Explainer: Energy security and infrastructure investing – understanding the opportunity
The global energy transition is often framed as a climate story. Increasingly, however, it is becoming a story about energy security, economic resilience and national competitiveness – and significant long-term investment opportunities.
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The global energy transition is entering a new phase. While decarbonisation remains an important objective, recent years have highlighted other powerful drivers of investment, such as energy security and affordability.
The energy price shocks that followed Russia's invasion of Ukraine exposed the vulnerabilities associated with dependence on imported fossil fuels. These have only been underscored further by the conflict in Iran this year, which again sent oil and gas – and so global energy – prices spiralling higher, triggering renewed inflation and economic concern.
Despite the calming (although by no means conclusion) of the Middle East crisis in recent weeks, for many countries, particularly in Europe and parts of Asia, these experiences have emphasised the strategic importance of domestic energy production and reducing reliance on imported fossil fuels. This is both in the context of access to reliable energy, as well as ensuring energy price stability, given the impact that volatility in this area can have on domestic economies.
As we explored in our recent article, governments, businesses and consumers are increasingly prioritising access to secure, affordable and domestically sourced energy, which in turn is bringing fresh structural tailwinds for investment in renewable generation, electricity networks, storage technologies and alternative fuels.
At the same time, broader global trends related to electrification, digitalisation and artificial intelligence are driving unprecedented growth in electricity demand. Meeting that demand sustainably and securely will require significant investment across the energy ecosystem.
For investors, this combination of policy support, growing demand and long-term capital requirements is creating a broad opportunity set for energy transition infrastructure. In this article, we explore where we see the most attractive opportunities, how they fit across the risk-return spectrum, and the role they can play in building more diversified and resilient portfolios.
Where are the opportunities?
We see three broad themes driving long-term investment opportunities in energy transition infrastructure: increasing domestically sourced renewable power, continued electrification of power demand, and alternative fuels and storage solutions that enable the transition.
These opportunities are derived from a rapidly evolving energy system, which brings new risks to manage, but also offers a broader range of opportunities. In this context, partnering with a specialist energy transition infrastructure manager, with the expertise and experience to navigate this complex landscape, could be critically important.
1. Increasing domestically sourced renewable power
The most visible aspect of the energy transition continues to be the continued build-out of renewable energy generation.
This includes established technologies such as solar power, onshore and offshore wind, alongside equally established but less prominent options such as hydroelectricity, bioenergy and geothermal power. These assets provide a direct route for countries to reduce dependence on imported fossil fuels while increasing domestic energy production.
The scale of private capital investment is already significant. Renewable energy has become the dominant segment of infrastructure investment activity globally; as the chart below shows, the sector currently accounts for 70% of infrastructure deal flow in Europe, while around 90% of new electricity generation capacity being built in the US is from renewables. These statistics reflect both the maturity of the sector and the enormous amount of capital still required to meet future energy needs.
Renewable energy dominates the infrastructure universe
Source: Schroders Greencoat. 1Preqin 2026 Global Report: Infrastructure. 2BloombergNEF (2025), Energy Transition Investment Trends, Bloomberg Finance L.P.
For investors, these assets can offer exposure to long-term structural growth trends, while often benefiting from contracted revenues, regulated frameworks or other mechanisms that support cashflow visibility.
2. Continued electrification of power demand
The second major opportunity lies in the electrification of the broader economy.
Many sectors that have historically relied on fossil fuels are increasingly shifting towards electricity-based solutions. This trend is helping to decarbonise activities that have traditionally been difficult to address, while creating new infrastructure requirements.
One example is district heating networks, which provide a low-carbon supply of domestic and commercial heating by recirculating energy released as heat from a range of sources. These networks can significantly reduce emissions from residential and commercial buildings while improving overall energy efficiency.
Domestic heating has significant growth headroom across Europe
Source: Ramboll, European Commission, 2020.
