The future of energy infrastructure

This chapter looks at the profound transformations which are currently shaping the energy sector with the aim of providing a better understanding of their potential implications for investors, asset managers and industrial stakeholders at large. The analysis starts with an overview of the global energy balance and its evolution over time, then highlights the relevant changes taking place in all fuels, from the shale gas revolution to the rapid expansion of renewable technologies and finally focuses on the electricity industry. The latter in particular deserves specific attention because of its leading role in all decarbonisation scenarios and its greater impact on the whole energy sector. Therefore, the chapter looks at the evolution of the electricity industry and at the key trends that are driving its economic fundamentals, investment opportunities and market strategies. Moreover, the study highlights how Europe’s largest utilities are responding with different business models and technological solutions to the challenges and opportunities provided by all these radical transformations. The evidence is not clear yet as to which of these models will be better suited to compete in this new environment and prospects for investments in the energy sectors vary widely according to the considered target and time horizon. Finally, the analysis concludes that the expected value of any investment will be significantly affected by changes in climate policy (e.g. carbon targets), market design (e.g. capacity mechanisms) and regulation (e.g. the regulated cost of capital).