Roundtable 'From Energy Transition to Energy Security: Investing in Resilient Infrastructure' - Materials

   

CHAIR: Harry van den Heuvel, Achmea Investment Management   PARTICIPANTS: Joost Bergsma, Nuveen Infrastructure Ita Demyttenare, BlackRock Jocelyn Dioux, Mirova Marco van de Geugten, MN Mark Gilligan, BNP Paribas AM Alts Igor Lukin, Allianz Global Investors Bart van Merriënboer, a.s.r. real assets investment partners Roger Pim, NTR (in partnership met L&G) Albena Vassileva, IFM Investors

   

In recent years, the focus has shifted from the energy transition to energy security. What does that mean for the priorities of European infrastructure investment over the coming decade?

Mark Gilligan: ‘In 2021, Europe was dependent on Russia for a large proportion of its oil and gas supplies. These days, the US is the main supplier. Until about a year and a half ago, this could still be interpreted as a shift from an adversary to an ally, but that is now less clear-cut. This does show, however, that it is in Europe’s long-term interest to continue accelerating the transition to renewable energy. Last year marked a turning point, as wind and solar energy in Europe outperformed fossil fuels in electricity generation for the first time. Nevertheless, we are still faced with a core problem in our energy strategy, namely that we cannot produce wind turbines, solar panels and batteries cheaply ourselves. We will have to form alliances with China and the United States to strive for the strategic autonomy that comes from decoupling from fossil fuels.’

Albena Vassileva: ‘Given what is happening in the world, we are increasingly realising that we must supply energy safely and at affordable prices. At present, actively investing in new ways of supplying energy is the best thing we can do as asset managers. At the same time, however, the existing energy infrastructure must also be managed effectively. After all, the system is not yet ready for fully renewable and entirely domestic production. How can we encourage the new as much as possible, whilst at the same time remaining good stewards of what already exists?’

Ita Demyttenaere: ‘It’s not just about building more renewable capacity. We need a much broader view of what energy security entails. This also focuses on the grid, interconnectors, storage and all such matters. The question we must ask before investing is not only whether it is low-carbon, but also whether it is resilient and whether the costs are stable.’

Joost Bergsma: ‘For the first time in a long while, Europe is actually on a path of energy growth. That presents choices: how are you going to fuel that growth? Are you going to use gas, nuclear energy or electricity? But if you look at factors such as security, affordability and sustainability, clean energy is in fact the winner on all three counts. You can see that Europe is really stepping up its commitment to clean energy and moving away from gas.’

How have geopolitical tensions and supply chain dependencies changed the way pension funds and insurers view infrastructure investments?

Marco van de Geugten: ‘There is certainly a trend towards focusing more on Europe. Apart from investments in renewable energy and the energy transition, there is an expansion into other parts or sub-sectors within infrastructure, such as the electrification of transport or district heating. These are sectors that historically were not considered part of the energy transition, but are now included in the new context.’

Bart van Merriënboer: ‘My clients aren’t necessarily keen to chase every new idea or follow the very latest trends, but they are open to them and very willing to invest, for example, in batteries – which didn’t exist two years ago but are now everywhere. I think the largest energy storage capacity worldwide lies in hydroelectric power stations. Hydropower may currently be less accessible for many investors to invest in, but the willingness to do so is certainly there.’

Jocelyn Dioux: ‘To give an example: the integration of energy projects with a battery storage system – or Battery Energy Storage System, BESS for short – in Spain has only recently become economically viable, because until recently the balance between risk and return was not yet right. Thanks to the sharp fall in BESS capital expenditure, this is now economically viable, which is good news for relieving the strain on the electricity grid.’

Igor Lukin: ‘Even before the challenges posed by Covid, the war in Ukraine and further geopolitical uncertainty, affordability, security of supply and decarbonisation were already playing a major role in the energy transition. I think there was a strong focus on the decarbonisation side of the “energy triangle” – comprising security of supply, affordability and decarbonisation. Particularly since the start of the war in Ukraine, the aspects of security, supply and decarbonisation have become more closely intertwined.’

