← The Infrastructure Investor Podcast
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- [00:03]
A
The energy transition is at a crossroads. On the one hand, there are many signs of dramatic progress as more and more countries generate record volumes of power from renewables. Clean energy technology is improving while the cost of key components is falling. But on the other hand, the whole rationale for the rollout of renewable energy is being questioned. In the United States, President Trump says climate change is a hoax and green energy is a scam. And the rapid increase of electricity usage linked to data centers and artificial intelligence is leading to new demand for fossil fuel power. So, in a rapidly evolving landscape, do investors need to change their approach to the transition? In this special episode sponsored by Nuveen Infrastructure and Quinbrooke, we'll discuss this vital question. To do so, we brought together two guests who know more about investing in the energy transition than just about anyone. From Sydney, we're joined by David Skasebrook, co founder and managing partner at Quinbrooke. And from London, we welcome Jos Bergsma, global head of clean energy at Nuveen Infrastructure. I'm Ben Paton, and this is the Infrastructure Investor podcast. While hundreds of billions of dollars continue to flow into energy transition assets globally, Jos Bergsma says investor sentiment has been dampened by drastic changes to energy policy in the United States.
- [01:45]
B
If you look at it through the investor lens, I would say that investors overall are a little bit more cautious. Don't forget, of course, that we have been going through very positive years, particularly two or three years ago, where the green sector was in very high demand. And it's a little bit inevitable that this goes somewhat with a zig and a zag. And clearly now investors are more cautious. This is predominantly because of the usa. The sentiment over there, of course, is quite negative. And the usa, given its largest economy, does of course have set the scene, set the tone, and has a ripple effect nonetheless, if you start putting it apart. If you look at Europe, I would say when I talk to European investors, they continue to be very interested to invest in the energy transition space.
- [02:25]
A
The one big beautiful bill passed by the US Congress and signed into law by President Trump in July, removed many of the incentives for energy transition investment that had been established under the Biden administration. Bergsma points out, though, that the impacts of the bill will vary across different types of assets.
- [02:47]
B
You have to look at it on a sector by sector basis. Evidently, the offshore wind sector in America has been frozen for many years, unfortunately. So overall, I would say that in solar and battery storage, of course, the repeal when it comes to solar PV does put also solar into focus. In the sense that most of the market is now focused on those projects that can meet the deadlines still to attract the investment tax credit attribution. But battery storage, as you know, I think has been grandfathered at least until 2033. So I would say that solar and battery storage, we are still cautiously optimistic with what we know today. Of course, these things can again change. But what we know today, we see a good future for reasonable good returns in solar and battery storage.
- [03:26]
A
While investment tax credits for new solar projects will now be withdrawn from 2027, David Skasebrook says solar projects in the United States can still be economical.
- [03:38]
C
Well, I think before the one big beautiful bill, we were really already at a situation with solar. Putting aside the issue of import tariffs, we didn't really need any ongoing financial assistance in the form of investment tax credits. Frankly, it was cheaper and still is in many respects than any other form of power generation. And so from that point of view, yes, it makes the cost of solar more expensive relative to what it was when it had the full benefit of the investment tax credit. But it's really only being sunsetted at a point where it was continuing to get cheaper and cheaper. So from that point of view, it's really not that significant that you would reduce or eliminate investment tax credits for solar PV and also solar PV teamed with battery storage.
- [04:28]
A
He points out that ironically, the recent disruption in U.S. energy policies could end up making solar projects more profitable.
- [04:37]
C
And the other thing I should say is that one of the inconvenient truths of US energy policy these days is by introducing the prospect of more gas fired generation into the energy mix. The increase in the cost of gas turbines, the increase in the price of Henry Hub gas, and gas right across the United States because of a higher demand outlook. You have this probably unintended consequence that the forward curves in the United States for power pricing have gone up by 20 to 50%. And so the revenue opportunity for solar has actually expanded. There is still a lot to be done in solar and battery storage coupled together. But also standalone storage is also a safe harboured approach. But the revenue capture opportunity in a lot of power markets is increased.
- [05:26]
A
But Scaysbrook does warn that imposing tariffs on imported solar panels and batteries could have much more negative effects on US projects.
- [05:36]
C
The issue with the withdrawal of the financial incentives is now, perversely, a lot of those financial incentives are necessary to offset the impact of import tariffs. So it's like a bit of a Robin Hood game. On the one hand, you're giving through the fiscal incentives of the investment tax credit, you're taking it away with the import tariffs that are being particularly imposed on imported Chinese solar and batteries.
- [06:03]
A
Globally, battery storage is one area of the energy transition enjoying considerable momentum. According to global energy think tank Ember, battery storage costs have fallen at an average rate of 10% a year over the past decade. Skasebrook believes the time is ripe for investors to go big on the technology.
