IN BRIEF

  • If the ongoing decline in the cost of renewable energy and battery storage proceeds faster than expected, infrastructure investment performance may vary considerably.
     
  • Investments in power projects with long-term contracts should be relatively insulated; those exposed to spot market pricing will be under stress.
     
  • Renewable energy installations and gas-fired “peaker” plants may be complementary investments, with each performing better under different downside scenarios.

  • The rise of renewables and batteries could speed the proliferation of electric vehicles, but widespread distributed (“rooftop”) generation remains a distant prospect.
 

We believe that core infrastructure investments are relatively less vulnerable to disruption because they are grounded in long-life physical assets that provide essential services. Nevertheless, they are not immune. Investors should consider the potential for disruptive changes in every underwriting, both for the individual asset and for the broader portfolio. As always, a diversified portfolio is central to mitigating downside risk.

In this publication, we explore the potential disruption of the power industry by renewable energy and battery storage—and the risks and opportunities they present to infrastructure investors.

Investment backdrop: current power industry trends

Vulnerable to disruption from lower-cost renewable energy

  • Projects with merchant power exposure
  • Existing wind and solar projects

Likely beneficiaries of disruption from lower-cost renewable energy

  • Gas-fired peaker plants

Vulnerable to disruption from low-cost batteries

  • Gas-fired peaker plants
  • Conventional base load power plants
  • Other associated infrastructure investments

Likely beneficiaries of disruption from low-cost batteries

  • Wind and solar power projects
  • Nascent battery storage industry

Prospects for distributed generation

The outlook for electric vehicles

Investment implications




Would you like to download the full PDF?

IncludedImage Download PDF