Vassileva: ‘We have a highly diversified portfolio in the energy sector and are making huge investments in new renewable energy infrastructure. At the same time, we also hold traditional energy assets. We see that very responsible investments can be made in these without necessarily compromising our own ambitions, whilst also promoting healthy systems.’

Lukin: ‘Investors must be very cautious and analyse the system costs and affordability for the end user. You need to consider what the energy system might look like in the future from a systemic perspective, without relying solely on electrification, for example. Six or seven years ago, the idea was that everything would become 100 per cent electrified. It has since become clear to all of us that the system will not function in that way and that, in the future, we will see a combination of green electricity and green molecules.’

Do investments in energy security lead to better portfolio diversification and greater protection against price falls, or do they primarily result in greater complexity and associated policy risks?

Bergsma: ‘When we began the transition to clean energy some fifteen years ago, it was strongly driven by the government. This incentive has worked well: the costs of producing new solar energy, new onshore wind energy, new offshore wind energy and now also new battery storage have fallen, and the barriers to entry have been lowered. The good news is that the new feed-in tariffs being introduced by governments now actually operate on a market basis, or are very close to it, so the system costs for the end user are not that high. We are seeing a healthy private-sector consumption market that is very robust. However, governments do need to intervene from time to time, simply to take the pressure off the market in certain sectors.’

Van de Geugten: ‘For us as infrastructure investors, long-term, stable cash flows are important. If the market is too volatile or not mature enough to deliver them, a government scheme can help to remove some of the commercial risk for investors.’
 

We will need to forge alliances with China and the United States in order to strive for that strategic autonomy.

 
Van Merriënboer: ‘Adding investments in energy security reduces portfolio risk and provides additional diversification due to the lower correlation with equities during geopolitical shocks and with credit spreads during periods of rapidly rising inflation.’

How do geopolitical tensions, supply chain dependencies and changing regulations influence return expectations and assumptions regarding the financing of energy infrastructure?

Demyttenaere: ‘In our view, these forces increase the spread in both risk and return. Assets that align with national security objectives may benefit from subsidies, faster permitting processes or scarcity. At the same time, concentration in the supply chain, tariffs, local regulations, delays in grid connections and regulatory changes increase execution risk. Underwriting must therefore become more conservative, for example through a thorough understanding of counterparties, and reliable long-term contracts combined with proven technologies.’

Roger Pim: ‘The pace of change is accelerating. In today’s world, you have to be cautious, be a specialist, and, to put it simply, expect the unexpected. In many of our projects, we work alongside government bodies, local planning experts, contractors and suppliers. The fact that we maintain long-term relationships and have extensive experience contributes to smooth project management and helps to mitigate certain risks. One of the major changes we are seeing is a growing awareness at government level of the importance of infrastructure for clean energy. This can assist with planning and give investors confidence regarding long-term support. As regards dependency within the supply chain, current geopolitical tensions can pose challenges. It is therefore all the more important to capitalise on relationships and keep multiple options open to prevent critical bottlenecks or risks.’

Bergsma: ‘Bear in mind that the supply chains for offshore wind, onshore wind and solar energy differ considerably. Wind turbine manufacturers are still predominantly European. That enables you to diversify somewhat at that level. Due to the pass-through of lithium price risk, we have opted to work with Chinese suppliers on longer-term agreements, particularly for solar panels and battery storage.’
 

The pace of change is accelerating. In today’s world, you need to be cautious, be a specialist, and expect the unexpected.

 
Lukin: ‘I think you need to think much more carefully about what sort of risks you analyse during your due diligence and examine much more closely how things might come back to haunt you later, because infrastructure is, by its very nature, a long-term business: you can’t change it quickly.’

Gilligan: ‘In a sense, we’ve doubled down on a single supplier, and that’s in line with the overall strategy. But it means that infrastructure owners on the GP side are becoming increasingly sophisticated and adopting a much longer-term perspective on managing their business risks and maintaining long-term relationships, through which they are making a significant difference in reducing risks in the supply chain.’

