Infrastructure Investment Trusts in Energy: Unlocking Capital for Grid Modernization
Introduction
As the world works towards transitioning to renewable and cleaner sources of energy,
modernizing our aging energy infrastructure has become an urgent priority. Decarbonizing the
electric grid requires massive investments in transmission and distribution systems in order to
connect renewable energy sources located far from demand centers as well as make the grid
more resilient, flexible and intelligent. However, traditional utility financing through rate hikes can
only go so far given the enormity of infrastructure needs. Innovative financing mechanisms are
needed to unlock large pools of private capital for grid modernization.
One such financing tool that has gained traction globally is Infrastructure Investment Trusts
(InvITs) in the energy sector. InvITs allow pooling of infrastructure assets into a trust structure
which issues units to investors, thereby monetizing infrastructure assets to raise capital. Several
countries, including the US, UK and India, have already successfully used InvITs to channel
significant private investments into modernizing energy infrastructure. However, there are still
challenges that need to be addressed for InvITs to be deployed at a scale needed for grid
decarbonization.
This paper aims to analyze the potential of InvITs for financing grid modernization in the context
of the massive investments needed to transition to a clean energy future. It examines the
experiences of countries that have utilized InvITs so far, identifies challenges still remaining and
provides policy recommendations for fully unlocking the potential of this financing tool. The
discussion is structured as follows:
1. Investments needed for a clean energy transition and grid modernization
2. Overview of Infrastructure Investment Trusts as a financing mechanism
3. Global experiences with InvITs in the energy sector
4. Challenges and opportunities for InvITs in grid decarbonization
5. Policy recommendations for scaling up InvIT financing
6. Conclusion
1. Investments needed for a clean energy transition and grid modernization
Transitioning to renewable energy at the scale needed to achieve climate targets requires
immense investments in upgrading and expanding power infrastructure over the coming
decades. According to IEA estimates, annual global energy supply investments need to rise to
$4 trillion by 2030 from current levels of about $2 trillion to put the world on a sustainable energy
path.
A significant portion of this estimated $2 trillion additional investment is needed for modernizing
electricity grids. The World Economic Forum pegs infrastructure investment requirements for
electrification and grid modernization at over $50 trillion between 2015-2050 globally. In the US
alone, upgrading aging transmission and distribution systems is estimated to require $2.5 trillion
over the next 25 years according to the American Society of Civil Engineers.
Grid modernization refers to upgrading existing transmission and distribution systems to make
them more resilient, digitally enabled, integrated with distributed energy resources, and capable
of handling high volumes of renewable power. Key areas of investment needs include:
- Upgrading T&D lines to increase capacity and utilize higher-capacity conductors for
transporting renewable power over long distances.
- Developing new high-voltage transmission lines to connect remote renewable energy zones to
population centers.
- Making subsystem upgrades like reconductoring, replacing poles and cross-arms, adding new
transformers and substations.
- Investing in 'smart grid' technologies like advanced metering, distributed energy management
systems, energy storage and microgrids.
- Modernizing distribution infrastructure for bidirectional power flows to accommodate rooftop
solar and electric vehicles.
- Hardening systems against extreme weather events through undergrounding of lines, storm
hardening of poles etc.
While government grants and public utilities shoulder some of these costs, the scale of financing
required is far more than what can be mobilized through traditional rate-based models alone.
Innovative financing that taps large pools ofprivate capital is urgently needed for modernizing
energy infrastructure.
2. Overview of Infrastructure Investment Trusts as a financing mechanism
Infrastructure Investment Trusts (InvITs) refer to trusts set up to own, operate and invest in
infrastructure assets. They provide an avenue to monetize operational infrastructure by pooling
multiple assets/projects into a single investment entity. Key features of InvITs include:
- InvITs are set up as trusts regulated by securities market regulators.
- Infrastructure projects/assets are contributed to the trust in return for trust units given to the
project developer.
- Units of the InvIT are issued to different classes of public/private investors to raise capital.
- Proceeds are utilized to acquire other assets or invest further in portfolio infrastructure assets.
- Cash flows from underlying assets are distributed to unit holders as dividends on a periodic
basis.
- Management of assets and fund deployment is handled by the Sponsor and Investment
Manager.
InvITs allow infrastructure assets to be pooled and monetized through capital markets, attracting
a wide variety of institutional and retail investors. The stable and long-term cash flows from
operating assets make InvITs an attractive investment proposition. Some key benefits include:
- Mobilizing large pools of long-term private/institutional capital for infrastructure modernization.
- Improving liquidity of infrastructure assets and allowing investors an ‘exit’ route.
- Reducing reliance on public funds and aids resource mobilization.
- Enabling efficient capital recycling for developers as assets get monetized.
- Offering yield-oriented investment avenues to large institutional investors.
Over time, InvITs have emerged as a popular structured financing instrument globally for
channeling investments into roads, power transmission and renewable energy projects.
3. Global experiences with InvITs in the energy sector
Several countries have already demonstrated the successful deployment of InvITs for raising
private capital to modernize energy infrastructure networks. A few prominent examples are
discussed below:
United States:
- US introduced Master Limited Partnerships (MLPs) in 1981 which facilitated asset
monetization in midstream energy.
- Since then over $400 billion has been raised through 30+ Listed MLPs for pipeline
construction.
- Emergence of YieldCos since 2012 provided a yield-focused vehicle for renewable energy
through platforms like NRG Yield, TerraForm Power.
- YieldCos have raised $40+ billion and today own/operate 31 GW of renewable assets in the
US.
India:
- SEBI notified InvIT regulations in 2014 paving way for energy sector investments.
- India Grid Trust (IndiGrid) launched in 2017 was Asia’s first power sector InvIT, raising $300
million.
- It now holds transmission assets worth $1 billion with portfolio of 13 projects spanning over 9
states.
- Several other InvITs have replicated this model, mobilizing billions in private capital for
transmission infrastructure.
United Kingdom:
- UK’s Green Investment Bank pioneered use of YieldCos like Green Investment Group in
offshore wind platforms.
- It has mobilized $6 billion of private capital through public-private Green InvITs.
- Infradebt Infracapital InvIT focuses on renewables and energy efficiency, raising $300 million.
- Recent initiatives like Open Energi are further scaling up private capital through regulated
asset-based models.
These examples demonstrate how InvITs have successfully provided an avenue for monetizing
operating energy infrastructure assets, unlocking large pools of institutional investment capital
required for transmission and renewable energy buildouts globally.
4. Challenges and opportunities for InvITs in grid decarbonization
While InvITs hold enormous promise as a financing tool, there are still regulatory, policy and
market-related barriers that need to be addressed to deploy them at scale for modernizing
energy grids:
- Regulatory impediments: Overly strict regulations can discourage participation. Simplifying
compliances for smaller projects and flexibility in governance structures is needed.
- Lack of size and scale: Most energy InvITs operate relatively small portfolios. Consolidating
assets is important to improve scale and market visibility.
- Absence of volume: Limited number of transactions restricts liquidity and risk appetite of
investors. Sustained deal volumes are required.
- Returns perception: Investors see InvIT returns as low compared to other infrastructure.
Incentivizing first-movers through returns enhancement is important.
- Policy push: Active government support in identification, aggregation and enabling of priority
asset pipelines is needed to catalyze the market.
- Credit enhancement: Mechanisms like partial credit guarantees can lower risks particularly for
transmission projects. This can boost investor confidence.
- Lack of standardized contracts: Contractual standardization of PPAs and market-linking of
tariffs reduces risks and improves monetization efficiency.
However, the coming decade also presents several opportunities for InvITs if these barriers are
addressed:
- Huge requirement for last-mile distribution network upgrades that can potentially be packaged
into InvITs.
- Emergence of new grid-edge technologies de-risk long term revenue streams, boosting yields.
- Increasing investor appetite for green and ESG-linked investments presents a suitable
targeted investor base.
- Growing role of renewable energy integration makes T&D modernization and system
balancing large addressable markets.
- Maturity of policies supporting renewable purchase obligations and market-determined tariff
structures.
- Increased focus on privatization of transmission assets globally opens up many brownfield
opportunities.
If structured properly with appropriate derisking measures, InvITs could play a leading role in
mobilizing investments into decarbonizing energy grids globally over the coming decade. The
scale of required financing provides a large addressable market opportunity.
5. Policy recommendations for scaling up InvIT financing
Based on the analysis, following key policy actions are recommended by governments and
regulators to optimize use of InvITs for grid modernization:
1) Develop priority asset pipelines: Governments must take the lead in identifying, aggregating
and readying bankable public and private transmission/distribution projects suitable for InvIT
structuring.
2) Simplify regulatory compliances: Regulators need to reduce unnecessary rigidities in InvIT
regulations, enable smaller retail sizes and provide flexibilities in governance without
compromising investor protections.
3) Enhance creditworthiness: Measures like partial credit guarantees, securitization against
regulated cash flows and achieving investment grade credit ratings can boost confidence in
asset-backed InvIT instruments.
4) Standardize contracting frameworks: Standard master service agreements, PPAs with pass-
through tariff determination and dispute resolution help monetize revenue streams efficiently
and derisk projects for infrastructure and institutional investors.
5) Develop specialized fund structures: Creation of publicly-sponsored green energy investment
vehicles or renewable-focused InvIT platforms with deep domain expertise and reach can
catalyze the market.
6) Provide tax incentives: Tax exemptions on InvIT dividend distributions and capital gains can
encourage higher participation of individual investors over time to build critical mass.
7) Mandate privatization through InvITs: Governments can direct strategic sale of public energy
assets through regulated InvIT structures to participate as sponsors while mobilizing private
capital at scale.
8) Develop secondary markets: Regulators need to facilitate listing of InvIT units with adequate
liquidity through recognized stock exchanges to enhance exit options and viability as an asset
class.
9) Strengthen market connectivity: Initiatives to link regional power markets through
augmentation/creation of transmission superhighways and advancing real-time balancing
mechanisms help increase tenor visibility of InvIT yields.
10) Conduct awareness programs: Regulators and industry associations need to undertake
investor awareness and education programs to popularize InvITs as a viable long term tool for
channeling ‘patient capital’ into large green infrastructure projects.
A comprehensive action plan with sustained focus on these policy measures could help
countries unlock vast pools of private investment through InvITs for urgently needed electricity
grid modernization. This in turn would go a long way in facilitating the accelerated energy
transition.
6. Conclusion
Transitioning to a low-carbon economy requires unprecedented investments in upgrading aging
energy infrastructure. Public financing alone falls far short of what is needed making innovative
sources of private capital indispensable. As the world steps up climate action ambitions,
innovative financing tools that can channel large institutional money into grid modernization
needs to be scaled up rapidly.
Infrastructure Investment Trusts have emerged as an attractive mechanism worldwide for
monetizing infrastructure assets and raising institutional investment for the energy sector.
Countries that have used regulated InvIT structures have successfully demonstrated the ability
to unlock billions in private capital for transmission and clean energy projects.
However, continued progress is dependent on adopting policies that address existing barriers
around regulatory clarity, risk mitigation measures, standardized contracts and market
development support. With the scale of green infrastructure investment needs looming larger
than ever, governments must play a proactive role in developing bankable projects and fostering
an enabling environment for InvITs to flourish.
Overall, if policy frameworks optimize InvITs as an asset class, they have tremendous untapped
potential to mobilize large pools of long-term private capital required for overhauling electricity
grids to support low-carbon economies of the future. Their deployment holds the key to
accelerating progress on clean energy transitions globally. Working to realize this potential
should be a high priority policy agenda for countries serious about achieving their
decarbonization goals.
As the world works towards transitioning to renewable and cleaner sources of energy,
modernizing our aging energy infrastructure has become an urgent priority. Decarbonizing the
electric grid requires massive investments in transmission and distribution systems in order to
connect renewable energy sources located far from demand centers as well as make the grid
more resilient, flexible and intelligent. However, traditional utility financing through rate hikes can
only go so far given the enormity of infrastructure needs. Innovative financing mechanisms are
needed to unlock large pools of private capital for grid modernization.
One such financing tool that has gained traction globally is Infrastructure Investment Trusts
(InvITs) in the energy sector. InvITs allow pooling of infrastructure assets into a trust structure
which issues units to investors, thereby monetizing infrastructure assets to raise capital. Several
countries, including the US, UK and India, have already successfully used InvITs to channel
significant private investments into modernizing energy infrastructure. However, there are still
challenges that need to be addressed for InvITs to be deployed at a scale needed for grid
decarbonization.
This paper aims to analyze the potential of InvITs for financing grid modernization in the context
of the massive investments needed to transition to a clean energy future. It examines the
experiences of countries that have utilized InvITs so far, identifies challenges still remaining and
provides policy recommendations for fully unlocking the potential of this financing tool. The
discussion is structured as follows:
1. Investments needed for a clean energy transition and grid modernization
2. Overview of Infrastructure Investment Trusts as a financing mechanism
3. Global experiences with InvITs in the energy sector
4. Challenges and opportunities for InvITs in grid decarbonization
5. Policy recommendations for scaling up InvIT financing
6. Conclusion
1. Investments needed for a clean energy transition and grid modernization
Transitioning to renewable energy at the scale needed to achieve climate targets requires
immense investments in upgrading and expanding power infrastructure over the coming
decades. According to IEA estimates, annual global energy supply investments need to rise to
$4 trillion by 2030 from current levels of about $2 trillion to put the world on a sustainable energy
path.
