Most discussion of the energy transition treats it as a single phenomenon. It is not. It is at least four overlapping cycles — generation, storage, transmission, and end-use electrification — each at a different stage of build-out, each with different return profiles, and each requiring different capital structures to underwrite well. The opportunity for patient capital sits in understanding which of these cycles we are at the beginning of, and which we are well into.
Where we are in each cycle.
Generation: well underway, modest returns ahead
Solar and onshore wind have substantially completed their cost-curve descent. The economics are well-understood. Operating assets sell at yields that reflect mature infrastructure pricing. There are still attractive opportunities — particularly in markets where regulatory frameworks remain inefficient — but they are not where the asymmetric returns sit. We continue to hold operational generation as the cash-yielding base of our energy portfolio. We are not, however, expecting to expand it materially.
Storage: mid-cycle, still highly attractive
Battery storage at grid scale entered its commercial era in 2021–2022. The pricing of lithium-ion technology, the regulatory frameworks for ancillary services, and the willingness of grid operators to dispatch storage are all in a position they were not even three years ago. We are roughly mid-way through what we believe will be a fifteen-year build-out cycle. Returns on well-sited, well-financed storage projects are still meaningfully above what comparable infrastructure earns elsewhere.
What concerns us is that consensus has caught up to this view. Storage is no longer a contrarian position. The capital deployed to storage in the last twenty-four months exceeds the capital deployed in the previous five years combined. This means the most attractive sites are largely spoken for, and underwriting standards across the sector have loosened. We are still investing — we have closed two storage projects in the last twelve months — but with materially tighter discipline than we would have applied two years ago.
Transmission: early-cycle, structurally undersupplied
This is where, in our analysis, the asymmetry sits. The grid in Europe and the UK has not been built for the load profile, the geographic distribution, or the bidirectional flow that the energy transition requires. Generation has caught up. Storage is catching up. Transmission has not.
We have written separately about why the grid is the next bottleneck. The summary is that, on current build rates, the UK alone needs to deliver more new transmission infrastructure in the next ten years than it has in the last forty. France, Germany, Italy, and Spain show similar profiles. Investment opportunities in this space — through regulated returns, through co-investment with utilities, and through specialist transmission developers — are some of the most attractive infrastructure positions we are currently underwriting.
Electrification: just beginning
The fourth cycle — the electrification of heating, transport, and industrial process heat — is only beginning. EV adoption is accelerating but is far from saturating. Heat pump installation rates are still small fractions of total residential boiler replacements. Industrial electrification is, in some sectors, in its first generation. Our exposure to this cycle is currently more selective and is concentrated in supply-chain businesses serving electrification rather than direct consumer-facing positions.
"Generation has caught up. Storage is catching up. Transmission has not. That is where the next decade of returns sits."
How we underwrite energy infrastructure.
Cash yield first, optionality second
Our energy investments are underwritten for cash yield. Every position we hold is expected to produce contracted or quasi-contracted revenues that exceed our cost of capital from year one. We do not invest in energy projects that require terminal value to make their numbers work. The discipline this imposes is uncomfortable — it eliminates a lot of apparently attractive opportunities — but it has saved us from the cycle-dependent assumptions that have caught out plenty of capital deployed by others.
Operator-led, not allocator-led
Every energy position we hold is alongside an operator we have known for at least five years. We do not invest in funds. We invest in projects, alongside operating partners, with governance rights and exposure proportional to our economics. Several of these operators we have worked with across multiple projects; some have transitioned from being our investments to being our co-investors as their own balance sheets have grown.
Structurally hedged, where possible
Where the structure permits, we hedge our exposure to commodity prices. Long-duration PPAs, contracted ancillary services, regulated returns. We are willing to take residual exposure to power prices but we are not willing to make it the primary driver of our return profile. Several of the most attractive opportunities we have walked away from in the last two years had returns that were, on inspection, almost entirely a function of long-dated power-price assumptions.
What we are avoiding.
Hydrogen at scale. The economics, the supply chain, and the demand profile for green hydrogen are not, in our analysis, converging on terms that justify direct project investment at current capital costs. We may revisit this view in three years.
Speculative offshore. Offshore wind in Northern Europe has had a difficult two years. Capex inflation, supply chain bottlenecks, and recent auction outcomes have left several major projects in a position where the original economics are no longer defensible. We have selectively participated in restructured offshore positions, but we are not committing fresh capital to greenfield offshore on the terms currently available.
Single-asset, single-jurisdiction concentration. Even in our most conviction-led energy positions, we structure exposure to allow diversification across at least two jurisdictions and three projects. Single-asset, single-jurisdiction infrastructure tends to look attractive in pro forma and very different in execution.
Where the next decade of returns lives
Our highest-conviction view is that infrastructure capital deployed against the energy transition over the next decade will materially outperform comparable infrastructure capital deployed elsewhere — but only if it is deployed against the bottlenecks rather than the headlines. Generation is the headline. Transmission is the bottleneck. Storage was a bottleneck and is now mid-resolution. Electrification will become a bottleneck in the next five years.
The discipline we are applying is to deploy where the structural undersupply is real, where the regulated frameworks are sufficiently mature to underwrite, where the operating partners are exceptional, and where the cash yields support our cost of capital from year one. Within those constraints, the opportunity set is the largest we have seen in our careers. Outside them, it is mostly a story.
A note on time horizons
Energy infrastructure is not a five-year asset class. It is a fifteen-to-twenty-five-year asset class. Capital deployed with shorter horizons is typically deployed against the wrong economics. We are willing to hold these positions for as long as the underlying physics — the demand for clean electricity, the inadequacy of existing grid infrastructure, the cost trajectory of storage — continues to play out as we expect.
Patient capital is rarely rewarded immediately. It is, in our experience, almost always rewarded eventually. That is the position we are taking with our energy book.