The winds of change are blowing through the infrastructure investment landscape, and it’s clear that the future is heavily intertwined with digital innovation and energy transition. Four out of the five largest infrastructure funds are diving headfirst into both digital infrastructure and energy, while one is laser-focused on renewables. This trend signals a seismic shift in how these funds are positioning themselves to ride the wave of emerging technologies and sustainability.
Eddy Frances, principal at Ares Management, encapsulates the essence of this transformation. He notes that while the fundamentals of infrastructure remain consistent, the most thrilling developments are happening where traditional infrastructure meets cutting-edge trends. The energy transition has been a hot topic for a while, but it’s now firmly entrenched in the infrastructure playbook. The rise of artificial intelligence, coupled with the demand for the infrastructure that supports it, is also making headlines. Data centers, for instance, are projected to consume over 7 percent of global energy by the decade’s end, a dramatic leap from the current 1.5 percent.
Pauline Thomson from Ardian highlights a pressing concern: “Power is really becoming the bottleneck for AI and even for data center deployment.” This sentiment is echoed by Peter Corsell of I Squared Capital, who emphasizes the staggering $50 billion investment U.S. electric utilities need to make to accommodate data centers alone. This scenario not only presents challenges but also opens the door for significant investment opportunities in energy generation, especially renewables.
The UK is setting the pace here, becoming the first G7 nation to eliminate coal from its energy mix. Keith Reader from Wilmington Trust underscores this progress, noting that wind energy recently outpaced gas generation for two consecutive quarters. This momentum is a boon for renewable energy investments, which are expected to be a cornerstone of future infrastructure projects. However, it’s crucial to recognize that renewables aren’t the only game in town. Natural gas still has a part to play, as Patrick Freer from Fengate Asset Management suggests, in facilitating the transition to a greener grid. The potential of hydrogen as a complementary energy source, as articulated by James Samworth of Schroders Greencoat, adds yet another layer of complexity and opportunity to the conversation.
While the sectors may feel familiar, the faces behind them are evolving. The Infrastructure Investor’s Rising Stars list showcases a diverse group of young leaders making waves in the industry. Monica Huffer, at just 28, is already making significant contributions as portfolio director for the Texas Municipal Retirement System. Her insights point to North American power and waste management as key sectors to watch in 2025, a sentiment echoed by Dillon Anderiesz from Macquarie Asset Management, who emphasizes the increasing focus on emissions and sustainability.
Digital infrastructure is another hot topic, with Tim Power from Ancala noting that the demand for data centers is surging, although the economic viability of AI applications still needs to be proven. This is particularly relevant in the Asia-Pacific region, where the digital market is expected to thrive. Alex Ayscough from Morrison calls for private capital to step up in addressing Australia’s water infrastructure challenges, especially as climate change exacerbates drought conditions.
Private capital is not sitting on the sidelines. Infrastructure Investor reports a robust landscape of large funds targeting at least $10 billion, with Global Infrastructure Partners V leading the charge at $25 billion. This fund is expected to focus on a blend of digital infrastructure, energy, transport, and utilities. DigitalBridge Partners III is uniquely positioned with a pure focus on data centers, already halfway to its $8 billion goal.
With over $230 billion sought by the largest funds in the market, the infrastructure investment landscape is ripe for transformation. As these funds gear up for the future, the interplay of digital and energy infrastructure will not only dictate where capital flows but will also shape the very fabric of our energy systems and technological advancements. The future is bright, and those poised to harness these trends will undoubtedly be the rainmakers of tomorrow.
