Transition indicators in action: clean energy infrastructure

Understanding the speed of the energy transition can highlight risks while revealing compelling investment opportunities. To help investors gauge the pace and path of the transition, we identified key metrics that investors should monitor in our recent paper, The energy transition: 10 essential indicators for institutional investors.

Leveraging this framework, Jordi Francesch, head of global asset management, clean energy, Nuveen Infrastructure, highlights the ways in which three indicators—government trade policies, corporate carbon reduction and climate technology funding—are driving the development and implementation of clean energy projects. This article is part of a series.

Indicator #7—Major policies influencing global trade

Geopolitics is a crucial factor influencing trade policy, particularly in light of the ongoing war in Ukraine and the strategic competition between the U.S. and China over energy transition technologies. These trade policies impact supply chains, policy decisions of other countries, and market dynamics across various energy sectors, including solar, wind and batteries. These conflicts have accelerated the need for energy independence and security, prompting countries to consider strengthening support for renewable energy sources and infrastructure. Consequentially, the monitoring of trade policies and subsidies is important for our strategy.

While the European Green Deal and U.S. Inflation Reduction Act are the most impactful to our strategy and the progression of the energy transition, subsidy programs such as the Repower EU plan, the U.S. Infrastructure and Jobs Act and China’s 14th Five-Year Plan also drive significant opportunities. On the trade policy side, we are closely watching EU tariffs on electric vehicles from China as well as U.S.-China trade policies that impact the solar supply chain.

Indicator #3—Corporate carbon reduction

Corporate decarbonization commitments are another vital indicator for clean energy investing. Large corporations like Amazon, Google and Apple are leading the way in signing power purchase agreements (PPAs) for clean energy to meet their sustainability goals and gain a competitive edge. These companies want to offer carbon-neutral products and services, which influences their willingness to enter into long-term agreements with clean energy providers.

This trend extends beyond the tech industry, with manufacturing and heavy industry sectors increasingly seeking PPAs to hedge against energy cost volatility. By engaging with corporations on decarbonization, clean energy providers can secure stable, long-term revenue streams through PPAs, thereby enhancing the financial viability of their clean energy projects.

Indicator #9—Climate technology funding

Significant cost reductions in capital expenditure and cost per megawatt across various technologies—starting with onshore wind, followed by solar photovoltaics, and now batteries—are accelerating the energy transition. These advances result from investment, which is why monitoring the climate tech funding—how much is being raised and the projects being funded—is critical.

The decreasing cost of batteries, in particular, has been a game-changer, enabling greater grid stability and higher penetration of renewable energy sources. We are actively developing both standalone battery projects and co-located battery systems with solar plants. These advancements not only support the integration of more renewables into the energy system but also provide flexibility in how energy is stored and distributed, enhancing the overall efficiency and reliability of clean energy infrastructure. Ultimately the reduced cost curves are enabling higher levels of clean energy capital expenditure.

Additionally, the development of floating offshore wind technology holds significant potential for future investments. Countries with deep water areas, such as Japan, Korea and some European nations, may benefit from floating wind turbines that offer more predictable energy generation compared to onshore wind. These projects, although still five to 10 years from being economically viable, may offer substantial capital deployment opportunities looking forward.

Nuveen Infrastructure’s clean energy strategy invests in the transition to a low carbon economy and aims to deliver reliable income streams and capital appreciation through exposure to high quality defensive infrastructure assets. Click here to learn more.