A significant portion of this estimated $2 trillion additional investment is needed for modernizing
electricity grids. The World Economic Forum pegs infrastructure investment requirements for
electrification and grid modernization at over $50 trillion between 2015-2050 globally. In the US
alone, upgrading aging transmission and distribution systems is estimated to require $2.5 trillion
over the next 25 years according to the American Society of Civil Engineers.
Grid modernization refers to upgrading existing transmission and distribution systems to make
them more resilient, digitally enabled, integrated with distributed energy resources, and capable
of handling high volumes of renewable power. Key areas of investment needs include:
- Upgrading T&D lines to increase capacity and utilize higher-capacity conductors for
transporting renewable power over long distances.
- Developing new high-voltage transmission lines to connect remote renewable energy zones to
population centers.
- Making subsystem upgrades like reconductoring, replacing poles and cross-arms, adding new
transformers and substations.
- Investing in 'smart grid' technologies like advanced metering, distributed energy management
systems, energy storage and microgrids.
- Modernizing distribution infrastructure for bidirectional power flows to accommodate rooftop
solar and electric vehicles.
- Hardening systems against extreme weather events through undergrounding of lines, storm
hardening of poles etc.
While government grants and public utilities shoulder some of these costs, the scale of financing
required is far more than what can be mobilized through traditional rate-based models alone.
Innovative financing that taps large pools ofprivate capital is urgently needed for modernizing
energy infrastructure.
2. Overview of Infrastructure Investment Trusts as a financing mechanism
Infrastructure Investment Trusts (InvITs) refer to trusts set up to own, operate and invest in
infrastructure assets. They provide an avenue to monetize operational infrastructure by pooling
multiple assets/projects into a single investment entity. Key features of InvITs include:
- InvITs are set up as trusts regulated by securities market regulators.
- Infrastructure projects/assets are contributed to the trust in return for trust units given to the
project developer.
- Units of the InvIT are issued to different classes of public/private investors to raise capital.
- Proceeds are utilized to acquire other assets or invest further in portfolio infrastructure assets.
- Cash flows from underlying assets are distributed to unit holders as dividends on a periodic
basis.
- Management of assets and fund deployment is handled by the Sponsor and Investment
Manager.
InvITs allow infrastructure assets to be pooled and monetized through capital markets, attracting
a wide variety of institutional and retail investors. The stable and long-term cash flows from
operating assets make InvITs an attractive investment proposition. Some key benefits include:
- Mobilizing large pools of long-term private/institutional capital for infrastructure modernization.
- Improving liquidity of infrastructure assets and allowing investors an ‘exit’ route.
- Reducing reliance on public funds and aids resource mobilization.
- Enabling efficient capital recycling for developers as assets get monetized.
- Offering yield-oriented investment avenues to large institutional investors.
Over time, InvITs have emerged as a popular structured financing instrument globally for
channeling investments into roads, power transmission and renewable energy projects.
3. Global experiences with InvITs in the energy sector
Several countries have already demonstrated the successful deployment of InvITs for raising
private capital to modernize energy infrastructure networks. A few prominent examples are
discussed below:
United States:
- US introduced Master Limited Partnerships (MLPs) in 1981 which facilitated asset
monetization in midstream energy.
- Since then over $400 billion has been raised through 30+ Listed MLPs for pipeline
construction.
- Emergence of YieldCos since 2012 provided a yield-focused vehicle for renewable energy
through platforms like NRG Yield, TerraForm Power.
- YieldCos have raised $40+ billion and today own/operate 31 GW of renewable assets in the
US.
India:
- SEBI notified InvIT regulations in 2014 paving way for energy sector investments.
- India Grid Trust (IndiGrid) launched in 2017 was Asia’s first power sector InvIT, raising $300
million.
- It now holds transmission assets worth $1 billion with portfolio of 13 projects spanning over 9
states.
- Several other InvITs have replicated this model, mobilizing billions in private capital for
transmission infrastructure.
United Kingdom:
- UK’s Green Investment Bank pioneered use of YieldCos like Green Investment Group in
offshore wind platforms.
- It has mobilized $6 billion of private capital through public-private Green InvITs.
- Infradebt Infracapital InvIT focuses on renewables and energy efficiency, raising $300 million.
- Recent initiatives like Open Energi are further scaling up private capital through regulated
asset-based models.
These examples demonstrate how InvITs have successfully provided an avenue for monetizing
operating energy infrastructure assets, unlocking large pools of institutional investment capital
required for transmission and renewable energy buildouts globally.
4. Challenges and opportunities for InvITs in grid decarbonization
While InvITs hold enormous promise as a financing tool, there are still regulatory, policy and
market-related barriers that need to be addressed to deploy them at scale for modernizing
energy grids:
- Regulatory impediments: Overly strict regulations can discourage participation. Simplifying
compliances for smaller projects and flexibility in governance structures is needed.
- Lack of size and scale: Most energy InvITs operate relatively small portfolios. Consolidating
assets is important to improve scale and market visibility.
- Absence of volume: Limited number of transactions restricts liquidity and risk appetite of
investors. Sustained deal volumes are required.
- Returns perception: Investors see InvIT returns as low compared to other infrastructure.
Incentivizing first-movers through returns enhancement is important.
- Policy push: Active government support in identification, aggregation and enabling of priority
asset pipelines is needed to catalyze the market.
- Credit enhancement: Mechanisms like partial credit guarantees can lower risks particularly for
transmission projects. This can boost investor confidence.
- Lack of standardized contracts: Contractual standardization of PPAs and market-linking of
tariffs reduces risks and improves monetization efficiency.
However, the coming decade also presents several opportunities for InvITs if these barriers are
addressed:
- Huge requirement for last-mile distribution network upgrades that can potentially be packaged
into InvITs.
- Emergence of new grid-edge technologies de-risk long term revenue streams, boosting yields.
- Increasing investor appetite for green and ESG-linked investments presents a suitable
targeted investor base.
- Growing role of renewable energy integration makes T&D modernization and system
balancing large addressable markets.
- Maturity of policies supporting renewable purchase obligations and market-determined tariff
structures.
- Increased focus on privatization of transmission assets globally opens up many brownfield
opportunities.
If structured properly with appropriate derisking measures, InvITs could play a leading role in
mobilizing investments into decarbonizing energy grids globally over the coming decade. The
scale of required financing provides a large addressable market opportunity.
5. Policy recommendations for scaling up InvIT financing
Based on the analysis, following key policy actions are recommended by governments and
regulators to optimize use of InvITs for grid modernization:
1) Develop priority asset pipelines: Governments must take the lead in identifying, aggregating
and readying bankable public and private transmission/distribution projects suitable for InvIT
structuring.
2) Simplify regulatory compliances: Regulators need to reduce unnecessary rigidities in InvIT
regulations, enable smaller retail sizes and provide flexibilities in governance without
compromising investor protections.
3) Enhance creditworthiness: Measures like partial credit guarantees, securitization against
regulated cash flows and achieving investment grade credit ratings can boost confidence in
asset-backed InvIT instruments.
4) Standardize contracting frameworks: Standard master service agreements, PPAs with pass-
through tariff determination and dispute resolution help monetize revenue streams efficiently
and derisk projects for infrastructure and institutional investors.
5) Develop specialized fund structures: Creation of publicly-sponsored green energy investment
vehicles or renewable-focused InvIT platforms with deep domain expertise and reach can
catalyze the market.
6) Provide tax incentives: Tax exemptions on InvIT dividend distributions and capital gains can
encourage higher participation of individual investors over time to build critical mass.
7) Mandate privatization through InvITs: Governments can direct strategic sale of public energy
assets through regulated InvIT structures to participate as sponsors while mobilizing private
capital at scale.
8) Develop secondary markets: Regulators need to facilitate listing of InvIT units with adequate
liquidity through recognized stock exchanges to enhance exit options and viability as an asset
class.
9) Strengthen market connectivity: Initiatives to link regional power markets through
augmentation/creation of transmission superhighways and advancing real-time balancing
mechanisms help increase tenor visibility of InvIT yields.
10) Conduct awareness programs: Regulators and industry associations need to undertake
investor awareness and education programs to popularize InvITs as a viable long term tool for
channeling ‘patient capital’ into large green infrastructure projects.
A comprehensive action plan with sustained focus on these policy measures could help
countries unlock vast pools of private investment through InvITs for urgently needed electricity
grid modernization. This in turn would go a long way in facilitating the accelerated energy
transition.
6. Conclusion
Transitioning to a low-carbon economy requires unprecedented investments in upgrading aging
energy infrastructure. Public financing alone falls far short of what is needed making innovative
sources of private capital indispensable. As the world steps up climate action ambitions,
innovative financing tools that can channel large institutional money into grid modernization
needs to be scaled up rapidly.
Infrastructure Investment Trusts have emerged as an attractive mechanism worldwide for
monetizing infrastructure assets and raising institutional investment for the energy sector.
Countries that have used regulated InvIT structures have successfully demonstrated the ability
to unlock billions in private capital for transmission and clean energy projects.
However, continued progress is dependent on adopting policies that address existing barriers
around regulatory clarity, risk mitigation measures, standardized contracts and market
development support. With the scale of green infrastructure investment needs looming larger
than ever, governments must play a proactive role in developing bankable projects and fostering
an enabling environment for InvITs to flourish.
Overall, if policy frameworks optimize InvITs as an asset class, they have tremendous untapped
potential to mobilize large pools of long-term private capital required for overhauling electricity
grids to support low-carbon economies of the future. Their deployment holds the key to
accelerating progress on clean energy transitions globally. Working to realize this potential
should be a high priority policy agenda for countries serious about achieving their
decarbonization goals.
As the world works towards transitioning to renewable and cleaner sources of energy,
modernizing our aging energy infrastructure has become an urgent priority. Decarbonizing the
electric grid requires massive investments in transmission and distribution systems in order to
connect renewable energy sources located far from demand centers as well as make the grid
more resilient, flexible and intelligent. However, traditional utility financing through rate hikes can
only go so far given the enormity of infrastructure needs. Innovative financing mechanisms are
needed to unlock large pools of private capital for grid modernization.
One such financing tool that has gained traction globally is Infrastructure Investment Trusts
(InvITs) in the energy sector. InvITs allow pooling of infrastructure assets into a trust structure
which issues units to investors, thereby monetizing infrastructure assets to raise capital. Several
countries, including the US, UK and India, have already successfully used InvITs to channel
significant private investments into modernizing energy infrastructure. However, there are still
challenges that need to be addressed for InvITs to be deployed at a scale needed for grid
decarbonization.
This paper aims to analyze the potential of InvITs for financing grid modernization in the context
of the massive investments needed to transition to a clean energy future. It examines the
experiences of countries that have utilized InvITs so far, identifies challenges still remaining and
provides policy recommendations for fully unlocking the potential of this financing tool. The
discussion is structured as follows:
1. Investments needed for a clean energy transition and grid modernization
2. Overview of Infrastructure Investment Trusts as a financing mechanism
3. Global experiences with InvITs in the energy sector
4. Challenges and opportunities for InvITs in grid decarbonization
5. Policy recommendations for scaling up InvIT financing
6. Conclusion
1. Investments needed for a clean energy transition and grid modernization
Transitioning to renewable energy at the scale needed to achieve climate targets requires
immense investments in upgrading and expanding power infrastructure over the coming
decades. According to IEA estimates, annual global energy supply investments need to rise to
$4 trillion by 2030 from current levels of about $2 trillion to put the world on a sustainable energy
path.
A significant portion of this estimated $2 trillion additional investment is needed for modernizing
electricity grids. The World Economic Forum pegs infrastructure investment requirements for
electrification and grid modernization at over $50 trillion between 2015-2050 globally. In the US
alone, upgrading aging transmission and distribution systems is estimated to require $2.5 trillion
over the next 25 years according to the American Society of Civil Engineers.
Grid modernization refers to upgrading existing transmission and distribution systems to make
them more resilient, digitally enabled, integrated with distributed energy resources, and capable
of handling high volumes of renewable power. Key areas of investment needs include:
- Upgrading T&D lines to increase capacity and utilize higher-capacity conductors for
transporting renewable power over long distances.
- Developing new high-voltage transmission lines to connect remote renewable energy zones to
population centers.
- Making subsystem upgrades like reconductoring, replacing poles and cross-arms, adding new
transformers and substations.
- Investing in 'smart grid' technologies like advanced metering, distributed energy management
systems, energy storage and microgrids.
- Modernizing distribution infrastructure for bidirectional power flows to accommodate rooftop
solar and electric vehicles.
- Hardening systems against extreme weather events through undergrounding of lines, storm
hardening of poles etc.
While government grants and public utilities shoulder some of these costs, the scale of financing
required is far more than what can be mobilized through traditional rate-based models alone.
Innovative financing that taps large pools ofprivate capital is urgently needed for modernizing
energy infrastructure.
