Financing the energy transition: themes and realities

Last week, Locogen attended the Financing Energy Transition conference in London. This painted a vivid, although sometimes uncomfortable, picture of the financing and investment perspectives of the current clean energy landscape, with many of the key players present from finance, development, insurance and advice sectors. Overall, the sentiment at the conference was that optimism remains, but the path to 2030 and beyond is jagged. The potential growth opportunities are enormous, yet so are the risks: political, technical, financial, and climatic. We’ve written up our key observations from the event, covering: 

1. The current investment landscape 

2. Offshore Wind 

3. Grid Infrastructure 

4. Energy Storage 

5. Data Centres and AI 

6. Weather risk, insurance and resilience 

7. Policy and alternative models 

8. Our final reflections 

Macro outlook and investment climate

The COP28 mandate to triple renewable capacity by 2030 remains the defining benchmark, and the investment requirement ($72 to $117 trillion by 2050) to meet this is colossal. The developers present were generally cautiously positive, but not naïve. They understand that the easy years are gone. That said, one developer found that there was less competition for exclusivity, although this does not necessarily fit with how we have been seeing the wider UK market recently, and may have been more specific to BESS transactions.  

Representatives from larger developers held much wider and diversified outlooks. There was broad agreement that the sector has shifted from a “Goldilocks era” into a harsher investment climate where returns must be proven and risks better managed. This scarcity of capital is forcing discipline and investors want simplicity, scalability, and predictability. For example, MUFG stated that they are seeing carbon neutrality increasingly being balanced with growth, meaning renewables projects are now competing with other infrastructure that might be less risky and more attractive.

What stood out: 

• Risk vs. return: Investors are demanding more visibility. Developers need to demonstrate not just growth potential but credible downside management. There was a view that investors have been more flexible or optimistic in recent years with the aim to meet investment targets, but this return to downside scrutiny is good news for consultants. It was suggested that there is an opportunity to identify the gap and capitalise on an approach that differentiates from competitors, however it’s all in the framing. 

• Market structure: M&A is increasingly about large, proven platforms. On that basis, single-asset developers are disadvantaged and likely to struggle unless they are part of larger portfolios. MUFG also said the market could be moving toward corporate covenant style agreements. Macquarie indicated that they are seeing M&A activity down for only the 3^rd cycle in 20 years. 

• Capital recycling: Churn, repeatability, and balance sheet discipline now matter more than big-bang project finance. 

• NIMBYism: Local opposition is slowing projects even as policymakers set aggressive national targets. The rise of populism movements across Europe was clearly discussed, with the impact and uncertainties that this brings to certain asset classes (specifically onshore projects located close to populations, like Solar PV and BESS). This presents a structural drag on growth that capital does not ignore. 

Offshore wind: growth, but at a crossroads

Offshore wind sits at the centre of European energy strategy, but its risks are multiplying and the competition for capital is increasing. 

• The scale challenge: £70bn in UK offshore debt required by 2030 is a staggering ask. Offshore projects are now competing head-to-head with storage, hydrogen, and solar, many of which offer cleaner risk-return profiles. 

• Auction failures: AR5 and similar episodes reflect systemic design flaws. Regulators’ urge to reinvent policy frameworks, rather than scale what works, has cost time and investor trust. 

• FID blurred: Hundreds of millions are being sunk pre-FID to secure supply chain slots and vessels, which represents a huge amount of capital being put at risk before financial close. 

• Floating wind: This oft-discussed technological opportunity is still immature, still too expensive, and currently only niche markets like the UK and Korea are attracting serious attention. 

The sector risks cannibalising its own momentum unless financing frameworks, insurance structures, and risk allocation are adapted to today’s realities. 

Grid infrastructure

The refrain across sessions was clear: “no transition without transmission” 

• UK reforms: The Gate 2 process is a bold attempt to clear the 730 GW connection backlog, but credibility hinges on clarity of dates. Transactions and financing are stuck until certainty emerges.  

• Funding shortfall: There are considerable concerns that the TSOs and DSOs cannot finance the project works at the scale required. It was suggested therefore that private capital mobilisation is unavoidable. 

• Centralisation risks: A shift towards centralised control risks inefficiency. Without market input, consumer outcomes could worsen. Fragmentation among UK state actors shows how difficult “joined-up thinking” really is. Some of the panel sessions reflected on how similar approaches in Germany had stalled the market for two years, and policymakers should be wise to these lessons. 

Overall grid reform is the bottleneck of the 2020s, and developers will price in the uncertainty until this is resolved. 

Energy storage: hybridisation and market risk

Storage is moving from sideshow to centre stage, with a large part of the day discussing storage either directly or indirectly. The fact that globally 175.4 GWh in Energy Storage capacity was added in 2024 tells its own story. 

