Masoud Homayoun: Net Zero: A Once-In-A-Generation Infrastructure Opportunity
To achieve net zero, transition infrastructure needs to be rolled out at scale. For investors, an opportunity to help build a climate-resilient future is now ripe for the taking.
When I joined EQT more than 15 years ago, the infrastructure investing scene looked very different.
Take solar energy. Back then, it still wasn’t clear how we were going to make the economics of it work at mass scale, and companies and researchers were wondering how solar panels could be made efficiently enough that a business model could be built around them.
Eventually, those developments happened and today, solar power is showing exponential growth. The International Energy Agency has upped its forecasts for globally installed solar PV capacity by 2030 by a factor of 55 since 2006, and today solar accounts for 4.5 percent of all electricity generation. Look around, and you see panels everywhere: in supermarket car parks, empty fields, or of course, on your neighbors’ rooftops. Could you have imagined that 15 years ago?
Solar’s journey is just one example of how technologies essential to net zero prove themselves by coming down the cost curve, demonstrating customer demand and achieving operational efficiency. This pattern has repeated itself across the renewable energy generation sector, and today we are seeing a wave of investment opportunities open up across infrastructure. When I look ahead to the next 15 years, the opportunity set is like nothing I have seen before.
To unlock the potential of renewable energy generation, we don’t just need more solar panels and wind turbines, but a whole new system of energy generation, storage and distribution, where batteries are used to solve the problem of energy intermittency, and energy-as-a-service solutions work with commercial consumers to make sure they have access to clean electricity. Electrification will continue to touch many sectors, not only in transport, but also moving on to heat systems and then harder-to-abate industrial sectors like steel and cement production, and agriculture. Finally, infrastructure that allows resources to be used more efficiently, and put back into the system, will be needed. If we want more batteries to store energy, for example, investing in better technologies to recycle and reuse their components is also necessary.
“The longer we wait, the more it will cost – both in terms of the opportunity as investors but also in terms of the climate effects that are worsening, and which are having a real impact on people’s lives around the world.”
Systemic shifts are now happening that rely on the building and modernization of physical infrastructure, across multiple phases. It’s a complete overhaul, and it’s happening not simply because we want to reach net zero, but because those cost curves are coming down. In a world where it’s more efficient to invest in energy transition than to continue spending on conventional fuels, net zero is a matter of time, not possibility.
When you look at the world through that lens, it also becomes obvious that investing in infrastructure that doesn’t advance the transition would mean backing companies that simply may not be worth much in the future. If we stick to our convictions, and deliver these future-proofed investments to their full potential, then what’s on the other side is a world that is cleaner, cheaper to live in, and more in line with the resources we have available.
It’s a compelling future to aim for, but the longer we wait, the more it will cost – both in terms of the opportunity as investors but also in terms of the climate effects that are worsening, and which are having a real impact on people’s lives around the world.
Still, there is a huge investment gap to fill. Much of this infrastructure is regulated or supported in some way by governments, with budgets that are constrained by other pressing issues like boosting defense spending and addressing rising public sector debt.
Private investment, therefore, will play a critical role alongside public bodies in delivering the estimated $275tn of investment needed by 2050 to meet transition targets.
To identify the highest quality opportunities, investors will need to operate with a global perspective and local teams and incorporate deep sector expertise into their decision-making.
Private capital managers also have an important role to play when it comes to attracting talent and professionalizing the execution of the infrastructure buildout, as well as understanding where money is best put to use. This is a transition that will take place over several phases, where some subsectors are ripe for exponential growth here and now, such as battery storage and distributed energy, while others need more time to prove themselves, such as carbon capture.
Not everything labeled as “net zero” is a good investment for today, and managers will need to make sure they are allocating funds to solutions that have been developed to the point where they are ready to scale. In all my time working in infrastructure investing, there has never been a bigger opportunity to build a climate-resilient future.
Masoud Homayoun, joined EQT Partners in 2008 and is Partner and Head of Value-Add Infrastructure. Masoud is a member of the Infrastructure Partners’ Investment Committee, Infrastructure Portfolio Performance Review Committee and has been a board member in portfolio companies across digital infrastructure, energy & environmental, and transport sectors. Prior to joining EQT Partners, Masoud worked at Bain & Company in Stockholm.
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