2. Overview of Infrastructure Investment Trusts as a financing mechanism
Infrastructure Investment Trusts (InvITs) refer to trusts set up to own, operate and invest in
infrastructure assets. They provide an avenue to monetize operational infrastructure by pooling
multiple assets/projects into a single investment entity. Key features of InvITs include:
- InvITs are set up as trusts regulated by securities market regulators.
- Infrastructure projects/assets are contributed to the trust in return for trust units given to the
project developer.
- Units of the InvIT are issued to different classes of public/private investors to raise capital.
- Proceeds are utilized to acquire other assets or invest further in portfolio infrastructure assets.
- Cash flows from underlying assets are distributed to unit holders as dividends on a periodic
basis.
- Management of assets and fund deployment is handled by the Sponsor and Investment
Manager.
InvITs allow infrastructure assets to be pooled and monetized through capital markets, attracting
a wide variety of institutional and retail investors. The stable and long-term cash flows from
operating assets make InvITs an attractive investment proposition. Some key benefits include:
- Mobilizing large pools of long-term private/institutional capital for infrastructure modernization.
- Improving liquidity of infrastructure assets and allowing investors an ‘exit’ route.
- Reducing reliance on public funds and aids resource mobilization.
- Enabling efficient capital recycling for developers as assets get monetized.
- Offering yield-oriented investment avenues to large institutional investors.
Over time, InvITs have emerged as a popular structured financing instrument globally for
channeling investments into roads, power transmission and renewable energy projects.
3. Global experiences with InvITs in the energy sector
Several countries have already demonstrated the successful deployment of InvITs for raising
private capital to modernize energy infrastructure networks. A few prominent examples are
discussed below:
United States:
- US introduced Master Limited Partnerships (MLPs) in 1981 which facilitated asset
monetization in midstream energy.
- Since then over $400 billion has been raised through 30+ Listed MLPs for pipeline
construction.
- Emergence of YieldCos since 2012 provided a yield-focused vehicle for renewable energy
through platforms like NRG Yield, TerraForm Power.
- YieldCos have raised $40+ billion and today own/operate 31 GW of renewable assets in the
US.
India:
- SEBI notified InvIT regulations in 2014 paving way for energy sector investments.
- India Grid Trust (IndiGrid) launched in 2017 was Asia’s first power sector InvIT, raising $300
million.
- It now holds transmission assets worth $1 billion with portfolio of 13 projects spanning over 9
states.
- Several other InvITs have replicated this model, mobilizing billions in private capital for
transmission infrastructure.
United Kingdom:
- UK’s Green Investment Bank pioneered use of YieldCos like Green Investment Group in
offshore wind platforms.
- It has mobilized $6 billion of private capital through public-private Green InvITs.
- Infradebt Infracapital InvIT focuses on renewables and energy efficiency, raising $300 million.
- Recent initiatives like Open Energi are further scaling up private capital through regulated
asset-based models.
These examples demonstrate how InvITs have successfully provided an avenue for monetizing
operating energy infrastructure assets, unlocking large pools of institutional investment capital
required for transmission and renewable energy buildouts globally.
4. Challenges and opportunities for InvITs in grid decarbonization
While InvITs hold enormous promise as a financing tool, there are still regulatory, policy and
market-related barriers that need to be addressed to deploy them at scale for modernizing
energy grids:
- Regulatory impediments: Overly strict regulations can discourage participation. Simplifying
compliances for smaller projects and flexibility in governance structures is needed.
- Lack of size and scale: Most energy InvITs operate relatively small portfolios. Consolidating
assets is important to improve scale and market visibility.
- Absence of volume: Limited number of transactions restricts liquidity and risk appetite of
investors. Sustained deal volumes are required.
- Returns perception: Investors see InvIT returns as low compared to other infrastructure.
Incentivizing first-movers through returns enhancement is important.
- Policy push: Active government support in identification, aggregation and enabling of priority
asset pipelines is needed to catalyze the market.
- Credit enhancement: Mechanisms like partial credit guarantees can lower risks particularly for
transmission projects. This can boost investor confidence.
- Lack of standardized contracts: Contractual standardization of PPAs and market-linking of
tariffs reduces risks and improves monetization efficiency.
However, the coming decade also presents several opportunities for InvITs if these barriers are
addressed:
- Huge requirement for last-mile distribution network upgrades that can potentially be packaged
into InvITs.
- Emergence of new grid-edge technologies de-risk long term revenue streams, boosting yields.
- Increasing investor appetite for green and ESG-linked investments presents a suitable
targeted investor base.
- Growing role of renewable energy integration makes T&D modernization and system
balancing large addressable markets.
- Maturity of policies supporting renewable purchase obligations and market-determined tariff
structures.
- Increased focus on privatization of transmission assets globally opens up many brownfield
opportunities.
If structured properly with appropriate derisking measures, InvITs could play a leading role in
mobilizing investments into decarbonizing energy grids globally over the coming decade. The
scale of required financing provides a large addressable market opportunity.
5. Policy recommendations for scaling up InvIT financing
Based on the analysis, following key policy actions are recommended by governments and
regulators to optimize use of InvITs for grid modernization:
1) Develop priority asset pipelines: Governments must take the lead in identifying, aggregating
and readying bankable public and private transmission/distribution projects suitable for InvIT
structuring.
2) Simplify regulatory compliances: Regulators need to reduce unnecessary rigidities in InvIT
regulations, enable smaller retail sizes and provide flexibilities in governance without
compromising investor protections.
3) Enhance creditworthiness: Measures like partial credit guarantees, securitization against
regulated cash flows and achieving investment grade credit ratings can boost confidence in
asset-backed InvIT instruments.
4) Standardize contracting frameworks: Standard master service agreements, PPAs with pass-
through tariff determination and dispute resolution help monetize revenue streams efficiently
and derisk projects for infrastructure and institutional investors.
5) Develop specialized fund structures: Creation of publicly-sponsored green energy investment
vehicles or renewable-focused InvIT platforms with deep domain expertise and reach can
catalyze the market.
6) Provide tax incentives: Tax exemptions on InvIT dividend distributions and capital gains can
encourage higher participation of individual investors over time to build critical mass.
7) Mandate privatization through InvITs: Governments can direct strategic sale of public energy
assets through regulated InvIT structures to participate as sponsors while mobilizing private
capital at scale.
8) Develop secondary markets: Regulators need to facilitate listing of InvIT units with adequate
liquidity through recognized stock exchanges to enhance exit options and viability as an asset
class.
9) Strengthen market connectivity: Initiatives to link regional power markets through
augmentation/creation of transmission superhighways and advancing real-time balancing
mechanisms help increase tenor visibility of InvIT yields.
10) Conduct awareness programs: Regulators and industry associations need to undertake
investor awareness and education programs to popularize InvITs as a viable long term tool for
channeling ‘patient capital’ into large green infrastructure projects.
A comprehensive action plan with sustained focus on these policy measures could help
countries unlock vast pools of private investment through InvITs for urgently needed electricity
grid modernization. This in turn would go a long way in facilitating the accelerated energy
transition.
6. Conclusion
Transitioning to a low-carbon economy requires unprecedented investments in upgrading aging
energy infrastructure. Public financing alone falls far short of what is needed making innovative
sources of private capital indispensable. As the world steps up climate action ambitions,
innovative financing tools that can channel large institutional money into grid modernization
needs to be scaled up rapidly.
Infrastructure Investment Trusts have emerged as an attractive mechanism worldwide for
monetizing infrastructure assets and raising institutional investment for the energy sector.
Countries that have used regulated InvIT structures have successfully demonstrated the ability
to unlock billions in private capital for transmission and clean energy projects.
However, continued progress is dependent on adopting policies that address existing barriers
around regulatory clarity, risk mitigation measures, standardized contracts and market
development support. With the scale of green infrastructure investment needs looming larger
than ever, governments must play a proactive role in developing bankable projects and fostering
an enabling environment for InvITs to flourish.
Overall, if policy frameworks optimize InvITs as an asset class, they have tremendous untapped
potential to mobilize large pools of long-term private capital required for overhauling electricity
grids to support low-carbon economies of the future. Their deployment holds the key to
accelerating progress on clean energy transitions globally. Working to realize this potential
should be a high priority policy agenda for countries serious about achieving their
decarbonization goals.
As the world works towards transitioning to renewable and cleaner sources of energy,
modernizing our aging energy infrastructure has become an urgent priority. Decarbonizing the
electric grid requires massive investments in transmission and distribution systems in order to
connect renewable energy sources located far from demand centers as well as make the grid
more resilient, flexible and intelligent. However, traditional utility financing through rate hikes can
only go so far given the enormity of infrastructure needs. Innovative financing mechanisms are
needed to unlock large pools of private capital for grid modernization.
One such financing tool that has gained traction globally is Infrastructure Investment Trusts
(InvITs) in the energy sector. InvITs allow pooling of infrastructure assets into a trust structure
which issues units to investors, thereby monetizing infrastructure assets to raise capital. Several
countries, including the US, UK and India, have already successfully used InvITs to channel
significant private investments into modernizing energy infrastructure. However, there are still
challenges that need to be addressed for InvITs to be deployed at a scale needed for grid
decarbonization.
This paper aims to analyze the potential of InvITs for financing grid modernization in the context
of the massive investments needed to transition to a clean energy future. It examines the
experiences of countries that have utilized InvITs so far, identifies challenges still remaining and
provides policy recommendations for fully unlocking the potential of this financing tool. The
discussion is structured as follows:
1. Investments needed for a clean energy transition and grid modernization
2. Overview of Infrastructure Investment Trusts as a financing mechanism
3. Global experiences with InvITs in the energy sector
4. Challenges and opportunities for InvITs in grid decarbonization
5. Policy recommendations for scaling up InvIT financing
6. Conclusion
1. Investments needed for a clean energy transition and grid modernization
Transitioning to renewable energy at the scale needed to achieve climate targets requires
immense investments in upgrading and expanding power infrastructure over the coming
decades. According to IEA estimates, annual global energy supply investments need to rise to
$4 trillion by 2030 from current levels of about $2 trillion to put the world on a sustainable energy
path.
A significant portion of this estimated $2 trillion additional investment is needed for modernizing
electricity grids. The World Economic Forum pegs infrastructure investment requirements for
electrification and grid modernization at over $50 trillion between 2015-2050 globally. In the US
alone, upgrading aging transmission and distribution systems is estimated to require $2.5 trillion
over the next 25 years according to the American Society of Civil Engineers.
Grid modernization refers to upgrading existing transmission and distribution systems to make
them more resilient, digitally enabled, integrated with distributed energy resources, and capable
of handling high volumes of renewable power. Key areas of investment needs include:
- Upgrading T&D lines to increase capacity and utilize higher-capacity conductors for
transporting renewable power over long distances.
- Developing new high-voltage transmission lines to connect remote renewable energy zones to
population centers.
- Making subsystem upgrades like reconductoring, replacing poles and cross-arms, adding new
transformers and substations.
- Investing in 'smart grid' technologies like advanced metering, distributed energy management
systems, energy storage and microgrids.
- Modernizing distribution infrastructure for bidirectional power flows to accommodate rooftop
solar and electric vehicles.
- Hardening systems against extreme weather events through undergrounding of lines, storm
hardening of poles etc.
While government grants and public utilities shoulder some of these costs, the scale of financing
required is far more than what can be mobilized through traditional rate-based models alone.
Innovative financing that taps large pools ofprivate capital is urgently needed for modernizing
energy infrastructure.
2. Overview of Infrastructure Investment Trusts as a financing mechanism
Infrastructure Investment Trusts (InvITs) refer to trusts set up to own, operate and invest in
infrastructure assets. They provide an avenue to monetize operational infrastructure by pooling
multiple assets/projects into a single investment entity. Key features of InvITs include:
- InvITs are set up as trusts regulated by securities market regulators.
- Infrastructure projects/assets are contributed to the trust in return for trust units given to the
project developer.
- Units of the InvIT are issued to different classes of public/private investors to raise capital.
- Proceeds are utilized to acquire other assets or invest further in portfolio infrastructure assets.
- Cash flows from underlying assets are distributed to unit holders as dividends on a periodic
basis.
- Management of assets and fund deployment is handled by the Sponsor and Investment
Manager.
InvITs allow infrastructure assets to be pooled and monetized through capital markets, attracting
a wide variety of institutional and retail investors. The stable and long-term cash flows from
operating assets make InvITs an attractive investment proposition. Some key benefits include:
- Mobilizing large pools of long-term private/institutional capital for infrastructure modernization.
- Improving liquidity of infrastructure assets and allowing investors an ‘exit’ route.
- Reducing reliance on public funds and aids resource mobilization.
- Enabling efficient capital recycling for developers as assets get monetized.
- Offering yield-oriented investment avenues to large institutional investors.
Over time, InvITs have emerged as a popular structured financing instrument globally for
channeling investments into roads, power transmission and renewable energy projects.
3. Global experiences with InvITs in the energy sector
Several countries have already demonstrated the successful deployment of InvITs for raising
private capital to modernize energy infrastructure networks. A few prominent examples are
discussed below:
United States:
- US introduced Master Limited Partnerships (MLPs) in 1981 which facilitated asset
monetization in midstream energy.