Where does the biggest gap lie between the infrastructure Europe needs for energy security and what institutional investors can finance on a large scale?

Demyttenaere: ‘In the field of electrification and networks, we are seeing a very large and growing investment need in Europe. Governments are investing heavily to build strategic autonomy, for example in defence, but their fiscal scope is limited. Since the financial crisis, banks have been more cautious in utilising their balance sheets, and this is precisely where a clear role for the capital markets emerges: private investors can help bridge the investment gap, and pension funds can be a natural partner in this. The Savings and Investment Union, faster licensing procedures and less fragmented regulation are crucial to further stimulating this flow of capital. This combination could give Europe a real competitive advantage.’

Pim: ‘One of the interesting areas where I believe there is currently a gap is long-term storage. If you look at the overall European energy mix, this is an area where many breakthroughs are still needed. Government frameworks still have some catching up to do in this regard.’
 

The question is not only whether it is low-carbon, but also whether it is resilient and whether the costs are stable.

 
Dioux: ‘From a macroeconomic perspective, work must be done as quickly as possible to strengthen the electricity grids across Europe, in order to accommodate both the electrification of consumption and the increase in renewable energy. This could be financed through public-private partnerships, with strict regulation and government support. At present, we do not see many opportunities for private investment funds such as ours in this area in Europe, but that may yet change. What is immediately available and needed, however, is BESS. Financing BESS, using both equity and debt, is no simple matter, particularly as there is a wide range of investment scenarios, whether they involve standalone, hybrid, trader-exposed or tolling agreement-based projects. For investors, the aim is to strike the right balance and achieve diversification in terms of countries, the risks taken and how these are mitigated, the level of financing, and so on.’

Van de Geugten: ‘I think our clients are certainly willing to invest in the electricity grid, but on the European mainland this is really complicated. Many electricity grids here are (semi-)publicly owned.’

As energy systems become more complex, how should investors approach the in-depth expertise and analytical skills required to invest in infrastructure assets with confidence?

Vassileva: ‘We must ensure we target the right opportunities with the right capital in terms of risk-return. This also helps in managing the expectations of institutional clients. For example, if we say we are pursuing a core or core-plus strategy, this means we must stick to it, which entails focusing on a stable risk profile and investing, under controlled conditions, in renewable energy and storage projects, rather than in unproven technologies or generation in locations where it shouldn’t be.’

Van Merriënboer: ‘One of the crucial aspects from the LP’s perspective is selection – finding the right manager. Be prepared and ensure you have the right expertise in-house.’

Lukin: ‘When you look at the challenge ahead of us, I don’t think that we in Europe, as a society, will be able to mobilise sufficient capital within the current framework for the energy transition, and I believe that transferring some of the knowledge and experience from our usual infrastructure playbook could play an important role. Business models for the energy transition that are closer to the infrastructure sector would enable us to attract more capital by mitigating risks.’
 

Given what is happening in the world, we are increasingly realising that we must supply energy safely and at affordable prices

 
Bergsma: ‘One of the key risk factors that has changed over the past five to seven years is the revenue side. It is crucial to keep a close eye on that revenue risk. For onshore wind, solar energy and battery storage, our approach is to, let’s say, work backwards from the revenue.

We start with the revenue, we identify the customer, and then we find the right assets to meet the customer’s needs. We do this through very large platforms, including by combining different technologies across several countries. In this way, we try to find the right revenue mix and manage revenue risks.’

Dioux: ‘We take a balanced approach and do not take on excessive risk with debt financing. We have built up our internal strength in the electricity market with dedicated people who secure revenue and are proactive in hedging risks.’

Which types of energy infrastructure are currently most crucial to resilience, and to what extent are these assets suitable for long-term investment with institutional capital, given the current market structure?

