August 2025
“Grid investment of $15.8 trillion is needed between now and 2050 under BloombergNEF’s base case scenario for the global energy transition, most of it for physical assets like wires, cables, towers and substations to deliver a required 29-million-kilometer (17.4-million-mile) extension. Replacement of aging assets and connecting renewable energy remain the key cost drivers, and distribution grid spending remains slightly higher than outlays on the transmission grid. For this year’s New Energy Outlook, BNEF focused on updating the Economic Transition Scenario (ETS), incorporating new analysis on data-center power demand, policy shifts in key geographies, and refreshed cost estimates for clean and fossil energy. However, in addition to this ETS focus, we have applied grid cost and model updates to last year’s Net Zero Scenario.” [BNEF New Energy Outlook 2025: Grids]
Commentary by Dan McGoey, lead portfolio manager of Caldwell-Lazard CorePlus Infrastructure
BNEF expects global grid investment to require US$15.8 trillion in investment between now and 2050 under its base-case scenario for energy transition (which assumes decision-making is driven by costs and economics rather than climate policy initiatives, a more conservative scenario than its Net Zero scenario). BNEF projects annual capital expenditure for grids globally in the next 5 years (2025-30) that is double that of 2020-24, with the estimated US$594b of investment in 2030e approximately 70% above the 2020-2024 average. It is important to note, these figures do not include generation and pertain solely to grid transmission and distribution.
We believe a primary way of gaining investment exposure to this surging trend is via traditional electric utilities, which tend to be responsible for grid investment and typically earn a regulated return on their investment according to their respective regulatory frameworks. In most cases, this is seen as a core component of exposure to power grids and the trend towards electrification. However, BNEF also notes that the vast majority of the investment anticipated is for physical assets like wires, cables, towers, and substations to replace aging assets and to integrate renewable energy sources into the grid.
Caldwell Lazard CorePlus Infrastructure strategy was designed to cast a wide net to identify the most compelling investment opportunities poised to benefit from strong growth in key areas of global infrastructure spending, including a universe of infrastructure as well as infrastructure-related securities. Our investment approach emphasizes rooting the strategy in a solid foundation of core, real asset infrastructure businesses for prospects of compelling real (ex-inflation) returns as well as to establish the low volatility characteristics to which infrastructure investors are likely accustomed. But the strategy also utilizes a unique, proprietary investment process that integrates fundamental and quantitative methods that seek to capture the key beneficiaries – the picks and shovels – of infrastructure investment spending without sacrificing its low volatility objective.
While supplying the critical components, technologies, services and materials that constitute modern grid (or, infrastructure, writ large) investment may inherently be a higher volatility business than earning a regulated return on capital investment, our investment process seeks to effectively manage volatility and identify opportunities where supply-demand imbalances for infrastructure-related goods and services have the potential to produce superior returns for investors.
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