- Since then over $400 billion has been raised through 30+ Listed MLPs for pipeline
construction.
- Emergence of YieldCos since 2012 provided a yield-focused vehicle for renewable energy
through platforms like NRG Yield, TerraForm Power.
- YieldCos have raised $40+ billion and today own/operate 31 GW of renewable assets in the
US.
India:
- SEBI notified InvIT regulations in 2014 paving way for energy sector investments.
- India Grid Trust (IndiGrid) launched in 2017 was Asia’s first power sector InvIT, raising $300
million.
- It now holds transmission assets worth $1 billion with portfolio of 13 projects spanning over 9
states.
- Several other InvITs have replicated this model, mobilizing billions in private capital for
transmission infrastructure.
United Kingdom:
- UK’s Green Investment Bank pioneered use of YieldCos like Green Investment Group in
offshore wind platforms.
- It has mobilized $6 billion of private capital through public-private Green InvITs.
- Infradebt Infracapital InvIT focuses on renewables and energy efficiency, raising $300 million.
- Recent initiatives like Open Energi are further scaling up private capital through regulated
asset-based models.
These examples demonstrate how InvITs have successfully provided an avenue for monetizing
operating energy infrastructure assets, unlocking large pools of institutional investment capital
required for transmission and renewable energy buildouts globally.
4. Challenges and opportunities for InvITs in grid decarbonization
While InvITs hold enormous promise as a financing tool, there are still regulatory, policy and
market-related barriers that need to be addressed to deploy them at scale for modernizing
energy grids:
- Regulatory impediments: Overly strict regulations can discourage participation. Simplifying
compliances for smaller projects and flexibility in governance structures is needed.
- Lack of size and scale: Most energy InvITs operate relatively small portfolios. Consolidating
assets is important to improve scale and market visibility.
- Absence of volume: Limited number of transactions restricts liquidity and risk appetite of
investors. Sustained deal volumes are required.
- Returns perception: Investors see InvIT returns as low compared to other infrastructure.
Incentivizing first-movers through returns enhancement is important.
- Policy push: Active government support in identification, aggregation and enabling of priority
asset pipelines is needed to catalyze the market.
- Credit enhancement: Mechanisms like partial credit guarantees can lower risks particularly for
transmission projects. This can boost investor confidence.
- Lack of standardized contracts: Contractual standardization of PPAs and market-linking of
tariffs reduces risks and improves monetization efficiency.
However, the coming decade also presents several opportunities for InvITs if these barriers are
addressed:
- Huge requirement for last-mile distribution network upgrades that can potentially be packaged
into InvITs.
- Emergence of new grid-edge technologies de-risk long term revenue streams, boosting yields.
- Increasing investor appetite for green and ESG-linked investments presents a suitable
targeted investor base.
- Growing role of renewable energy integration makes T&D modernization and system
balancing large addressable markets.
- Maturity of policies supporting renewable purchase obligations and market-determined tariff
structures.
- Increased focus on privatization of transmission assets globally opens up many brownfield
opportunities.
If structured properly with appropriate derisking measures, InvITs could play a leading role in
mobilizing investments into decarbonizing energy grids globally over the coming decade. The
scale of required financing provides a large addressable market opportunity.
5. Policy recommendations for scaling up InvIT financing
Based on the analysis, following key policy actions are recommended by governments and
regulators to optimize use of InvITs for grid modernization:
1) Develop priority asset pipelines: Governments must take the lead in identifying, aggregating
and readying bankable public and private transmission/distribution projects suitable for InvIT
structuring.
2) Simplify regulatory compliances: Regulators need to reduce unnecessary rigidities in InvIT
regulations, enable smaller retail sizes and provide flexibilities in governance without
compromising investor protections.
3) Enhance creditworthiness: Measures like partial credit guarantees, securitization against
regulated cash flows and achieving investment grade credit ratings can boost confidence in
asset-backed InvIT instruments.
4) Standardize contracting frameworks: Standard master service agreements, PPAs with pass-
through tariff determination and dispute resolution help monetize revenue streams efficiently
and derisk projects for infrastructure and institutional investors.
5) Develop specialized fund structures: Creation of publicly-sponsored green energy investment
vehicles or renewable-focused InvIT platforms with deep domain expertise and reach can
catalyze the market.
6) Provide tax incentives: Tax exemptions on InvIT dividend distributions and capital gains can
encourage higher participation of individual investors over time to build critical mass.
7) Mandate privatization through InvITs: Governments can direct strategic sale of public energy
assets through regulated InvIT structures to participate as sponsors while mobilizing private
capital at scale.
8) Develop secondary markets: Regulators need to facilitate listing of InvIT units with adequate
liquidity through recognized stock exchanges to enhance exit options and viability as an asset
class.
9) Strengthen market connectivity: Initiatives to link regional power markets through
augmentation/creation of transmission superhighways and advancing real-time balancing
mechanisms help increase tenor visibility of InvIT yields.
10) Conduct awareness programs: Regulators and industry associations need to undertake
investor awareness and education programs to popularize InvITs as a viable long term tool for
channeling ‘patient capital’ into large green infrastructure projects.
A comprehensive action plan with sustained focus on these policy measures could help
countries unlock vast pools of private investment through InvITs for urgently needed electricity
grid modernization. This in turn would go a long way in facilitating the accelerated energy
transition.
6. Conclusion
Transitioning to a low-carbon economy requires unprecedented investments in upgrading aging
energy infrastructure. Public financing alone falls far short of what is needed making innovative
sources of private capital indispensable. As the world steps up climate action ambitions,
innovative financing tools that can channel large institutional money into grid modernization
needs to be scaled up rapidly.
Infrastructure Investment Trusts have emerged as an attractive mechanism worldwide for
monetizing infrastructure assets and raising institutional investment for the energy sector.
Countries that have used regulated InvIT structures have successfully demonstrated the ability
to unlock billions in private capital for transmission and clean energy projects.
However, continued progress is dependent on adopting policies that address existing barriers
around regulatory clarity, risk mitigation measures, standardized contracts and market
development support. With the scale of green infrastructure investment needs looming larger
than ever, governments must play a proactive role in developing bankable projects and fostering
an enabling environment for InvITs to flourish.
Overall, if policy frameworks optimize InvITs as an asset class, they have tremendous untapped
potential to mobilize large pools of long-term private capital required for overhauling electricity
grids to support low-carbon economies of the future. Their deployment holds the key to
accelerating progress on clean energy transitions globally. Working to realize this potential
should be a high priority policy agenda for countries serious about achieving their
decarbonization goals.
As the world works towards transitioning to renewable and cleaner sources of energy,
modernizing our aging energy infrastructure has become an urgent priority. Decarbonizing the
electric grid requires massive investments in transmission and distribution systems in order to
connect renewable energy sources located far from demand centers as well as make the grid
more resilient, flexible and intelligent. However, traditional utility financing through rate hikes can
only go so far given the enormity of infrastructure needs. Innovative financing mechanisms are
needed to unlock large pools of private capital for grid modernization.
One such financing tool that has gained traction globally is Infrastructure Investment Trusts
(InvITs) in the energy sector. InvITs allow pooling of infrastructure assets into a trust structure
which issues units to investors, thereby monetizing infrastructure assets to raise capital. Several
countries, including the US, UK and India, have already successfully used InvITs to channel
significant private investments into modernizing energy infrastructure. However, there are still
challenges that need to be addressed for InvITs to be deployed at a scale needed for grid
decarbonization.
This paper aims to analyze the potential of InvITs for financing grid modernization in the context
of the massive investments needed to transition to a clean energy future. It examines the
experiences of countries that have utilized InvITs so far, identifies challenges still remaining and
provides policy recommendations for fully unlocking the potential of this financing tool. The
discussion is structured as follows:
1. Investments needed for a clean energy transition and grid modernization
2. Overview of Infrastructure Investment Trusts as a financing mechanism
3. Global experiences with InvITs in the energy sector
4. Challenges and opportunities for InvITs in grid decarbonization
5. Policy recommendations for scaling up InvIT financing
6. Conclusion
1. Investments needed for a clean energy transition and grid modernization
Transitioning to renewable energy at the scale needed to achieve climate targets requires
immense investments in upgrading and expanding power infrastructure over the coming
decades. According to IEA estimates, annual global energy supply investments need to rise to
$4 trillion by 2030 from current levels of about $2 trillion to put the world on a sustainable energy
path.
A significant portion of this estimated $2 trillion additional investment is needed for modernizing
electricity grids. The World Economic Forum pegs infrastructure investment requirements for
electrification and grid modernization at over $50 trillion between 2015-2050 globally. In the US
alone, upgrading aging transmission and distribution systems is estimated to require $2.5 trillion
over the next 25 years according to the American Society of Civil Engineers.
Grid modernization refers to upgrading existing transmission and distribution systems to make
them more resilient, digitally enabled, integrated with distributed energy resources, and capable
of handling high volumes of renewable power. Key areas of investment needs include:
- Upgrading T&D lines to increase capacity and utilize higher-capacity conductors for
transporting renewable power over long distances.
- Developing new high-voltage transmission lines to connect remote renewable energy zones to
population centers.
- Making subsystem upgrades like reconductoring, replacing poles and cross-arms, adding new
transformers and substations.
- Investing in 'smart grid' technologies like advanced metering, distributed energy management
systems, energy storage and microgrids.
- Modernizing distribution infrastructure for bidirectional power flows to accommodate rooftop
solar and electric vehicles.
- Hardening systems against extreme weather events through undergrounding of lines, storm
hardening of poles etc.
While government grants and public utilities shoulder some of these costs, the scale of financing
required is far more than what can be mobilized through traditional rate-based models alone.
Innovative financing that taps large pools ofprivate capital is urgently needed for modernizing
energy infrastructure.
2. Overview of Infrastructure Investment Trusts as a financing mechanism
Infrastructure Investment Trusts (InvITs) refer to trusts set up to own, operate and invest in
infrastructure assets. They provide an avenue to monetize operational infrastructure by pooling
multiple assets/projects into a single investment entity. Key features of InvITs include:
- InvITs are set up as trusts regulated by securities market regulators.
- Infrastructure projects/assets are contributed to the trust in return for trust units given to the
project developer.
- Units of the InvIT are issued to different classes of public/private investors to raise capital.
- Proceeds are utilized to acquire other assets or invest further in portfolio infrastructure assets.
- Cash flows from underlying assets are distributed to unit holders as dividends on a periodic
basis.
- Management of assets and fund deployment is handled by the Sponsor and Investment
Manager.
InvITs allow infrastructure assets to be pooled and monetized through capital markets, attracting
a wide variety of institutional and retail investors. The stable and long-term cash flows from
operating assets make InvITs an attractive investment proposition. Some key benefits include:
- Mobilizing large pools of long-term private/institutional capital for infrastructure modernization.
- Improving liquidity of infrastructure assets and allowing investors an ‘exit’ route.
- Reducing reliance on public funds and aids resource mobilization.
- Enabling efficient capital recycling for developers as assets get monetized.
- Offering yield-oriented investment avenues to large institutional investors.
Over time, InvITs have emerged as a popular structured financing instrument globally for
channeling investments into roads, power transmission and renewable energy projects.
3. Global experiences with InvITs in the energy sector
Several countries have already demonstrated the successful deployment of InvITs for raising
private capital to modernize energy infrastructure networks. A few prominent examples are
discussed below:
United States:
- US introduced Master Limited Partnerships (MLPs) in 1981 which facilitated asset
monetization in midstream energy.
- Since then over $400 billion has been raised through 30+ Listed MLPs for pipeline
construction.
- Emergence of YieldCos since 2012 provided a yield-focused vehicle for renewable energy
through platforms like NRG Yield, TerraForm Power.
- YieldCos have raised $40+ billion and today own/operate 31 GW of renewable assets in the
US.
India:
- SEBI notified InvIT regulations in 2014 paving way for energy sector investments.
- India Grid Trust (IndiGrid) launched in 2017 was Asia’s first power sector InvIT, raising $300
million.
- It now holds transmission assets worth $1 billion with portfolio of 13 projects spanning over 9
states.
- Several other InvITs have replicated this model, mobilizing billions in private capital for
transmission infrastructure.
United Kingdom:
- UK’s Green Investment Bank pioneered use of YieldCos like Green Investment Group in
offshore wind platforms.
- It has mobilized $6 billion of private capital through public-private Green InvITs.
- Infradebt Infracapital InvIT focuses on renewables and energy efficiency, raising $300 million.
- Recent initiatives like Open Energi are further scaling up private capital through regulated
asset-based models.
These examples demonstrate how InvITs have successfully provided an avenue for monetizing
operating energy infrastructure assets, unlocking large pools of institutional investment capital
required for transmission and renewable energy buildouts globally.
4. Challenges and opportunities for InvITs in grid decarbonization
While InvITs hold enormous promise as a financing tool, there are still regulatory, policy and
market-related barriers that need to be addressed to deploy them at scale for modernizing
energy grids:
- Regulatory impediments: Overly strict regulations can discourage participation. Simplifying
compliances for smaller projects and flexibility in governance structures is needed.
