In June 2024, the United Nations released its latest report emphasising the critical need for increased investments in new infrastructure to meet global climate goals.1
The required figure for global decarbonisation investment is projected to reach a staggering $4.5 trillion annually until 2030. To grasp the magnitude, this amount is above Germany’s annual GDP of approximately $4.1 trillion in 2023, underscoring the critical role of the energy transition for the global economy.2
Central to this investment requirement is the infrastructure middle market (mid-market).
Moreover, the mid-market in mature geographies such as North America and Europe has played a major role in the build out to date. Since 2023 to mid-2024, the volume of infrastructure and energy transition transactions in the mid-market has surged to over $200 billion in these advanced economies. It stands out as the most dynamic and rapidly expanding market segment for private infrastructure investment.
As a result of a broadening opportunity set created by the decarbonisation agenda, the infrastructure market is changing, and we are witnessing a decrease in the median equity deal size in the private infrastructure space. For example, in Europe, it has decreased from $520 million in 2018 to $340 million in 2023, highlighting how the lower end of the mid-market is gaining in importance.3
The mid-market has therefore become pivotal to decarbonisation, particularly for investors traditionally focused on large-cap infrastructure who are now increasingly seeking to participate in the long-term value creation potential of the energy transition.
Decarbonisation: Driving diversification and digitalisation
As Europe and North America continue their respective decarbonisation journeys, supported by meaningful policy stimulus, it’s the mid-market segment that has become a hive of activity. InfraRed has had a presence in Europe since 1997 and North America since 2009, we are now witnessing the mid-market not just facilitating new renewable energy generation capacity but also supporting essential enhancements to existing infrastructure.
A diverse array of projects are being financed from wind and solar to vital decarbonisation technologies, such as battery storage and biofuels. With the bulk of new power capacity consisting of renewables and battery storage, the mid-market also represents a powerful enabler of other key megatrends, like digitalisation.
Global energy demand is predicted to grow annually by more than 3%, driven in large part by the electrification of economies. For example, the data centre sector currently consumes c. 3% of global power, with forecasts predicting it could reach 8% by 2030.4 It is fair to assume that mid-market capital flowing into new renewables projects will be critical for the operation and growth of some large-cap, hyperscale data centre platforms.
1United Nations, World Investment Report 2024, June 2024
2 Macrobond, June 2024
3 InfraRed analysis on Infralogic transaction database of closed infrastructure deals
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