Similarly, the continued rollout of electric vehicle charging infrastructure is supporting the transition away from fossil fuel-based engines across passenger and commercial transport.
Importantly, technologies such as these are not only helping to reduce emissions; they are also becoming major sources of future electricity demand that further reinforces the need for continued investment in renewable generation and supporting infrastructure.
Heat pumps, electric heating systems and electric vehicle charging networks, for instance, rely on electricity from the grid, rather than gas and other fossil fuels. Similarly, alternative clean fuels also tend to increase electricity demand due to the way they are produced. For example, green hydrogen (more on this below) relies on the use of electricity-intensive electrolysers.
Perhaps the most talked-about source of future electricity demand is the rapid expansion of data centres, which in turn serve underlying demand for artificial intelligence, cloud computing and digital services. AI-enabled searches and applications also generally require more computing power than traditional internet searches.
In short, the growth of digital infrastructure and the energy transition are becoming increasingly interconnected. Meeting future demand will require not only more power generation, but also investment in the networks and systems needed to deliver that power efficiently.
3. Alternative fuels and storage solutions to enable the transition
While renewable electricity will play a central role in future energy systems, some sectors remain difficult to electrify directly. Meanwhile the intermittency of renewable energy generation is bringing focus on accelerating solutions to smooth that volatility. This is where alternative fuels and storage technologies come to the fore.
Green hydrogen is one example. Produced using renewable electricity, hydrogen and derivative fuels have a wide range of applications (see chart below) – and so the potential to help decarbonise industries such as chemicals, refining and heavy transportation, where direct electrification may be less practical. As a result, investment in hydrogen production capacity is once again growing rapidly.
Green hydrogen and related fuels have a wide range of applications across industries
Source: Schroders Greencoat, 2025.
Biomethane represents another important opportunity. Produced from organic waste, biomethane can be used as a substitute for conventional natural gas that is able to leverage much of the existing transmission and distribution infrastructure already in place. European production in particular has expanded rapidly in recent years.
Evolution of European biomethane production
Source: EBA Database, Schroders Greencoat, 2025.
On the other hand, storage infrastructure is equally critical. As renewable energy generation increases, so does the importance of managing intermittency. Solar and wind generation fluctuate according to weather conditions, creating challenges for electricity grids designed around more predictable sources of power.
Battery storage systems are part of the solution. By storing excess electricity when generation is high and releasing it when demand increases, batteries help improve grid stability and maximise the value of renewable energy production.
Likewise, investment in transmission and distribution networks is a key enabler. New renewable generation cannot contribute fully to energy systems without sufficient grid capacity to connect projects and transport electricity to end users.
Further reading
Where do the opportunities sit on the risk-return spectrum?
Energy transition infrastructure offers opportunities across a wide range of risk-return profiles.
Infrastructure strategies are typically categorised along a spectrum ranging from Core to Core+ and Value Add, reflecting differences in investment risk, return objectives and asset-specific characteristics.
Core and Core+ strategies generally focus on operational assets with established cashflows. In the energy transition context, these might include mature solar or wind farms operating under long-term contractual arrangements. The objective is often to generate stable, income-oriented returns, typically in the high single-digit or low double-digit range.
At the other end of the spectrum, Value Add and Opportunistic strategies incorporate greater exposure to assets being developed or constructed, or with less well-established contracts and so that are more exposed to market or growth-related risks. These strategies are typically shorter duration and target higher returns, often in the low-to-mid teens, reflecting the additional complexity and execution risk involved.
Many opportunities within emerging energy transition technologies sit within these higher risk-return categories. Investors may gain exposure to assets with attractive growth prospects and potentially lower entry valuations, while accepting a greater degree of operational or development risk.
Increasingly, wealth-focused investment solutions are combining these approaches. Semi-liquid evergreen structures, for example, may blend a foundation of Core and Core+ infrastructure assets that provide stable income with selected Value Add investments designed to enhance overall return potential.