- Lack of size and scale: Most energy InvITs operate relatively small portfolios. Consolidating
assets is important to improve scale and market visibility.
- Absence of volume: Limited number of transactions restricts liquidity and risk appetite of
investors. Sustained deal volumes are required.
- Returns perception: Investors see InvIT returns as low compared to other infrastructure.
Incentivizing first-movers through returns enhancement is important.
- Policy push: Active government support in identification, aggregation and enabling of priority
asset pipelines is needed to catalyze the market.
- Credit enhancement: Mechanisms like partial credit guarantees can lower risks particularly for
transmission projects. This can boost investor confidence.
- Lack of standardized contracts: Contractual standardization of PPAs and market-linking of
tariffs reduces risks and improves monetization efficiency.
However, the coming decade also presents several opportunities for InvITs if these barriers are
addressed:
- Huge requirement for last-mile distribution network upgrades that can potentially be packaged
into InvITs.
- Emergence of new grid-edge technologies de-risk long term revenue streams, boosting yields.
- Increasing investor appetite for green and ESG-linked investments presents a suitable
targeted investor base.
- Growing role of renewable energy integration makes T&D modernization and system
balancing large addressable markets.
- Maturity of policies supporting renewable purchase obligations and market-determined tariff
structures.
- Increased focus on privatization of transmission assets globally opens up many brownfield
opportunities.
If structured properly with appropriate derisking measures, InvITs could play a leading role in
mobilizing investments into decarbonizing energy grids globally over the coming decade. The
scale of required financing provides a large addressable market opportunity.
5. Policy recommendations for scaling up InvIT financing
Based on the analysis, following key policy actions are recommended by governments and
regulators to optimize use of InvITs for grid modernization:
1) Develop priority asset pipelines: Governments must take the lead in identifying, aggregating
and readying bankable public and private transmission/distribution projects suitable for InvIT
structuring.
2) Simplify regulatory compliances: Regulators need to reduce unnecessary rigidities in InvIT
regulations, enable smaller retail sizes and provide flexibilities in governance without
compromising investor protections.
3) Enhance creditworthiness: Measures like partial credit guarantees, securitization against
regulated cash flows and achieving investment grade credit ratings can boost confidence in
asset-backed InvIT instruments.
4) Standardize contracting frameworks: Standard master service agreements, PPAs with pass-
through tariff determination and dispute resolution help monetize revenue streams efficiently
and derisk projects for infrastructure and institutional investors.
5) Develop specialized fund structures: Creation of publicly-sponsored green energy investment
vehicles or renewable-focused InvIT platforms with deep domain expertise and reach can
catalyze the market.
6) Provide tax incentives: Tax exemptions on InvIT dividend distributions and capital gains can
encourage higher participation of individual investors over time to build critical mass.
7) Mandate privatization through InvITs: Governments can direct strategic sale of public energy
assets through regulated InvIT structures to participate as sponsors while mobilizing private
capital at scale.
8) Develop secondary markets: Regulators need to facilitate listing of InvIT units with adequate
liquidity through recognized stock exchanges to enhance exit options and viability as an asset
class.
9) Strengthen market connectivity: Initiatives to link regional power markets through
augmentation/creation of transmission superhighways and advancing real-time balancing
mechanisms help increase tenor visibility of InvIT yields.
10) Conduct awareness programs: Regulators and industry associations need to undertake
investor awareness and education programs to popularize InvITs as a viable long term tool for
channeling ‘patient capital’ into large green infrastructure projects.
A comprehensive action plan with sustained focus on these policy measures could help
countries unlock vast pools of private investment through InvITs for urgently needed electricity
grid modernization. This in turn would go a long way in facilitating the accelerated energy
transition.
6. Conclusion
Transitioning to a low-carbon economy requires unprecedented investments in upgrading aging
energy infrastructure. Public financing alone falls far short of what is needed making innovative
sources of private capital indispensable. As the world steps up climate action ambitions,
innovative financing tools that can channel large institutional money into grid modernization
needs to be scaled up rapidly.
Infrastructure Investment Trusts have emerged as an attractive mechanism worldwide for
monetizing infrastructure assets and raising institutional investment for the energy sector.
Countries that have used regulated InvIT structures have successfully demonstrated the ability
to unlock billions in private capital for transmission and clean energy projects.
However, continued progress is dependent on adopting policies that address existing barriers
around regulatory clarity, risk mitigation measures, standardized contracts and market
development support. With the scale of green infrastructure investment needs looming larger
than ever, governments must play a proactive role in developing bankable projects and fostering
an enabling environment for InvITs to flourish.
Overall, if policy frameworks optimize InvITs as an asset class, they have tremendous untapped
potential to mobilize large pools of long-term private capital required for overhauling electricity
grids to support low-carbon economies of the future. Their deployment holds the key to
accelerating progress on clean energy transitions globally. Working to realize this potential
should be a high priority policy agenda for countries serious about achieving their
decarbonization goals.
As the world works towards transitioning to renewable and cleaner sources of energy,
modernizing our aging energy infrastructure has become an urgent priority. Decarbonizing the
electric grid requires massive investments in transmission and distribution systems in order to
connect renewable energy sources located far from demand centers as well as make the grid
more resilient, flexible and intelligent. However, traditional utility financing through rate hikes can
only go so far given the enormity of infrastructure needs. Innovative financing mechanisms are
needed to unlock large pools of private capital for grid modernization.
One such financing tool that has gained traction globally is Infrastructure Investment Trusts
(InvITs) in the energy sector. InvITs allow pooling of infrastructure assets into a trust structure
which issues units to investors, thereby monetizing infrastructure assets to raise capital. Several
countries, including the US, UK and India, have already successfully used InvITs to channel
significant private investments into modernizing energy infrastructure. However, there are still
challenges that need to be addressed for InvITs to be deployed at a scale needed for grid
decarbonization.
This paper aims to analyze the potential of InvITs for financing grid modernization in the context
of the massive investments needed to transition to a clean energy future. It examines the
experiences of countries that have utilized InvITs so far, identifies challenges still remaining and
provides policy recommendations for fully unlocking the potential of this financing tool. The
discussion is structured as follows:
1. Investments needed for a clean energy transition and grid modernization
2. Overview of Infrastructure Investment Trusts as a financing mechanism
3. Global experiences with InvITs in the energy sector
4. Challenges and opportunities for InvITs in grid decarbonization
5. Policy recommendations for scaling up InvIT financing
6. Conclusion
1. Investments needed for a clean energy transition and grid modernization
Transitioning to renewable energy at the scale needed to achieve climate targets requires
immense investments in upgrading and expanding power infrastructure over the coming
decades. According to IEA estimates, annual global energy supply investments need to rise to
$4 trillion by 2030 from current levels of about $2 trillion to put the world on a sustainable energy
path.
A significant portion of this estimated $2 trillion additional investment is needed for modernizing
electricity grids. The World Economic Forum pegs infrastructure investment requirements for
electrification and grid modernization at over $50 trillion between 2015-2050 globally. In the US
alone, upgrading aging transmission and distribution systems is estimated to require $2.5 trillion
over the next 25 years according to the American Society of Civil Engineers.
Grid modernization refers to upgrading existing transmission and distribution systems to make
them more resilient, digitally enabled, integrated with distributed energy resources, and capable
of handling high volumes of renewable power. Key areas of investment needs include:
- Upgrading T&D lines to increase capacity and utilize higher-capacity conductors for
transporting renewable power over long distances.
- Developing new high-voltage transmission lines to connect remote renewable energy zones to
population centers.
- Making subsystem upgrades like reconductoring, replacing poles and cross-arms, adding new
transformers and substations.
- Investing in 'smart grid' technologies like advanced metering, distributed energy management
systems, energy storage and microgrids.
- Modernizing distribution infrastructure for bidirectional power flows to accommodate rooftop
solar and electric vehicles.
- Hardening systems against extreme weather events through undergrounding of lines, storm
hardening of poles etc.
While government grants and public utilities shoulder some of these costs, the scale of financing
required is far more than what can be mobilized through traditional rate-based models alone.
Innovative financing that taps large pools ofprivate capital is urgently needed for modernizing
energy infrastructure.
2. Overview of Infrastructure Investment Trusts as a financing mechanism
Infrastructure Investment Trusts (InvITs) refer to trusts set up to own, operate and invest in
infrastructure assets. They provide an avenue to monetize operational infrastructure by pooling
multiple assets/projects into a single investment entity. Key features of InvITs include:
- InvITs are set up as trusts regulated by securities market regulators.
- Infrastructure projects/assets are contributed to the trust in return for trust units given to the
project developer.
- Units of the InvIT are issued to different classes of public/private investors to raise capital.
- Proceeds are utilized to acquire other assets or invest further in portfolio infrastructure assets.
- Cash flows from underlying assets are distributed to unit holders as dividends on a periodic
basis.
- Management of assets and fund deployment is handled by the Sponsor and Investment
Manager.
InvITs allow infrastructure assets to be pooled and monetized through capital markets, attracting
a wide variety of institutional and retail investors. The stable and long-term cash flows from
operating assets make InvITs an attractive investment proposition. Some key benefits include:
- Mobilizing large pools of long-term private/institutional capital for infrastructure modernization.
- Improving liquidity of infrastructure assets and allowing investors an ‘exit’ route.
- Reducing reliance on public funds and aids resource mobilization.
- Enabling efficient capital recycling for developers as assets get monetized.
- Offering yield-oriented investment avenues to large institutional investors.
Over time, InvITs have emerged as a popular structured financing instrument globally for
channeling investments into roads, power transmission and renewable energy projects.
3. Global experiences with InvITs in the energy sector
Several countries have already demonstrated the successful deployment of InvITs for raising
private capital to modernize energy infrastructure networks. A few prominent examples are
discussed below:
United States:
- US introduced Master Limited Partnerships (MLPs) in 1981 which facilitated asset
monetization in midstream energy.
- Since then over $400 billion has been raised through 30+ Listed MLPs for pipeline
construction.
- Emergence of YieldCos since 2012 provided a yield-focused vehicle for renewable energy
through platforms like NRG Yield, TerraForm Power.
- YieldCos have raised $40+ billion and today own/operate 31 GW of renewable assets in the
US.
India:
- SEBI notified InvIT regulations in 2014 paving way for energy sector investments.
- India Grid Trust (IndiGrid) launched in 2017 was Asia’s first power sector InvIT, raising $300
million.
- It now holds transmission assets worth $1 billion with portfolio of 13 projects spanning over 9
states.
- Several other InvITs have replicated this model, mobilizing billions in private capital for
transmission infrastructure.
United Kingdom:
- UK’s Green Investment Bank pioneered use of YieldCos like Green Investment Group in
offshore wind platforms.
- It has mobilized $6 billion of private capital through public-private Green InvITs.
- Infradebt Infracapital InvIT focuses on renewables and energy efficiency, raising $300 million.
- Recent initiatives like Open Energi are further scaling up private capital through regulated
asset-based models.
These examples demonstrate how InvITs have successfully provided an avenue for monetizing
operating energy infrastructure assets, unlocking large pools of institutional investment capital
required for transmission and renewable energy buildouts globally.
4. Challenges and opportunities for InvITs in grid decarbonization
While InvITs hold enormous promise as a financing tool, there are still regulatory, policy and
market-related barriers that need to be addressed to deploy them at scale for modernizing
energy grids:
- Regulatory impediments: Overly strict regulations can discourage participation. Simplifying
compliances for smaller projects and flexibility in governance structures is needed.
- Lack of size and scale: Most energy InvITs operate relatively small portfolios. Consolidating
assets is important to improve scale and market visibility.
- Absence of volume: Limited number of transactions restricts liquidity and risk appetite of
investors. Sustained deal volumes are required.
- Returns perception: Investors see InvIT returns as low compared to other infrastructure.
Incentivizing first-movers through returns enhancement is important.
- Policy push: Active government support in identification, aggregation and enabling of priority
asset pipelines is needed to catalyze the market.
- Credit enhancement: Mechanisms like partial credit guarantees can lower risks particularly for
transmission projects. This can boost investor confidence.
- Lack of standardized contracts: Contractual standardization of PPAs and market-linking of
tariffs reduces risks and improves monetization efficiency.
However, the coming decade also presents several opportunities for InvITs if these barriers are
addressed:
- Huge requirement for last-mile distribution network upgrades that can potentially be packaged
into InvITs.
- Emergence of new grid-edge technologies de-risk long term revenue streams, boosting yields.
- Increasing investor appetite for green and ESG-linked investments presents a suitable
targeted investor base.
- Growing role of renewable energy integration makes T&D modernization and system
balancing large addressable markets.
- Maturity of policies supporting renewable purchase obligations and market-determined tariff
structures.
- Increased focus on privatization of transmission assets globally opens up many brownfield
opportunities.
If structured properly with appropriate derisking measures, InvITs could play a leading role in
mobilizing investments into decarbonizing energy grids globally over the coming decade. The
scale of required financing provides a large addressable market opportunity.