Demyttenaere: ‘For us, it is crucial to consistently analyse how three megatrends interact: the rise of digitalisation and AI, geopolitical fragmentation with a stronger focus on national security, and the transition to a low-carbon economy. These megatrends clash and reinforce one another, and it is precisely at that intersection that we see the most interesting investment opportunities. Energy infrastructure in transition sits at that crossroads, and grids and storage in particular are uniquely positioned to support multiple long-term themes simultaneously: electrification, energy security, affordability and decarbonisation. In our view, these assets are structurally supported by these forces, rather than being merely exposed to the shocks they cause.’

Gilligan: ‘Over the next ten years, around six trillion will need to be invested in electricity grids worldwide – particularly in China, Europe and the United States. In China, this is straightforward due to the government’s full support and the ability to finance it within the Chinese capital markets. In Europe and the United States, it is more complicated, because we still have regulatory systems that were established in the twentieth century and were designed to regulate existing monopolies. We are now looking at a system that requires the actual Regulated Asset Base, or RAB, to be doubled in a very short space of time, and the regulatory frameworks are not really adapted to that. Regulators need to think deeply and engage in dialogue with the government and the electorate to make it clear that these are difficult issues, often involving significant sums of money.’
 

You need to examine much more closely how things might come back to haunt you later, because infrastructure is, by its very nature, a long-term endeavour

 
Pim: ‘In Ireland, an island with a fairly high penetration rate of renewable energy, we were already confronted some three to five years ago with many of the structural problems the rest of Europe is now facing. This has enabled us to gain experience with and a better understanding of a number of potential challenges, and to develop solutions. One of the lessons we have learnt is that it is vital to build relationships with all stakeholders, including the government, in order to develop the necessary infrastructure and thereby create resilience.’

Vassileva: ‘The costs of electricity grids in most countries need to be socialised. There is an enormous amount of physical infrastructure in the world. Much of it has been neglected and needs to be put to better use. If we truly want to move towards a world in which sustainable molecules are abundant, a great deal is required – sometimes even diverse physical infrastructure, ranging from ships to ports and moorings, and so on. This brings us back to the theme of also cherishing existing infrastructure and preparing it for the transition.

The energy transition also requires large quantities of rare-earth minerals, which must be extracted in a sustainable and ethically responsible manner and transported around the world.’

Van Merriënboer: ‘Batteries are the most important, especially those for the short term. They are affordable and, apparently, easy to implement and use to hybridise existing assets. They are used in brownfield projects but, these days, increasingly in greenfield projects as well. It’s all very promising.’
 

If you look at safety, affordability and sustainability, clean energy is in fact the winner on all three counts

 
Pim: ‘At the moment, we’re seeing many of the most attractive opportunities in batteries with a storage duration of two to possibly four hours. However, that will continue to evolve and change. In any case, the market for this is maturing: financing options are improving and, over time, we’ll see a wider range of solutions.’

Bergsma: ‘Batteries can relieve a large part of the load on the grid. Lithium-iron therefore seems to be the clear winner. The positives are a very extensive supply chain (in China there are at least ten suppliers offering high-quality batteries at low cost) and sound technology. The negatives are, of course, the risks involved. This is much less of an issue with a wind farm than with battery storage. Who knows what a battery will still be worth after, say, ten years? In five years’ time, there might be a cheaper battery that also performs better. Ideally, you’ll see your investment in batteries double within six or seven years.’

Dioux: ‘Whether you make the best investment in BESS depends on your risk appetite, whether it involves mature markets with lower IRRs but greater certainty regarding revenue thanks to fixed tolling agreements, or emerging markets where you can capitalise on the ‘pioneer premium’ through revenue from ancillary services.’

Vassileva: ‘We have also given careful thought to what the situation on the electricity market will look like in a few years’ time. Will volatility on the electricity market still be the same? Could there, technically speaking, even be some deterioration? With an infrastructure investment, it’s all about predictability and staying true to the risk profile that has been communicated to investors.’

Lukin: ‘We spent about three years assessing the best opportunities in the green hydrogen market before deciding to enter it. We wanted to gain an understanding of the prospects for mitigating risk in cash flows before it actually fitted into our investment strategy, because we didn’t want to do exactly what some players in the energy sector have done and are currently doing, such as a ‘gradual’ change of strategy or shift in investment style. For us, it was absolutely crucial to see that you can structure high-quality, long-term off-take agreements in the green molecules market.’