The result can be a portfolio that seeks to balance resilience and growth, while providing access to a broader range of opportunities across the energy transition ecosystem.
How can these strategies support diversification and resilience?
Diversification remains one of the primary objectives for many investors.
Recent market experience has reinforced why this matters – as our latest Global Investor Insights Survey shows. Periods of elevated inflation specifically have demonstrated that traditional assumptions about diversification can break down, with equities and bonds sometimes moving in the same direction under stress.
Energy transition infrastructure differs structurally from listed markets – and even other private markets and diversified infrastructure strategies. Cashflows derive from physical generation and contracted revenues. Performance drivers include power market dynamics, inflation, regulatory frameworks and of course the weather.
Energy transition infrastructure diversification potential
Simulated performance is no guarantee of future returns. Source: Schroders Capital, 2025. For illustrative purposes only. There can be no assurance that any objective or intended outcome will be achieved. No strategy can guarantee future results. The views shared are those of Schroders Capital and may not be verified. 1Based on simulated performance. Energy Transition Infrastructure Returns are based off quarterly prices, covering the period from 30 September 2015 – 30 September 2025. Simulated energy transition returns are constructed using a combined Net Asset Value (including dividend) performance of Schroders Greencoat listed vehicles. All other private asset classes are sourced from pitchbook benchmarks for private assets, Public assets are sourced from Refinitiv, September 2025, Global equities returns is calculated from MSCI World Gross USD prices. Source: Refinitiv, September2025, Fixed income returns are calculated from Bloomberg Global Aggregate Credit Total Return Index. This simulation covers covering the period (30 September 2015 – 30 September 2025).
Several characteristics contribute to this diversification potential.
- Inflation exposure: Many assets benefit from revenues that are directly or indirectly linked to inflation, helping preserve real purchasing power over time.
- Power price exposure: Rising electricity prices can be a positive driver for many energy transition assets, whereas higher energy costs often act as a headwind for other sectors and asset classes.
- Weather and resource exposure: Renewable generation depends on natural resources such as wind and solar irradiation, creating return drivers that are largely independent of traditional financial market factors.
- Technology diversification: Different renewable technologies carry distinct operating characteristics and risk profiles, creating opportunities for diversification within the sector itself.
- Geographic and policy exposure: Government support for energy transition objectives continues to evolve across regions, creating additional sources of opportunity and diversification.
This does not mean the sector is immune from volatility. Energy markets can be dynamic, and regulatory frameworks can change over time. However, the factors driving returns are often fundamentally different from those influencing global equities or sovereign bonds.
The experience of 2022 provides a useful illustration. As energy prices surged, both equity and bond markets experienced significant declines, while many private market strategies generated only modest returns. Energy transition infrastructure, by contrast, benefited from exposure to power markets and delivered materially stronger performance in excess of 20%.
For investors seeking to build more resilient portfolios, that differentiated return profile can be a valuable attribute.
Conclusion: A broad opportunity set – and the benefit of specialism
The energy transition is no longer driven solely by climate objectives. Increasingly, it is being shaped by energy security, economic competitiveness and the need to support rapidly growing electricity demand.
These forces are creating a broad and evolving opportunity set across renewable generation, electrification infrastructure, alternative fuels, storage technologies and grid networks. Importantly, investors can access these themes through strategies spanning the full risk-return spectrum, from income-oriented Core assets to higher-growth Value Add opportunities.
At a portfolio level, energy transition infrastructure also offers something increasingly valuable: exposure to a set of return drivers that differ from those of traditional equity and bond markets.
In an environment where diversification and resilience remain key investor priorities, that combination of structural growth, income potential and differentiated risk exposure helps explain why energy transition infrastructure is becoming an increasingly important component of long-term portfolio allocations.
Notably, with different energy transition infrastructure segments and drivers becoming interdependent, and often reliant on external forces and stakeholders, it can be beneficial to partner and invest with managers that possess specialist expertise and technical knowledge to access and optimise this opportunity set.
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