5. Policy recommendations for scaling up InvIT financing
Based on the analysis, following key policy actions are recommended by governments and
regulators to optimize use of InvITs for grid modernization:
1) Develop priority asset pipelines: Governments must take the lead in identifying, aggregating
and readying bankable public and private transmission/distribution projects suitable for InvIT
structuring.
2) Simplify regulatory compliances: Regulators need to reduce unnecessary rigidities in InvIT
regulations, enable smaller retail sizes and provide flexibilities in governance without
compromising investor protections.
3) Enhance creditworthiness: Measures like partial credit guarantees, securitization against
regulated cash flows and achieving investment grade credit ratings can boost confidence in
asset-backed InvIT instruments.
4) Standardize contracting frameworks: Standard master service agreements, PPAs with pass-
through tariff determination and dispute resolution help monetize revenue streams efficiently
and derisk projects for infrastructure and institutional investors.
5) Develop specialized fund structures: Creation of publicly-sponsored green energy investment
vehicles or renewable-focused InvIT platforms with deep domain expertise and reach can
catalyze the market.
6) Provide tax incentives: Tax exemptions on InvIT dividend distributions and capital gains can
encourage higher participation of individual investors over time to build critical mass.
7) Mandate privatization through InvITs: Governments can direct strategic sale of public energy
assets through regulated InvIT structures to participate as sponsors while mobilizing private
capital at scale.
8) Develop secondary markets: Regulators need to facilitate listing of InvIT units with adequate
liquidity through recognized stock exchanges to enhance exit options and viability as an asset
class.
9) Strengthen market connectivity: Initiatives to link regional power markets through
augmentation/creation of transmission superhighways and advancing real-time balancing
mechanisms help increase tenor visibility of InvIT yields.
10) Conduct awareness programs: Regulators and industry associations need to undertake
investor awareness and education programs to popularize InvITs as a viable long term tool for
channeling ‘patient capital’ into large green infrastructure projects.
A comprehensive action plan with sustained focus on these policy measures could help
countries unlock vast pools of private investment through InvITs for urgently needed electricity
grid modernization. This in turn would go a long way in facilitating the accelerated energy
transition.
6. Conclusion
Transitioning to a low-carbon economy requires unprecedented investments in upgrading aging
energy infrastructure. Public financing alone falls far short of what is needed making innovative
sources of private capital indispensable. As the world steps up climate action ambitions,
innovative financing tools that can channel large institutional money into grid modernization
needs to be scaled up rapidly.
Infrastructure Investment Trusts have emerged as an attractive mechanism worldwide for
monetizing infrastructure assets and raising institutional investment for the energy sector.
Countries that have used regulated InvIT structures have successfully demonstrated the ability
to unlock billions in private capital for transmission and clean energy projects.
However, continued progress is dependent on adopting policies that address existing barriers
around regulatory clarity, risk mitigation measures, standardized contracts and market
development support. With the scale of green infrastructure investment needs looming larger
than ever, governments must play a proactive role in developing bankable projects and fostering
an enabling environment for InvITs to flourish.
Overall, if policy frameworks optimize InvITs as an asset class, they have tremendous untapped
potential to mobilize large pools of long-term private capital required for overhauling electricity
grids to support low-carbon economies of the future. Their deployment holds the key to
accelerating progress on clean energy transitions globally. Working to realize this potential
should be a high priority policy agenda for countries serious about achieving their
decarbonization goals.
As the world works towards transitioning to renewable and cleaner sources of energy,
modernizing our aging energy infrastructure has become an urgent priority. Decarbonizing the
electric grid requires massive investments in transmission and distribution systems in order to
connect renewable energy sources located far from demand centers as well as make the grid
more resilient, flexible and intelligent. However, traditional utility financing through rate hikes can
only go so far given the enormity of infrastructure needs. Innovative financing mechanisms are
needed to unlock large pools of private capital for grid modernization.
One such financing tool that has gained traction globally is Infrastructure Investment Trusts
(InvITs) in the energy sector. InvITs allow pooling of infrastructure assets into a trust structure
which issues units to investors, thereby monetizing infrastructure assets to raise capital. Several
countries, including the US, UK and India, have already successfully used InvITs to channel
significant private investments into modernizing energy infrastructure. However, there are still
challenges that need to be addressed for InvITs to be deployed at a scale needed for grid
decarbonization.
This paper aims to analyze the potential of InvITs for financing grid modernization in the context
of the massive investments needed to transition to a clean energy future. It examines the
experiences of countries that have utilized InvITs so far, identifies challenges still remaining and
provides policy recommendations for fully unlocking the potential of this financing tool. The
discussion is structured as follows:
1. Investments needed for a clean energy transition and grid modernization
2. Overview of Infrastructure Investment Trusts as a financing mechanism
3. Global experiences with InvITs in the energy sector
4. Challenges and opportunities for InvITs in grid decarbonization
5. Policy recommendations for scaling up InvIT financing
6. Conclusion
1. Investments needed for a clean energy transition and grid modernization
Transitioning to renewable energy at the scale needed to achieve climate targets requires
immense investments in upgrading and expanding power infrastructure over the coming
decades. According to IEA estimates, annual global energy supply investments need to rise to
$4 trillion by 2030 from current levels of about $2 trillion to put the world on a sustainable energy
path.
A significant portion of this estimated $2 trillion additional investment is needed for modernizing
electricity grids. The World Economic Forum pegs infrastructure investment requirements for
electrification and grid modernization at over $50 trillion between 2015-2050 globally. In the US
alone, upgrading aging transmission and distribution systems is estimated to require $2.5 trillion
over the next 25 years according to the American Society of Civil Engineers.
Grid modernization refers to upgrading existing transmission and distribution systems to make
them more resilient, digitally enabled, integrated with distributed energy resources, and capable
of handling high volumes of renewable power. Key areas of investment needs include:
- Upgrading T&D lines to increase capacity and utilize higher-capacity conductors for
transporting renewable power over long distances.
- Developing new high-voltage transmission lines to connect remote renewable energy zones to
population centers.
- Making subsystem upgrades like reconductoring, replacing poles and cross-arms, adding new
transformers and substations.
- Investing in 'smart grid' technologies like advanced metering, distributed energy management
systems, energy storage and microgrids.
- Modernizing distribution infrastructure for bidirectional power flows to accommodate rooftop
solar and electric vehicles.
- Hardening systems against extreme weather events through undergrounding of lines, storm
hardening of poles etc.
While government grants and public utilities shoulder some of these costs, the scale of financing
required is far more than what can be mobilized through traditional rate-based models alone.
Innovative financing that taps large pools ofprivate capital is urgently needed for modernizing
energy infrastructure.
2. Overview of Infrastructure Investment Trusts as a financing mechanism
Infrastructure Investment Trusts (InvITs) refer to trusts set up to own, operate and invest in
infrastructure assets. They provide an avenue to monetize operational infrastructure by pooling
multiple assets/projects into a single investment entity. Key features of InvITs include:
- InvITs are set up as trusts regulated by securities market regulators.
- Infrastructure projects/assets are contributed to the trust in return for trust units given to the
project developer.
- Units of the InvIT are issued to different classes of public/private investors to raise capital.
- Proceeds are utilized to acquire other assets or invest further in portfolio infrastructure assets.
- Cash flows from underlying assets are distributed to unit holders as dividends on a periodic
basis.
- Management of assets and fund deployment is handled by the Sponsor and Investment
Manager.
InvITs allow infrastructure assets to be pooled and monetized through capital markets, attracting
a wide variety of institutional and retail investors. The stable and long-term cash flows from
operating assets make InvITs an attractive investment proposition. Some key benefits include:
- Mobilizing large pools of long-term private/institutional capital for infrastructure modernization.
- Improving liquidity of infrastructure assets and allowing investors an ‘exit’ route.
- Reducing reliance on public funds and aids resource mobilization.
- Enabling efficient capital recycling for developers as assets get monetized.
- Offering yield-oriented investment avenues to large institutional investors.
Over time, InvITs have emerged as a popular structured financing instrument globally for
channeling investments into roads, power transmission and renewable energy projects.
3. Global experiences with InvITs in the energy sector
Several countries have already demonstrated the successful deployment of InvITs for raising
private capital to modernize energy infrastructure networks. A few prominent examples are
discussed below:
United States:
- US introduced Master Limited Partnerships (MLPs) in 1981 which facilitated asset
monetization in midstream energy.
- Since then over $400 billion has been raised through 30+ Listed MLPs for pipeline
construction.
- Emergence of YieldCos since 2012 provided a yield-focused vehicle for renewable energy
through platforms like NRG Yield, TerraForm Power.
- YieldCos have raised $40+ billion and today own/operate 31 GW of renewable assets in the
US.
India:
- SEBI notified InvIT regulations in 2014 paving way for energy sector investments.
- India Grid Trust (IndiGrid) launched in 2017 was Asia’s first power sector InvIT, raising $300
million.
- It now holds transmission assets worth $1 billion with portfolio of 13 projects spanning over 9
states.
- Several other InvITs have replicated this model, mobilizing billions in private capital for
transmission infrastructure.
United Kingdom:
- UK’s Green Investment Bank pioneered use of YieldCos like Green Investment Group in
offshore wind platforms.
- It has mobilized $6 billion of private capital through public-private Green InvITs.
- Infradebt Infracapital InvIT focuses on renewables and energy efficiency, raising $300 million.
- Recent initiatives like Open Energi are further scaling up private capital through regulated
asset-based models.
These examples demonstrate how InvITs have successfully provided an avenue for monetizing
operating energy infrastructure assets, unlocking large pools of institutional investment capital
required for transmission and renewable energy buildouts globally.
4. Challenges and opportunities for InvITs in grid decarbonization
While InvITs hold enormous promise as a financing tool, there are still regulatory, policy and
market-related barriers that need to be addressed to deploy them at scale for modernizing
energy grids:
- Regulatory impediments: Overly strict regulations can discourage participation. Simplifying
compliances for smaller projects and flexibility in governance structures is needed.
- Lack of size and scale: Most energy InvITs operate relatively small portfolios. Consolidating
assets is important to improve scale and market visibility.
- Absence of volume: Limited number of transactions restricts liquidity and risk appetite of
investors. Sustained deal volumes are required.
- Returns perception: Investors see InvIT returns as low compared to other infrastructure.
Incentivizing first-movers through returns enhancement is important.
- Policy push: Active government support in identification, aggregation and enabling of priority
asset pipelines is needed to catalyze the market.
- Credit enhancement: Mechanisms like partial credit guarantees can lower risks particularly for
transmission projects. This can boost investor confidence.
- Lack of standardized contracts: Contractual standardization of PPAs and market-linking of
tariffs reduces risks and improves monetization efficiency.
However, the coming decade also presents several opportunities for InvITs if these barriers are
addressed:
- Huge requirement for last-mile distribution network upgrades that can potentially be packaged
into InvITs.
- Emergence of new grid-edge technologies de-risk long term revenue streams, boosting yields.
- Increasing investor appetite for green and ESG-linked investments presents a suitable
targeted investor base.
- Growing role of renewable energy integration makes T&D modernization and system
balancing large addressable markets.
- Maturity of policies supporting renewable purchase obligations and market-determined tariff
structures.
- Increased focus on privatization of transmission assets globally opens up many brownfield
opportunities.
If structured properly with appropriate derisking measures, InvITs could play a leading role in
mobilizing investments into decarbonizing energy grids globally over the coming decade. The
scale of required financing provides a large addressable market opportunity.
5. Policy recommendations for scaling up InvIT financing
Based on the analysis, following key policy actions are recommended by governments and
regulators to optimize use of InvITs for grid modernization:
1) Develop priority asset pipelines: Governments must take the lead in identifying, aggregating
and readying bankable public and private transmission/distribution projects suitable for InvIT
structuring.
2) Simplify regulatory compliances: Regulators need to reduce unnecessary rigidities in InvIT
regulations, enable smaller retail sizes and provide flexibilities in governance without
compromising investor protections.
3) Enhance creditworthiness: Measures like partial credit guarantees, securitization against
regulated cash flows and achieving investment grade credit ratings can boost confidence in
asset-backed InvIT instruments.
4) Standardize contracting frameworks: Standard master service agreements, PPAs with pass-
through tariff determination and dispute resolution help monetize revenue streams efficiently
and derisk projects for infrastructure and institutional investors.
5) Develop specialized fund structures: Creation of publicly-sponsored green energy investment
vehicles or renewable-focused InvIT platforms with deep domain expertise and reach can
catalyze the market.
6) Provide tax incentives: Tax exemptions on InvIT dividend distributions and capital gains can
encourage higher participation of individual investors over time to build critical mass.
7) Mandate privatization through InvITs: Governments can direct strategic sale of public energy
assets through regulated InvIT structures to participate as sponsors while mobilizing private
capital at scale.
8) Develop secondary markets: Regulators need to facilitate listing of InvIT units with adequate
liquidity through recognized stock exchanges to enhance exit options and viability as an asset
class.
9) Strengthen market connectivity: Initiatives to link regional power markets through
augmentation/creation of transmission superhighways and advancing real-time balancing
mechanisms help increase tenor visibility of InvIT yields.