• Shift to duration: 2–4 hour projects with wholesale arbitrage revenue models are becoming standard. 

• Revenue cannibalisation: Frequency response markets are saturated. UK projects are now heavily merchant-exposed, with the Balancing Mechanism playing a growing role. 

• Hybridisation: Combining wind and battery is seen as a stabilising force against negative pricing in PV-heavy markets. But a critical unanswered question is how PPAs can be structured if the battery is unavailable for contracted periods. This tension between flexibility and predictability will define hybrid deal structures. 

• Risk appetite: Developers need to make investors comfortable with nodal risk, cannibalisation, and volatility. Predictability of output and contracted revenues remain top of the checklist. 

Germany stands out as a favourable storage market at the moment; Spain less so due to solar’s effect on spreads. During the day the Italian MACSE results came out, which also dominated a lot of the questions as people tried to interpret whether the pricing in this represented enthusiasm or overconfidence through the number of bidders. Meanwhile, Li-ion remains dominant (even for 8h projects) because maturity and cost curves beat alternatives. 

Data centres and AI

Data centres are increasingly becoming the load discussion of all markets. They are shaping national demand curves and policy. There was much debate over the type and scale of the impact they will have, the concern that their requirements will dwarf other loads, as well as the perceived benefit that they will become the offtakers to balance the market demands. In all cases, their location will be key. 

• Ireland as a case study: It was stated that over 20% of demand in Ireland (for 2023) came from data centres, creating 4% annual load growth. Policy backlash has already arrived, with managed growth/moratoria in place. 

• Global AI load: AI is already 1.5% of global electricity demand, with exponential growth likely. 

• Behind-the-meter innovation: Developers are exploring hybrid and co-located models, but misalignment between short IT asset lives and long-term energy structures remains a financing headache. 

• Policy evolution: Regulators are forcing data centres into the wholesale market as flexible participants. The era of “passive dumb load” is over. 

This is both an opportunity and a constraint: flexible demand is going to be increasingly valuable moving forward, but unmanaged growth risks grid adequacy and emissions. 

Weather risk, insurance and resilience

Perhaps the sharpest reality check was the insurance discussion. Attritional losses (like a single blade) were once the norm. Now the severity has escalated: hail, hurricanes, and ice storms generate catastrophic payouts. This has caused premiums to rise as larger and larger individual event payouts made the insurance industry unprofitable. This caused a reaction and premiums rocketed. This has somewhat been levelled out, but it remains a significant risk to long term project viability. 

• Risk sharing: Insurance cannot carry the full weight anymore. Increasingly lenders, investors, and developers must co-share the climate risk. 

• Due diligence evolution: Technical DD is now more risk-based and site-specific, covering weather patterns, regional exposure, and resilience. PML studies are becoming non-negotiable. 

• Past ≠ future: As one presenter put it: “past performance is no guarantee of future outputs anymore.” Stress tests and downside modelling are now mandatory. 

• Resilience by design: Site selection, cable protection, tracking systems, and even blade edge technology are shifting from “optional extras” to financing prerequisites. 

Margins are under pressure. The smarter developers will build risk-adjusted design and modelling into projects up-front, not as an afterthought. And the more variable and inverter-heavy our grid becomes, the more these conditions could align by chance. That’s why investment in coordination, testing, and visibility is so important.

Policy and alternative models

Policy remains the constant enabler or obstacle. 

• EU 2030 targets: These are helpful at EU level, but national implementation is uneven. Germany’s rapid permitting is the exception. 

• Hydrogen: The hype is cooling. The viable path is co-located green hydrogen with renewables. Standalone hydrogen is struggling to attract capital. 

• Nuclear: SMRs remain theoretical until the 2030s, and are not investible today. 

• Business model innovation: Virtual utilities, demand response, and “energy-as-a-service” are attracting attention with their capital-light, software-heavy, and potentially disruptive approaches. 
• Italian innovation: Italy’s MACSE auction for storage, where TSOs pay 15-year inflation-linked revenues, is one of the few policy designs widely praised for de-risking investment. 

Final reflections

The sector is growing, but complexity has multiplied, both with changes in scale and the increasing penetration in markets. Where once the barrier to developer entry was low, today it requires full-stack teams, robust H&S understanding, risk-based technical diligence, and resilience planning. 

Investors will continue to chase growth, but only with confidence in predictability, risk allocation, and resilience. Developers who can prove they’ve internalised this, through hybrid models, risk modelling, and disciplined design could capture a disproportionate market share, but only if they can navigate the increasing requirements of scope and scale which necessitate more work earlier in the development cycle.  

The transition is not just about megawatts on the grid; it is about building confidence in a world where the past no longer predicts the future.