- [06:25]
C
Well, our approach to storage has really been to team it, especially with solar. I mean, we were one of the first to go into D.C. coupled solar and storage with our Gemini project. And we learned so much as a consequence of that project, particularly how potent the combination of solar with co located storage could be, particularly from a levelized cost perspective, but also the time of day that you could, if you like, shift the cheapest form of solar electricity into the early evening peak. So we've really been focused on how we develop hybrid projects where battery storage turbocharges the cost benefit, particularly of solar. And we've wrapped that into a hybrid solution for a customer under long term offtake arrangements. We haven't particularly pursued standalone battery storage that is merchant exposed or has the intention to be an arbitrage machine.
- [07:28]
A
Bergsma is also excited by battery storage and highlights opportunities in Europe.
- [07:34]
B
So the economic case, I think for battery storage, whether it's the Netherlands, Germany, Spain, Italy, the economic case is really, really strong for battery storage. That is, let's say from a revenue perspective, a volatility perspective. At the same time, the economics also are looking a lot better than two years ago because the supply chain for battery storage and particularly the cost of battery storage has very significantly declined, I would say over the last 12 months. We look at batteries more from an infrastructure perspective. Our investors give us capital to produce long term cash flows that are quite predictable. So that means that we are mostly focused on battery storage inside our solar PV platforms. So we create these multi technology platforms in Europe that do a combination of solar PV but also a little bit wind and then you add on battery storage. And the role of battery storage is of course to provide more flexible generation, to get a better average capture price for your overall production to be able to enter into more attractive PPAs. So that's how we're predominantly looking at battery storage.
- [08:35]
A
And he adds that he's looking forward to more progress in the year ahead, despite some clear challenges.
- [08:41]
B
2025, I would say was very much the year of battery storage. I would say that 2026 is going to be again the year of battery storage. I think there's A very strong supply chain that is very efficient, very deep. We're starting to see governments coming together, but of course we still have to see how that whole value chain is going to be delivered. Grid connections are an issue. The timelines Frankly Typical are 18 months, two years. And of course we need a whole supply chain also of optimizers and other parties that are really able to manage these batteries. So there that all still has to come together. But I'm optimistic that we're getting very quickly in the right direction.
- [09:16]
A
In the United States, battery storage largely escaped the one big beautiful bill, chopping board storage projects that commence construction before 2033 and remain eligible for tax credits. However, Skasebrooke is concerned that foreign entity of concern rules, which could make projects that use imported Chinese equipment ineligible for tax credits, will have a major impact on solar and storage investments in the United States.
- [09:46]
C
You know, we think it's the biggest sleeper issue, frankly. We got through the threats of repeal of the ira. We got through the one big beautiful bill largely in a way that you could navigate around it by being sort of selective in what you chose to focus your attention on. But really, you know, Chinese technology across solar and storage is so pervasive. It's the reason, quite frankly, the power from renewables is so cheap before you applied tariffs to it. So the alternate non Chinese supply chains are fairly nascent. And I'd also say that there is a significant difference in quality and reliability of batteries depending on the manufacturer.
- [10:30]
A
He says he's waiting nervously for detailed guidance on how the FIAC rules will be applied in practice.
- [10:36]
C
We think that actually it's hard to predict exactly how disruptive depending on the rules. And of course we're still waiting on the detailed rules of what a FIAC supply chain would look like. And the consequence of the FIAC supply chain is if you run the risk of it being tainted, it's catastrophic because it essentially means that to the extent your project is dependent on accessing investment tax credits, then those tax credits are almost retrospectively disqualified, which makes a project completely unbankable. And the indemnities that you would have to give to cover that situation are just unthinkable.
- [11:15]
A
Of course, there is a whole world outside the United States. Bergsma highlights how after several years of the US sucking in energy transition investment Europe could benefit as investors hunt for more favourable policy environments.
- [11:31]
B
Investors do have a choice. They don't have to invest in the usa. If you're not a USA investor in particular and you don't have USA pension liabilities of course, you have a choice whether you're going to invest in Australia or in Europe or the usa. At the same time, I do think that the backdrop for Europe is slightly more attractive. So many European investors see that as a result of the political turmoil, how important energy independence is as a theme. So that combined with the advent of data centers and the rapid rise of electricity consumption from data centers, there are some strong fundamentals driving the energy transition. Plus, of course, don't forget, people are still interested and concerned about warming up the Earth. So there are some really strong drivers, I would say, particularly in Europe, to finance the energy transition. The sector on the whole has also proven to deliver good returns, I would say, over the last 10, 15 years.
- [12:20]
A
One part of the energy transition facing particular challenges is the offshore wind sector. In the United States, President Trump's dislike of wind has delivered a knockout blow to the sector. But even outside the US Offshore wind projects are increasingly running into financial trouble. Bergsmith says part of the problem is the extended timeline for offshore projects, with project economics liable to change significantly during the planning phase.