10) Conduct awareness programs: Regulators and industry associations need to undertake
investor awareness and education programs to popularize InvITs as a viable long term tool for
channeling ‘patient capital’ into large green infrastructure projects.
A comprehensive action plan with sustained focus on these policy measures could help
countries unlock vast pools of private investment through InvITs for urgently needed electricity
grid modernization. This in turn would go a long way in facilitating the accelerated energy
transition.
6. Conclusion
Transitioning to a low-carbon economy requires unprecedented investments in upgrading aging
energy infrastructure. Public financing alone falls far short of what is needed making innovative
sources of private capital indispensable. As the world steps up climate action ambitions,
innovative financing tools that can channel large institutional money into grid modernization
needs to be scaled up rapidly.
Infrastructure Investment Trusts have emerged as an attractive mechanism worldwide for
monetizing infrastructure assets and raising institutional investment for the energy sector.
Countries that have used regulated InvIT structures have successfully demonstrated the ability
to unlock billions in private capital for transmission and clean energy projects.
However, continued progress is dependent on adopting policies that address existing barriers
around regulatory clarity, risk mitigation measures, standardized contracts and market
development support. With the scale of green infrastructure investment needs looming larger
than ever, governments must play a proactive role in developing bankable projects and fostering
an enabling environment for InvITs to flourish.
Overall, if policy frameworks optimize InvITs as an asset class, they have tremendous untapped
potential to mobilize large pools of long-term private capital required for overhauling electricity
grids to support low-carbon economies of the future. Their deployment holds the key to
accelerating progress on clean energy transitions globally. Working to realize this potential
should be a high priority policy agenda for countries serious about achieving their
decarbonization goals.
As the world works towards transitioning to renewable and cleaner sources of energy,
modernizing our aging energy infrastructure has become an urgent priority. Decarbonizing the
electric grid requires massive investments in transmission and distribution systems in order to
connect renewable energy sources located far from demand centers as well as make the grid
more resilient, flexible and intelligent. However, traditional utility financing through rate hikes can
only go so far given the enormity of infrastructure needs. Innovative financing mechanisms are
needed to unlock large pools of private capital for grid modernization.
One such financing tool that has gained traction globally is Infrastructure Investment Trusts
(InvITs) in the energy sector. InvITs allow pooling of infrastructure assets into a trust structure
which issues units to investors, thereby monetizing infrastructure assets to raise capital. Several
countries, including the US, UK and India, have already successfully used InvITs to channel
significant private investments into modernizing energy infrastructure. However, there are still
challenges that need to be addressed for InvITs to be deployed at a scale needed for grid
decarbonization.
This paper aims to analyze the potential of InvITs for financing grid modernization in the context
of the massive investments needed to transition to a clean energy future. It examines the
experiences of countries that have utilized InvITs so far, identifies challenges still remaining and
provides policy recommendations for fully unlocking the potential of this financing tool. The
discussion is structured as follows:
1. Investments needed for a clean energy transition and grid modernization
2. Overview of Infrastructure Investment Trusts as a financing mechanism
3. Global experiences with InvITs in the energy sector
4. Challenges and opportunities for InvITs in grid decarbonization
5. Policy recommendations for scaling up InvIT financing
6. Conclusion
1. Investments needed for a clean energy transition and grid modernization
Transitioning to renewable energy at the scale needed to achieve climate targets requires
immense investments in upgrading and expanding power infrastructure over the coming
decades. According to IEA estimates, annual global energy supply investments need to rise to
$4 trillion by 2030 from current levels of about $2 trillion to put the world on a sustainable energy
path.
A significant portion of this estimated $2 trillion additional investment is needed for modernizing
electricity grids. The World Economic Forum pegs infrastructure investment requirements for
electrification and grid modernization at over $50 trillion between 2015-2050 globally. In the US
alone, upgrading aging transmission and distribution systems is estimated to require $2.5 trillion
over the next 25 years according to the American Society of Civil Engineers.
Grid modernization refers to upgrading existing transmission and distribution systems to make
them more resilient, digitally enabled, integrated with distributed energy resources, and capable
of handling high volumes of renewable power. Key areas of investment needs include:
- Upgrading T&D lines to increase capacity and utilize higher-capacity conductors for
transporting renewable power over long distances.
- Developing new high-voltage transmission lines to connect remote renewable energy zones to
population centers.
- Making subsystem upgrades like reconductoring, replacing poles and cross-arms, adding new
transformers and substations.
- Investing in 'smart grid' technologies like advanced metering, distributed energy management
systems, energy storage and microgrids.
- Modernizing distribution infrastructure for bidirectional power flows to accommodate rooftop
solar and electric vehicles.
- Hardening systems against extreme weather events through undergrounding of lines, storm
hardening of poles etc.
While government grants and public utilities shoulder some of these costs, the scale of financing
required is far more than what can be mobilized through traditional rate-based models alone.
Innovative financing that taps large pools ofprivate capital is urgently needed for modernizing
energy infrastructure.
2. Overview of Infrastructure Investment Trusts as a financing mechanism
Infrastructure Investment Trusts (InvITs) refer to trusts set up to own, operate and invest in
infrastructure assets. They provide an avenue to monetize operational infrastructure by pooling
multiple assets/projects into a single investment entity. Key features of InvITs include:
- InvITs are set up as trusts regulated by securities market regulators.
- Infrastructure projects/assets are contributed to the trust in return for trust units given to the
project developer.
- Units of the InvIT are issued to different classes of public/private investors to raise capital.
- Proceeds are utilized to acquire other assets or invest further in portfolio infrastructure assets.
- Cash flows from underlying assets are distributed to unit holders as dividends on a periodic
basis.
- Management of assets and fund deployment is handled by the Sponsor and Investment
Manager.
InvITs allow infrastructure assets to be pooled and monetized through capital markets, attracting
a wide variety of institutional and retail investors. The stable and long-term cash flows from
operating assets make InvITs an attractive investment proposition. Some key benefits include:
- Mobilizing large pools of long-term private/institutional capital for infrastructure modernization.
- Improving liquidity of infrastructure assets and allowing investors an ‘exit’ route.
- Reducing reliance on public funds and aids resource mobilization.
- Enabling efficient capital recycling for developers as assets get monetized.
- Offering yield-oriented investment avenues to large institutional investors.
Over time, InvITs have emerged as a popular structured financing instrument globally for
channeling investments into roads, power transmission and renewable energy projects.
3. Global experiences with InvITs in the energy sector
Several countries have already demonstrated the successful deployment of InvITs for raising
private capital to modernize energy infrastructure networks. A few prominent examples are
discussed below:
United States:
- US introduced Master Limited Partnerships (MLPs) in 1981 which facilitated asset
monetization in midstream energy.
- Since then over $400 billion has been raised through 30+ Listed MLPs for pipeline
construction.
- Emergence of YieldCos since 2012 provided a yield-focused vehicle for renewable energy
through platforms like NRG Yield, TerraForm Power.
- YieldCos have raised $40+ billion and today own/operate 31 GW of renewable assets in the
US.
India:
- SEBI notified InvIT regulations in 2014 paving way for energy sector investments.
- India Grid Trust (IndiGrid) launched in 2017 was Asia’s first power sector InvIT, raising $300
million.
- It now holds transmission assets worth $1 billion with portfolio of 13 projects spanning over 9
states.
- Several other InvITs have replicated this model, mobilizing billions in private capital for
transmission infrastructure.
United Kingdom:
- UK’s Green Investment Bank pioneered use of YieldCos like Green Investment Group in
offshore wind platforms.
- It has mobilized $6 billion of private capital through public-private Green InvITs.
- Infradebt Infracapital InvIT focuses on renewables and energy efficiency, raising $300 million.
- Recent initiatives like Open Energi are further scaling up private capital through regulated
asset-based models.
These examples demonstrate how InvITs have successfully provided an avenue for monetizing
operating energy infrastructure assets, unlocking large pools of institutional investment capital
required for transmission and renewable energy buildouts globally.
4. Challenges and opportunities for InvITs in grid decarbonization
While InvITs hold enormous promise as a financing tool, there are still regulatory, policy and
market-related barriers that need to be addressed to deploy them at scale for modernizing
energy grids:
- Regulatory impediments: Overly strict regulations can discourage participation. Simplifying
compliances for smaller projects and flexibility in governance structures is needed.
- Lack of size and scale: Most energy InvITs operate relatively small portfolios. Consolidating
assets is important to improve scale and market visibility.
- Absence of volume: Limited number of transactions restricts liquidity and risk appetite of
investors. Sustained deal volumes are required.
- Returns perception: Investors see InvIT returns as low compared to other infrastructure.
Incentivizing first-movers through returns enhancement is important.
- Policy push: Active government support in identification, aggregation and enabling of priority
asset pipelines is needed to catalyze the market.
- Credit enhancement: Mechanisms like partial credit guarantees can lower risks particularly for
transmission projects. This can boost investor confidence.
- Lack of standardized contracts: Contractual standardization of PPAs and market-linking of
tariffs reduces risks and improves monetization efficiency.
However, the coming decade also presents several opportunities for InvITs if these barriers are
addressed:
- Huge requirement for last-mile distribution network upgrades that can potentially be packaged
into InvITs.
- Emergence of new grid-edge technologies de-risk long term revenue streams, boosting yields.
- Increasing investor appetite for green and ESG-linked investments presents a suitable
targeted investor base.
- Growing role of renewable energy integration makes T&D modernization and system
balancing large addressable markets.
- Maturity of policies supporting renewable purchase obligations and market-determined tariff
structures.
- Increased focus on privatization of transmission assets globally opens up many brownfield
opportunities.
If structured properly with appropriate derisking measures, InvITs could play a leading role in
mobilizing investments into decarbonizing energy grids globally over the coming decade. The
scale of required financing provides a large addressable market opportunity.
5. Policy recommendations for scaling up InvIT financing
Based on the analysis, following key policy actions are recommended by governments and
regulators to optimize use of InvITs for grid modernization:
1) Develop priority asset pipelines: Governments must take the lead in identifying, aggregating
and readying bankable public and private transmission/distribution projects suitable for InvIT
structuring.
2) Simplify regulatory compliances: Regulators need to reduce unnecessary rigidities in InvIT
regulations, enable smaller retail sizes and provide flexibilities in governance without
compromising investor protections.
3) Enhance creditworthiness: Measures like partial credit guarantees, securitization against
regulated cash flows and achieving investment grade credit ratings can boost confidence in
asset-backed InvIT instruments.
4) Standardize contracting frameworks: Standard master service agreements, PPAs with pass-
through tariff determination and dispute resolution help monetize revenue streams efficiently
and derisk projects for infrastructure and institutional investors.
5) Develop specialized fund structures: Creation of publicly-sponsored green energy investment
vehicles or renewable-focused InvIT platforms with deep domain expertise and reach can
catalyze the market.
6) Provide tax incentives: Tax exemptions on InvIT dividend distributions and capital gains can
encourage higher participation of individual investors over time to build critical mass.
7) Mandate privatization through InvITs: Governments can direct strategic sale of public energy
assets through regulated InvIT structures to participate as sponsors while mobilizing private
capital at scale.
8) Develop secondary markets: Regulators need to facilitate listing of InvIT units with adequate
liquidity through recognized stock exchanges to enhance exit options and viability as an asset
class.
9) Strengthen market connectivity: Initiatives to link regional power markets through
augmentation/creation of transmission superhighways and advancing real-time balancing
mechanisms help increase tenor visibility of InvIT yields.
10) Conduct awareness programs: Regulators and industry associations need to undertake
investor awareness and education programs to popularize InvITs as a viable long term tool for
channeling ‘patient capital’ into large green infrastructure projects.
A comprehensive action plan with sustained focus on these policy measures could help
countries unlock vast pools of private investment through InvITs for urgently needed electricity
grid modernization. This in turn would go a long way in facilitating the accelerated energy
transition.
6. Conclusion
Transitioning to a low-carbon economy requires unprecedented investments in upgrading aging
energy infrastructure. Public financing alone falls far short of what is needed making innovative
sources of private capital indispensable. As the world steps up climate action ambitions,
innovative financing tools that can channel large institutional money into grid modernization
needs to be scaled up rapidly.
Infrastructure Investment Trusts have emerged as an attractive mechanism worldwide for
monetizing infrastructure assets and raising institutional investment for the energy sector.
Countries that have used regulated InvIT structures have successfully demonstrated the ability
to unlock billions in private capital for transmission and clean energy projects.
However, continued progress is dependent on adopting policies that address existing barriers
around regulatory clarity, risk mitigation measures, standardized contracts and market
development support. With the scale of green infrastructure investment needs looming larger
than ever, governments must play a proactive role in developing bankable projects and fostering
an enabling environment for InvITs to flourish.
Overall, if policy frameworks optimize InvITs as an asset class, they have tremendous untapped
potential to mobilize large pools of long-term private capital required for overhauling electricity
grids to support low-carbon economies of the future. Their deployment holds the key to
accelerating progress on clean energy transitions globally. Working to realize this potential
should be a high priority policy agenda for countries serious about achieving their
decarbonization goals.
