The most important fact about the energy transition in 2025 is no longer about how much renewable generation we can build. It is about how much of that generation we can connect, dispatch, and deliver to the load. The binding constraint has moved from generation — where the cost curves descended for two decades and the build-out followed — to transmission, where the build rate has been a fraction of what is required, for reasons that are partly physical, partly regulatory, and partly political.
Where we actually are
The UK currently has a connection queue for new generation projects that exceeds 700GW. The country's peak demand is approximately 50GW. Even allowing for very generous assumptions about how much of the queue is duplicative or speculative, the gap between what wants to connect and what the grid can absorb is structural, not transient. Western European grids show similar profiles: Germany, Spain, Italy each have multi-year queues that bear no relationship to the system's near-term ability to absorb new generation.
The result is paradoxical. We are simultaneously short of generation in some hours and constrained from connecting more of it in others. We are paying generators to curtail in some regions while paying others to dispatch in adjacent regions, because the wires between them cannot carry the energy. The economic cost of these constraint payments is rising at a rate that, by 2030, will exceed the cost of building the transmission they reflect.
Why the grid is binding
Physical: the wires were not built for this load profile
The European transmission system was designed for centralised, dispatchable generation feeding load centres in predictable patterns. The actual generation profile of 2025 is decentralised, intermittent, geographically distant from load, and bidirectional. The wires that worked for the former do not work for the latter. The gap can only be closed with new infrastructure.
Regulatory: planning timelines are decade-long
Major UK transmission projects have, on average, taken twelve to fifteen years from concept to commissioning. The constraint is not capital. The constraint is consenting, environmental approval, and the political economy of infrastructure that is, by its nature, visible across long stretches of countryside. The most ambitious recent reforms have shortened this somewhat — but only somewhat.
Political: the costs are localised, the benefits are diffuse
Transmission infrastructure imposes visible local costs on the communities it crosses, while delivering benefits that are widely distributed across consumers and generators. The political economy of this asymmetry is well-known. It is the reason transmission build rates have lagged the rest of the energy stack despite repeated regulatory promises.
"The build-out of the next decade is not a renewable build-out. It is a wires build-out."
Where capital is going, and where it is not
Public capital is increasing — through regulated returns to the major transmission operators, through earmarked national funding, and through reforms designed to accelerate consenting. This is necessary but not sufficient. The scale of investment required exceeds what the regulated entities can deploy on their own balance sheets, and the speed at which it is required exceeds what regulated processes can typically produce.
The opening, then, is for private capital to participate alongside the regulated build-out, in three specific ways:
Co-investment with regulated transmission operators
Several of the major European transmission operators have, over the last twelve months, opened structures for co-investment in specific projects. The economics are typically a regulated return on the deployed capital, with limited downside protection and limited upside. This is appropriate infrastructure capital — capital with patience, capital with the willingness to accept a lower return profile in exchange for predictability. Several of our positions in this space sit here.
Specialist transmission developers
A small number of specialist developers focus on specific types of transmission infrastructure — interconnectors between national grids, point-to-point HVDC links from offshore wind farms, transmission-connected storage installations. These businesses operate at the intersection of regulated returns and contracted economics. The risk profile is more variable than the regulated returns of the operators themselves, but the return potential is materially higher.
Grid-edge infrastructure
The 'grid edge' — the layer between the transmission network and the distribution layer that delivers power to end users — is where the most innovation is happening, and where some of the most attractive private-capital opportunities currently sit. Battery storage at grid-balancing scale, demand-response platforms, distributed flexibility resources. Each of these reduces the load on the transmission system and each is, in our analysis, a meaningfully more attractive deployment of capital than the equivalent generation asset.
Returns characteristics.
Transmission and grid-edge infrastructure produces returns with different characteristics than generation. The cash yields are lower. The contracted revenues are typically longer. The downside protection is greater. The upside is more constrained. For long-duration capital, this is precisely the right shape.
What we have seen across our positions is that grid-related infrastructure compounds capital more reliably than generation, even though the headline IRRs are lower. The variance is smaller, the holding periods are longer, and the cash flows are more predictable. Over a decade of holding, this is the kind of profile that produces the best risk-adjusted returns we have observed in the energy stack.
What we are currently underwriting.
Without disclosing specific positions, we can describe the categories where we have most recently been deploying:
- Co-investment alongside a major UK transmission operator on a specific high-voltage upgrade project, with regulated returns and a 25-year horizon.
- Equity in a specialist HVDC interconnector developer with two operational projects and three under development.
- Grid-balancing battery storage at four sites in the UK, the Netherlands, and Germany, alongside a developer we have known for six years.
- Demand-response and flexibility platforms aggregating distributed assets at scale across UK industrial and commercial users.
Position sizes range from £30m to £100m. Holding periods range from seven to twenty-five years. Returns are appropriately calibrated to the risk profile of the specific infrastructure type.
The bigger point
The next decade of energy transition returns will not be earned by capital that piles into the most visible part of the cycle. It will be earned by capital that identifies the binding constraint, deploys behind it, and accepts the longer time horizons and lower headline returns that come with infrastructure positioned at the bottleneck.
Generation has caught up. Storage is catching up. Transmission has not. That is where we are deploying, and that is where we expect the asymmetric returns to be earned.