Following is an article as published in IREI i3 Institutional Investing in Infrastructure, January 2026.
Where are we in the energy transition? What is happening out there?
It’s really geographically dependent. If you are looking at Western and Northern Europe, the transition is further advanced. New generation capacity is almost exclusively renewable, there is consistent regulatory momentum toward greening surface transportation, and energy efficiency in the real estate sector is taken very seriously. In the U.S., the rolling back of tax credits for most renewables is on the surface a setback, but still the vast majority of installed new energy generation capacity is renewable. That’s because a lot of that power is needed quickly, and it’s much faster to develop a solar energy plant than a carbon-based plant.
What are the drivers for demand?
Data centers are the biggest drivers of new demand for electricity. Others are reindustrialization, population growth and electrification of transport, as well as GDP growth. You also have things that work against it, such as increased energy efficiency.
Where does private debt come into this?
Private debt traditionally seeks higher returns than, say, commercial banks, and so you don’t see a ton of lending activity at the project level for contracted renewables or hyperscale data centers. Private debt is more active at the holding company level supporting a combination of operating assets, construction assets and development assets. Private debt can also be useful in situations where a business model or revenue stream is less developed.
Where do you see opportunities?
We think this is a really interesting time to finance renewables, because so much money that had been poured into this sector following the passage of the IRA in the U.S. has now retrenched. We’re not doing much in data centers themselves because a lot of money has been chasing those deals and there isn’t so much to do in the middle market where we play.
We like transmission upgrades, things that make the grid more sturdy or reliable, so reliability improvements. We are looking at other generation sources, such as thermal generation. Midstream assets that will be required to serve that generation, as well as batteries, are also appealing.
Another sector of interest is electric vehicle charging. There is increasingly going to be penetration of heavy-duty vehicles in the EV space, and these types of vehicles all need places to charge. We’ve seen some developers building depots specifically for charging heavy-duty vehicles.
What are some of the current challenges?
One is that there’s a bit of dislocation in the market because banks have net-zero goals that they need to achieve, and so they’ve pushed the cost of capital down pretty significantly in certain industries, such as solar. Getting properly paid for the risk you are taking there can be difficult. There is also technology risk, depending on exactly what technology we are being asked to finance. I think of something like small modular nuclear reactors — people would like to buy the power from them, but who wants to take the risk on the construction and operation? These are highly bespoke transactions. It’s very difficult to do it at an industrial scale like you can in corporate private credit, and it requires specialized skill sets and quite a large suite of due diligence for every transaction that we finance.
What area of the market are you focused on?
We like to finance successful and/or well-established businesses or projects that have $1 billion to $2 billion of enterprise value, and sometimes even less, that are looking to grow or to optimize their capital structure. This is a much less competitive space than the one where the megafunds and very large players play.
Where do you see the energy transition in the next five or 10 years?
The energy transition has taken on a life of its own. We are renewing the global fleet, at least in the West, with less carbon-intensive materials and processes. We’re getting more efficient. I don’t see a reversal or plateauing of the trend line toward the greening of our infrastructure. While we can’t be sure when the world will reach net zero, the transition is in motion, and I don’t see it stopping.
