall, costs can no longer be fully passed on, or investment plans are more rigorously assessed. The long-cherished assumption that regulated utilities provide stable, isolated returns needs to be reviewed in light of these developments.