How should governments address energy security?

Demyttenaere: ‘Regulation must lay the foundations for sustained, market-driven innovation. Policymakers create the conditions; the market delivers the innovation. A good example is the commissioning of new wind power installations. Between 2020 and 2022, this took an average of four years in Europe, whereas in China it takes three years and in the United States as little as two years. Another issue is market fragmentation, which of course extends far beyond energy security alone. It is as if all these internal barriers are leading to a significant loss of GDP in Europe. Removing these barriers can help achieve economies of scale, which are important for an efficient infrastructure. A third point is the Savings and Investment Union, which enables a more efficient flow of capital. These measures will go a long way towards tackling the problems.’

Pim: ‘There is clearly a strategic level at which governments must address market failures. Among the most important things governments can do is to speed up the development process, and in particular the planning and licensing process.’

How can we best combine new and existing infrastructure to tackle the energy trilemma (security, affordability and sustainability)?

Vassileva: ‘We have specific projects, including in the Netherlands, where one of our midstream companies has reserved space for a facility to, for example, clean and upgrade used oils and then transport them, for instance for use in sustainable fuels. All these measures will be absolutely essential, including in the coming decade.’

Dioux: ‘We invest both directly in assets and in platforms. Around half of our portfolio consists of direct investments in assets, generally without development risk, and usually at the Ready to Build stage. This enables us to create value in the long term through refinancing, contract negotiations, hybridisation and similar optimisation measures. The other half is invested in platforms, development companies and large enterprises, whereby we assume development risks, but on the basis of a valuation derived from the risk-adjusted value of the underlying portfolio. Upon exit, we can sell the platform as a business to a larger infrastructure fund or utility company, or dispose of the assets individually. This combination of direct exposure to assets and platform investments ensures a balanced portfolio and helps us achieve consistent risk-adjusted returns in our closed-end funds.’
 

The combination of direct exposure to assets and platform investments ensures a balanced portfolio

 
Bergsma: ‘Platforms are better suited to a politicised, fragmented, volatile world. If you look at the various risks – supply chains, volume, delays, and so on – a portfolio puts you in a better position to manage across technologies and countries, and thus to deal with these risks. In terms of onshore wind, solar power and battery storage, stand-alone assets are the appropriate approach, but not in all countries. In some countries, you’re probably better off economically if you limit yourself to just one or two technologies. For example, I’m still not convinced about solar power in the Scandinavian countries and the United Kingdom, but I am convinced about solar power in Southern Europe. Offshore wind projects are an exception. These projects are so large that I do not yet really see a platform that focuses on offshore wind.’

What role could nuclear energy play in the context of energy security?

Van de Geugten: ‘Our clients recognise that there may be a role for nuclear energy in the energy transition. As investors, they have to weigh up the balance between risk and return with every investment. For an equity investor, it is currently simply impossible to make a profitable case when you consider the lead time involved in developing nuclear energy and the risk associated with it. A possible solution could be a public-private partnership.’
 

Adding investments in energy security reduces portfolio risk and provides additional diversification

 
Van Merriënboer: ‘The challenges in the field of nuclear energy are actually still too great, particularly with regard to the development of nuclear facilities. This takes a very long time, and during the period when there is no income, investors want to be compensated. Arrangements need to be put in place whereby governments pay in advance or pay on the basis of expected returns and annual revenues.’
 

IN BRIEF Given what is happening in the world, we are increasingly realising that energy must be supplied safely and at affordable prices. From the perspective of safety, sustainability and affordability, clean energy comes out on top on all three counts. The pace of change is accelerating. In today’s world, caution is required and the unexpected must be anticipated. In the field of electrification and grids, there is a very significant and growing need for investment in Europe. From a macroeconomic perspective, work must be carried out as quickly as possible to strengthen Europe’s electricity grids. Over the next ten years, approximately six trillion must be invested in electricity grids worldwide. Governments must become more involved in crucial energy infrastructure projects.

