The past year has been mixed for energy transition investing. In the US, the Trump administration has proved more hostile than expected towards renewable power. Investment incentives for solar energy have been stripped back, while even fully permitted offshore wind farms have faced stop-work orders.

Demand for gas turbines has also surged, with developers seemingly convinced that the fossil fuel is key to meeting the artificial intelligence-driven spike in power demand.

As investors look to the future, it would not be surprising if some harboured doubts about whether energy transition funding opportunities were overblown. Our Rising Stars, however, are unanimous in arguing the energy transition is a mega-trend here to stay.

“Despite noise around ESG, capital continues to flow into the energy transition,” says James Reid, investment director at manager Schroders Greencoat. “In an uncertain macroeconomic environment, renewable infrastructure investment offers inflation linkage, secure income characteristics and portfolio diversification through distinct risk premia such as energy prices.”

Global momentum

Although the energy transition may have lost momentum in the US, Reid notes this could provide opportunities for other markets.

He says Europe and Asia are leading the way in the transition, combining decarbonisation with energy security priorities. “In Europe alone, renewable infrastructure represents roughly €600 billion – almost half of total infrastructure investment – and we expect that figure to more than double to around €1.3 trillion by the early 2030s.”

Fiona Thomas Saura, director of investments at Frontier Renewables, agrees that jurisdictions with a “more stable regulatory and legal situation” can capitalise on the US situation. “In particular, we think Europe is quite interesting, because aside from the underlying regulatory and political stability, [the region] also has an energy crisis issue and really the only way to solve it is through home-grown renewable energy.”

While it might be assumed that greater levels of competition in the European market would push up the price of assets, Thomas Saura says the opposite is happening, with solar in particular: “Whenever you have a mature renewables market with high penetration of renewables, you have price cannibalisation and curtailment issues arise. Because of this cannibalisation, and the higher cost of capital, there’s been a reduction in valuations, particularly in the mid-market space.”

She adds that while there is more intense competition for the largest assets, there are “still opportunities” for firms seeking to acquire mid-market assets at attractive valuations.

Looking elsewhere

Roby Camagong, head of investments at Australia-based Equis, sees more investment flowing into the APAC region. Original equipment manufacturers, which prioritised the giant US market during the Biden administration, are now shifting their priorities, he says. “OEMs and suppliers are trying to diversify their exposure to the US, but they also recognise inherently the growth trajectory of this region. I see a lot more attention on Australia now.”

He adds that APAC can absorb far greater levels of investment, as the region looks to address a fundamental supply-demand gap in energy infrastructure. “Historically, APAC has always been underserved from a fundraising perspective. We’re less than 10 percent of the global fundraising market share.

“But in terms of where demand is going to come from, there’s going to be a higher population in APAC, there are ambitious [climate] targets in the region and all those renewable energy targets are going to be underpinned by the ability of investors and developers to meet the demand.”

In the US, the mood around the energy transition is very different. However, Andrew Gilbert, partner at Energy Capital Partners, insists that negativity around the future of renewables does not match what is happening in practice. “There definitely has been a shift in sentiment,” he says. “I think that shift has gotten away from reality, meaning that the negativity out there is much more extreme than the reality on the ground.”

While the One Big Beautiful Bill Act passed in July removes the investment tax credits that had been put in place for 10 years under the 2022 Inflation Reduction Act, the credits will not be phased out until 2027. This means there is motivation for developers to fast-track projects while incentives remain on the table.

Meanwhile, the OBBBA and Trump’s tariff policies have helped to push up power prices, accelerating the effects of a supply-demand crunch as AI data centres drive up electricity demand. “Most importantly, given higher power prices, solar and wind are more competitive than they’ve ever been before, despite protectionist policies and whatever happens with tax credits longer term,” says Gilbert.

A perhaps ironic effect of Trump’s policies is that inflationary pressures will see renewables stand on their own, even without subsidies. “If power prices continue on this trajectory, solar and wind will be more competitive than alternatives – even without tax credits,” Gilbert points out.

He says there is a mixed bag overall in terms of demand among infrastructure investors for US energy transition assets. “On the one side, we’ve obviously had much more policy uncertainty, and that means it’s a worse place to invest. But equally, and perhaps more powerfully, the demand growth in the US is stronger than anywhere else in the world. And that probably overwhelms everything else and keeps the US as the best place to invest.”

Technology shifts

As the energy transition progresses over the next decade, technologies that were relatively nascent are likely to become much more prevalent. “I think 10 years from now, we’ll have a much better idea on the practicality of small modular reactors,” says Gilbert.

He lists geothermal power, fuel cells and battery storage as technologies that are likely to become more prevalent as power prices rise. “All those things are existing technologies that have been, in most cases, too expensive. But if gas is two or three times as costly now, all of a sudden, that stuff doesn’t look so bad.”

Camagong, meanwhile, is particularly excited about improvements in battery storage technology. While a typical battery energy storage system operating today can provide power for only around two hours, he notes that far more advanced systems are coming to market: “I think most of the technological innovation will probably revolve around long-duration battery storage. We’re starting to look at eight hours plus, and this is requiring us to look beyond the chemistry of lithium.”