- [12:50]
B
So a lot of projects that look very economical a decade ago, that are now ready to build, are a lot less attractive. If you have to build a 1 gigawatt power station for, let's say, two and a half billion and half of that is debt financed, and suddenly you have to pay 5% as opposed to 2%, the economics for your power project look really, really different. So this is what we've seen playing out, I would say, over the last 18 months in the offshore wind sector.
- [13:12]
A
He argues that European governments need to step in to support the sector.
- [13:18]
B
It's not so much, I would say, that a lot of financial support is needed. Quite often I think it's just pure policy that is giving a sort of floor price that could be around the market level or even below the market. It's just that these projects are super capital intensive. They have long build times and long planning times. So I think just strong policy with strong signals that can help the offshore wind sector to go back and restart
- [13:41]
A
with the right support at this delicate moment. Bergsma believes wind can still have a bright future on the continent.
- [13:48]
B
I do think that Europe in particular is well placed. We have an awful lot of experience here. There is a very large installed base where there's a lot of progress being made on the operations and maintenance side. Technology has really reduced the cost and efficiency of the parks. We have very low build costs. The ocean beds are not very deep here. So I think in Europe, we will definitely Turn the corner and start building a lot more new offshore winds. But a little bit of a push today, I think from the government is needed. I also think that indirectly offshore wind is needed to decarbonize large other sectors to create potentially hydrogen or even let's say, support data centers as well. I really think that Europe cannot afford not to support offshore wind sector and really should give it a push. And then I think with a bit of a push, it doesn't need to be too much. I think the offshore wind sector can be very profitable again for the private sector.
- [14:35]
A
While offshore wind might be competitive in Europe, Scaysbrooke warns it will struggle to compete in areas where cheaper to develop solar power is more readily available.
- [14:46]
C
And the longer the duration storage technology emerges, the market is shrinking for more expensive offshore wind. And so you've seen that recently, you know, here in Australia with a number of project cancellations. And the reason for that is just simply affordability, you know, and the cost. When you're paying for the turbines in Australian dollars and they're denominated in Euro, let's say it's a really expensive capital investment to be made up front. But I'd say in Australia, over time, you know, as solar gets larger, cheaper, storage gets cheaper and longer duration, you'll see its market for offshore wind. Just the available megawatt hours will continue to shrink. And I think that's continued to be challenging here in Australia. To a lesser degree. You'll see the same in the United States. Except for a place like in the northeast of the U.S. they don't have a lot of those other options outside of gas and other more expensive alternatives. And so again, it then becomes really locationally specific. So it's not an across the board offshore wind is dead, I'd say in certain places that are endowed with other resource, especially solar, I'd say, you know, the long term prognosis is still challenging.
- [16:03]
A
In fact, Skasebrook argues that Australia, which is seeking to rely on renewables for 82% of its electricity generation by 2030, is an exciting market for infrastructure investors.
- [16:16]
C
Australia, I think, is one of the more interesting markets for us. It's our backyard, of course, but even compared to a few years ago, I think the state of the market here has become significantly better from an investor point of view. Still got challenges, but nevertheless, I'd say it's still behind the ball in a lot of cases. If you look at Solo and DC coupled batteries, we're still only seeing the first 5,600megawatt projects done in A place that can host lots and lots and lots of those mega scale projects here to get low cost renewable power.
- [16:53]
A
Australia's experience reminds us that there are many success stories supporting the energy transition as a growing number of countries accelerate their rollout of renewable power. One risk, however, is that an oversupply of intermittent solar or wind generation can lead to negative power prices. Spain, for example, experienced 693 hours of zero or negative prices in the first nine months of 2025. Bergsma says managers must learn how to navigate this risk.
- [17:28]
B
Of course we're a little bit sort of cautious in building out new solar in Spain at the moment. Having said that, I think there are things that you can do. Of course we're looking at revenues from a number of different lenses, really looking at the overall mix. Of course, on the one hand we are looking, every time that we build a renewable power asset, we're looking at long term offtake. So we've been very active in the PPA market. So something that we have been doing is really building, I wouldn't say propriety, but holding, let's say, really focused access to the best corporates, really becoming their partner. Not just, let's say doing it on price, but also in terms of service. So that's the backbone, having a real focused PPA strategy, really being partners to corporate clients and really sort of meeting their needs in terms of all kinds of things. The second thing that we're very active in is hedging. So in addition to long term contracting, there are opportunities now in more and more markets where you can do 6 months hedging, 12 months hedging. Of course this is more opportunity driven, but we do see from time to time really good opportunities to lock in downside and protect our downside.
- [18:29]
A
Skasebrook notes that similar issues occur in several other parts of the world where overcapacity is present.