  

Harry van den Heuvel Harry van den Heuvel has been with Achmea since 2007 and has been responsible for infrastructure investments for Achmea Investment Management’s pension and insurance clients since 2016. Prior to that, he managed alternative investments and property on the insurer’s balance sheet. He previously worked at Van Lanschot Bankiers, Van der Moolen, Alpha Options and Optiver. He holds qualifications in Economics (MSc), Investment Analysis (RBA), Alternative Investments (CAIA) and Real Estate (MSRE).

 

Joost Bergsma Joost Bergsma is Global Head of Clean Energy at Nuveen Infrastructure, formerly Glennmont Partners, where he previously served as CEO and Managing Partner. He has developed the platform into one of the largest clean energy investment platforms in Europe. In 2024, Bergsma was honoured with the Inspiratia Energy Transition 2024 Lifetime Achievement Award for his contributions to the sector.

 

Ita Demyttenaere Ita Demyttenaere has been working as a Sustainable and Transition Solutions Manager at BlackRock since November 2024. In this role, he supports Dutch clients in integrating sustainability, transition, impact and climate objectives into their investment policies. Prior to this, he spent more than ten years advising financial institutions across Europe on responsible investment whilst at Morningstar Sustainalytics.

 

Jocelyn Dioux Jocelyn Dioux has been Investment Director and a voting member of Mirova’s investment committee since 2019. In this role, he identifies, executes and manages asset and corporate transactions in Europe, with a focus on France, Eastern Europe and Northern Europe. Previously, he worked for KPMG TS, Rive Private Investment and 123 IM, where he specialised in the energy transition sector.

 

Marco van der Geugten Marco van der Geugten is a Senior Portfolio Manager at MN and, in this role, is responsible for advising clients and managing the infrastructure portfolios. He is also jointly responsible for the forestry portfolio and advises MN’s clients on impact investments. Van der Geugten has been with MN for over 18 years and has held various positions, including a long spell as a fiduciary adviser.

 

Mark Gilligan Mark Gilligan is a member of the Management Board at BNP Paribas AM Alts and, as Head of Infrastructure, is responsible for the infrastructure equities platform. Before joining the company in 2016, he worked at UBS Asset Management as Head of European Infrastructure. Prior to that, he spent ten years practising as a solicitor in Sydney, Australia. Gilligan began his career as a technical geologist.

 

Igor Lukin Igor Lukin is Managing Director at Allianz Global Investors in Munich, within the Direct Infra Equity Team. Since 2012, he has been working on infrastructure transactions in the energy, telecoms and transport sectors. He focuses on the energy transition and has led investments in Ren-Gas and FUELLA. He previously worked at UniCredit. Lukin holds a Master’s degree in Business Administration and Computer Science from the University of Darmstadt.

 

Bart van Merriënboer Bart van Merriënboer is a Senior Portfolio Manager at a.s.r. real assets investment partners and has worked in the financial industry for over 30 years. Since 2007, he has been responsible for the selection, monitoring and implementation of asset managers, as well as portfolio construction and management for institutional investors. Van Merriënboer specialises in private investment asset classes, particularly infrastructure.

 

Roger Pim  Roger Pim joined NTR in 2025 as Head of Strategy and Capital Raising and a member of the Management Committee. He has over 25 years’ experience in private markets, with expertise in investments, asset management, ESG and business development. He previously worked at Aberdeen, SL Capital and Goldman Sachs. Pim holds an MA in Economics.

 

Albena Vassileva Albena Vassileva is Executive Director in the Infrastructure Investment Team at IFM Investors, where she is responsible for infrastructure investments in Europe. She works on the energy transition and strategies relating to renewable energy and green fuels, and has been involved in investments in companies including Naturgy and SQ Renewables. Previously, she headed the M&A Energy Team at ABN AMRO and worked at Advent International and ABN AMRO Capital.

 

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