- [18:36]
C
I mean, you're seeing it really prevalent in a lot of markets now, particularly where you're seeing what we call a clustering effect, right, or the cannibalization effect of an overbuild of a particular technology. You saw that in wind in West Texas many years ago. In southern Oklahoma, you're going to see it more with the more solar build like we have here in Queensland in Australia. But overall, you know, the way we approach it, apart from locational issues, which is where you cite your project, particularly if you're in nodal markets, can insulate you from some of that effect. In most of the projects that we're doing these days, we're contractually protected from negative pricing. So it becomes a sort of a customer issue to manage as part of the offtake or the PPA arrangements. The third strategy we deploy is we're doing a lot of projects that are behind the meter co located behind the meter directly supplying load. You're going to see a lot more of that when it comes to data center strategies. So there's bring your own load phenomena that we're starting to see emerge where you know, the negative pricing won't be such an issue for the behind the meter power solution.
- [19:47]
A
Another key part of the puzzle here is battery storage.
- [19:50]
C
He says battery storage can be used strategically both to mitigate the risk of negative pricing, but also to profit from it. Right. In certain locations you can actually do quite well using batteries to be paid, you know, to charge. And we're seeing that in real time right now. So overall, if you are taking a holistic approach to it, you know, negative pricing really only significantly impacts those that are not prepared for it.
- [20:19]
A
One of the key drivers for demand for new renewable power projects currently comes from data centers. The International Energy Agency projects that data center power usage will more than double by 2030 as demand for artificial intelligence takes off. This, Skasebrook notes, is creating a global scramble for renewable power solutions.
- [20:43]
C
You know, some of the AI compute, algorithmic and reasoning data centers can be located outside of urban centers to where load co located with renewables and storage, et cetera. And that's the next big thing that you're going to see. And so it's something we've been very active in now for four years. And we've built the fifth largest data center developer called Rowan in the last three years, which has been the most amazing thing I've ever experienced in my career. Everything you read about in the headlines is true when it comes to hyperscale data center demand and what you see particularly going on in the United States, we're starting to see that replicated now in Europe and then also here in Australia. The first big OpenAI hyperscale announcement was announced the other day.
- [21:27]
A
He adds that the growth of data centers, which account for around half of new power demand in the United States, is changing energy system dynamics.
- [21:37]
C
There's no question that from a demand, a power demand perspective, it's changing supply demand economics in most deregulated power markets and it is changing the cost of electricity as a consequence of that. We're seeing if you like expedient solutions including mobile gas fired generation behind the meter, bring your own load development. It's like literally anything that can deliver power in a short time frame is on the table even if it's not helping you towards your net zero goals. It's it's that pervasive and competitive and urgent and it's really a phenomena that's difficult to underestimate its impact at the moment. But it is rewriting the fundamentals of electricity supply and demand in a lot of power markets.
- [22:30]
A
Bergsmar agrees that demand from data centers will push power prices upwards in Europe, noting that this can help firm up solar project economics.
- [22:40]
B
In my view it will have a bit of an upward effect on power prices which I think is really needed in quite a few number of sectors, not just I would say in solar PV where the economics I would say today look a little bit iffy. The returns are just not quite there given the risk profile sometimes. And I would say data centers could potentially help to readdress and getting a better power price environment for some clean energy investments. But I think if consumers and off takers are prepared, let's say to fund that, I do think there's a good potential for data centers. I would say the Nordics are very well placed, I think potentially Spain. But evidently grid I think is the key thing. And this is where we as power sector investors can really help the data centers. We really understand that grid process. We understand where there is potential to add further capacity and therefore data centers.
- [23:27]
A
So despite the many challenges, there is still plenty of room for optimism around energy transition investing in Europe, in Australia, and to some extent even in the United States. We're all familiar with the environmental arguments around the need to replace fossil fuels with renewable energy. But the reality on the ground is that economics is really what's driving the renewables rollout. The simple fact is that green energy is the lowest cost energy source in most of the world. The International Renewable Energy Agency says solar and wind are cheaper than fossil alternatives 91% of the time. And as we've discussed, falling battery storage costs are enabling countries to integrate ever greater volumes of renewables into their grids. Meanwhile, solar can be deployed much quicker than almost any other source of generation and the technology will be key to meeting rapidly growing data center demand. Thanks again to David Skasebrook from Quinbrook and Jos Bergsma from Nuveen for joining us. If you want to hear more episodes, you can subscribe to the podcast wherever you like to listen or head to infrastructureinvestor.com there you can also get all the news and analysis you need on the institutions, the funds and the transactions shaping private markets. Our producer on this episode was Charles Wayne. And our audio editor was Eric Fish. For Infrastructure Investor, I'm Ben Payton. Thank you for listening.