As the world works towards transitioning to renewable and cleaner sources of energy,
modernizing our aging energy infrastructure has become an urgent priority. Decarbonizing the
electric grid requires massive investments in transmission and distribution systems in order to
connect renewable energy sources located far from demand centers as well as make the grid
more resilient, flexible and intelligent. However, traditional utility financing through rate hikes can
only go so far given the enormity of infrastructure needs. Innovative financing mechanisms are
needed to unlock large pools of private capital for grid modernization.
One such financing tool that has gained traction globally is Infrastructure Investment Trusts
(InvITs) in the energy sector. InvITs allow pooling of infrastructure assets into a trust structure
which issues units to investors, thereby monetizing infrastructure assets to raise capital. Several
countries, including the US, UK and India, have already successfully used InvITs to channel
significant private investments into modernizing energy infrastructure. However, there are still
challenges that need to be addressed for InvITs to be deployed at a scale needed for grid
decarbonization.
This paper aims to analyze the potential of InvITs for financing grid modernization in the context
of the massive investments needed to transition to a clean energy future. It examines the
experiences of countries that have utilized InvITs so far, identifies challenges still remaining and
provides policy recommendations for fully unlocking the potential of this financing tool. The
discussion is structured as follows:
1. Investments needed for a clean energy transition and grid modernization
2. Overview of Infrastructure Investment Trusts as a financing mechanism
3. Global experiences with InvITs in the energy sector
4. Challenges and opportunities for InvITs in grid decarbonization
5. Policy recommendations for scaling up InvIT financing
6. Conclusion
1. Investments needed for a clean energy transition and grid modernization
Transitioning to renewable energy at the scale needed to achieve climate targets requires
immense investments in upgrading and expanding power infrastructure over the coming
decades. According to IEA estimates, annual global energy supply investments need to rise to
$4 trillion by 2030 from current levels of about $2 trillion to put the world on a sustainable energy
path.
A significant portion of this estimated $2 trillion additional investment is needed for modernizing
electricity grids. The World Economic Forum pegs infrastructure investment requirements for
electrification and grid modernization at over $50 trillion between 2015-2050 globally. In the US
alone, upgrading aging transmission and distribution systems is estimated to require $2.5 trillion
over the next 25 years according to the American Society of Civil Engineers.
Grid modernization refers to upgrading existing transmission and distribution systems to make
them more resilient, digitally enabled, integrated with distributed energy resources, and capable
of handling high volumes of renewable power. Key areas of investment needs include:
- Upgrading T&D lines to increase capacity and utilize higher-capacity conductors for
transporting renewable power over long distances.
- Developing new high-voltage transmission lines to connect remote renewable energy zones to
population centers.
- Making subsystem upgrades like reconductoring, replacing poles and cross-arms, adding new
transformers and substations.
- Investing in 'smart grid' technologies like advanced metering, distributed energy management
systems, energy storage and microgrids.
- Modernizing distribution infrastructure for bidirectional power flows to accommodate rooftop
solar and electric vehicles.
- Hardening systems against extreme weather events through undergrounding of lines, storm
hardening of poles etc.
While government grants and public utilities shoulder some of these costs, the scale of financing
required is far more than what can be mobilized through traditional rate-based models alone.
Innovative financing that taps large pools ofprivate capital is urgently needed for modernizing
energy infrastructure.
2. Overview of Infrastructure Investment Trusts as a financing mechanism
Infrastructure Investment Trusts (InvITs) refer to trusts set up to own, operate and invest in
infrastructure assets. They provide an avenue to monetize operational infrastructure by pooling
multiple assets/projects into a single investment entity. Key features of InvITs include:
- InvITs are set up as trusts regulated by securities market regulators.
- Infrastructure projects/assets are contributed to the trust in return for trust units given to the
project developer.
- Units of the InvIT are issued to different classes of public/private investors to raise capital.
- Proceeds are utilized to acquire other assets or invest further in portfolio infrastructure assets.
- Cash flows from underlying assets are distributed to unit holders as dividends on a periodic
basis.
- Management of assets and fund deployment is handled by the Sponsor and Investment
Manager.
InvITs allow infrastructure assets to be pooled and monetized through capital markets, attracting
a wide variety of institutional and retail investors. The stable and long-term cash flows from
operating assets make InvITs an attractive investment proposition. Some key benefits include:
- Mobilizing large pools of long-term private/institutional capital for infrastructure modernization.
- Improving liquidity of infrastructure assets and allowing investors an ‘exit’ route.
- Reducing reliance on public funds and aids resource mobilization.
- Enabling efficient capital recycling for developers as assets get monetized.
- Offering yield-oriented investment avenues to large institutional investors.
Over time, InvITs have emerged as a popular structured financing instrument globally for
channeling investments into roads, power transmission and renewable energy projects.
3. Global experiences with InvITs in the energy sector
Several countries have already demonstrated the successful deployment of InvITs for raising
private capital to modernize energy infrastructure networks. A few prominent examples are
discussed below:
United States:
- US introduced Master Limited Partnerships (MLPs) in 1981 which facilitated asset
monetization in midstream energy.
- Since then over $400 billion has been raised through 30+ Listed MLPs for pipeline
construction.
- Emergence of YieldCos since 2012 provided a yield-focused vehicle for renewable energy
through platforms like NRG Yield, TerraForm Power.
- YieldCos have raised $40+ billion and today own/operate 31 GW of renewable assets in the
US.
India:
- SEBI notified InvIT regulations in 2014 paving way for energy sector investments.
- India Grid Trust (IndiGrid) launched in 2017 was Asia’s first power sector InvIT, raising $300
million.
- It now holds transmission assets worth $1 billion with portfolio of 13 projects spanning over 9
states.
- Several other InvITs have replicated this model, mobilizing billions in private capital for
transmission infrastructure.
United Kingdom:
- UK’s Green Investment Bank pioneered use of YieldCos like Green Investment Group in
offshore wind platforms.
- It has mobilized $6 billion of private capital through public-private Green InvITs.
- Infradebt Infracapital InvIT focuses on renewables and energy efficiency, raising $300 million.
- Recent initiatives like Open Energi are further scaling up private capital through regulated
asset-based models.
These examples demonstrate how InvITs have successfully provided an avenue for monetizing
operating energy infrastructure assets, unlocking large pools of institutional investment capital
required for transmission and renewable energy buildouts globally.
4. Challenges and opportunities for InvITs in grid decarbonization
While InvITs hold enormous promise as a financing tool, there are still regulatory, policy and
market-related barriers that need to be addressed to deploy them at scale for modernizing
energy grids:
- Regulatory impediments: Overly strict regulations can discourage participation. Simplifying
compliances for smaller projects and flexibility in governance structures is needed.
- Lack of size and scale: Most energy InvITs operate relatively small portfolios. Consolidating
assets is important to improve scale and market visibility.
- Absence of volume: Limited number of transactions restricts liquidity and risk appetite of
investors. Sustained deal volumes are required.
- Returns perception: Investors see InvIT returns as low compared to other infrastructure.
Incentivizing first-movers through returns enhancement is important.
- Policy push: Active government support in identification, aggregation and enabling of priority
asset pipelines is needed to catalyze the market.
- Credit enhancement: Mechanisms like partial credit guarantees can lower risks particularly for
transmission projects. This can boost investor confidence.
- Lack of standardized contracts: Contractual standardization of PPAs and market-linking of
tariffs reduces risks and improves monetization efficiency.
However, the coming decade also presents several opportunities for InvITs if these barriers are
addressed:
- Huge requirement for last-mile distribution network upgrades that can potentially be packaged
into InvITs.
- Emergence of new grid-edge technologies de-risk long term revenue streams, boosting yields.
- Increasing investor appetite for green and ESG-linked investments presents a suitable
targeted investor base.
- Growing role of renewable energy integration makes T&D modernization and system
balancing large addressable markets.
- Maturity of policies supporting renewable purchase obligations and market-determined tariff
structures.
- Increased focus on privatization of transmission assets globally opens up many brownfield
opportunities.
If structured properly with appropriate derisking measures, InvITs could play a leading role in
mobilizing investments into decarbonizing energy grids globally over the coming decade. The
scale of required financing provides a large addressable market opportunity.
5. Policy recommendations for scaling up InvIT financing
Based on the analysis, following key policy actions are recommended by governments and
regulators to optimize use of InvITs for grid modernization:
1) Develop priority asset pipelines: Governments must take the lead in identifying, aggregating
and readying bankable public and private transmission/distribution projects suitable for InvIT
structuring.
2) Simplify regulatory compliances: Regulators need to reduce unnecessary rigidities in InvIT
regulations, enable smaller retail sizes and provide flexibilities in governance without
compromising investor protections.
3) Enhance creditworthiness: Measures like partial credit guarantees, securitization against
regulated cash flows and achieving investment grade credit ratings can boost confidence in
asset-backed InvIT instruments.
4) Standardize contracting frameworks: Standard master service agreements, PPAs with pass-
through tariff determination and dispute resolution help monetize revenue streams efficiently
and derisk projects for infrastructure and institutional investors.
5) Develop specialized fund structures: Creation of publicly-sponsored green energy investment
vehicles or renewable-focused InvIT platforms with deep domain expertise and reach can
catalyze the market.
6) Provide tax incentives: Tax exemptions on InvIT dividend distributions and capital gains can
encourage higher participation of individual investors over time to build critical mass.
7) Mandate privatization through InvITs: Governments can direct strategic sale of public energy
assets through regulated InvIT structures to participate as sponsors while mobilizing private
capital at scale.
8) Develop secondary markets: Regulators need to facilitate listing of InvIT units with adequate
liquidity through recognized stock exchanges to enhance exit options and viability as an asset
class.
9) Strengthen market connectivity: Initiatives to link regional power markets through
augmentation/creation of transmission superhighways and advancing real-time balancing
mechanisms help increase tenor visibility of InvIT yields.
10) Conduct awareness programs: Regulators and industry associations need to undertake
investor awareness and education programs to popularize InvITs as a viable long term tool for
channeling ‘patient capital’ into large green infrastructure projects.
A comprehensive action plan with sustained focus on these policy measures could help
countries unlock vast pools of private investment through InvITs for urgently needed electricity
grid modernization. This in turn would go a long way in facilitating the accelerated energy
transition.
6. Conclusion
Transitioning to a low-carbon economy requires unprecedented investments in upgrading aging
energy infrastructure. Public financing alone falls far short of what is needed making innovative
sources of private capital indispensable. As the world steps up climate action ambitions,
innovative financing tools that can channel large institutional money into grid modernization
needs to be scaled up rapidly.
Infrastructure Investment Trusts have emerged as an attractive mechanism worldwide for
monetizing infrastructure assets and raising institutional investment for the energy sector.
Countries that have used regulated InvIT structures have successfully demonstrated the ability
to unlock billions in private capital for transmission and clean energy projects.
However, continued progress is dependent on adopting policies that address existing barriers
around regulatory clarity, risk mitigation measures, standardized contracts and market
development support. With the scale of green infrastructure investment needs looming larger
than ever, governments must play a proactive role in developing bankable projects and fostering
an enabling environment for InvITs to flourish.
Overall, if policy frameworks optimize InvITs as an asset class, they have tremendous untapped
potential to mobilize large pools of long-term private capital required for overhauling electricity
grids to support low-carbon economies of the future. Their deployment holds the key to
accelerating progress on clean energy transitions globally. Working to realize this potential
should be a high priority policy agenda for countries serious about achieving their
decarbonization goals.
As the world works towards transitioning to renewable and cleaner sources of energy,
modernizing our aging energy infrastructure has become an urgent priority. Decarbonizing the
electric grid requires massive investments in transmission and distribution systems in order to
connect renewable energy sources located far from demand centers as well as make the grid
more resilient, flexible and intelligent. However, traditional utility financing through rate hikes can
only go so far given the enormity of infrastructure needs. Innovative financing mechanisms are
needed to unlock large pools of private capital for grid modernization.
One such financing tool that has gained traction globally is Infrastructure Investment Trusts
(InvITs) in the energy sector. InvITs allow pooling of infrastructure assets into a trust structure
which issues units to investors, thereby monetizing infrastructure assets to raise capital. Several
countries, including the US, UK and India, have already successfully used InvITs to channel
significant private investments into modernizing energy infrastructure. However, there are still
challenges that need to be addressed for InvITs to be deployed at a scale needed for grid
decarbonization.
This paper aims to analyze the potential of InvITs for financing grid modernization in the context
of the massive investments needed to transition to a clean energy future. It examines the
experiences of countries that have utilized InvITs so far, identifies challenges still remaining and
provides policy recommendations for fully unlocking the potential of this financing tool. The
discussion is structured as follows:
1. Investments needed for a clean energy transition and grid modernization
2. Overview of Infrastructure Investment Trusts as a financing mechanism
3. Global experiences with InvITs in the energy sector
4. Challenges and opportunities for InvITs in grid decarbonization
5. Policy recommendations for scaling up InvIT financing
6. Conclusion
1. Investments needed for a clean energy transition and grid modernization
Transitioning to renewable energy at the scale needed to achieve climate targets requires
immense investments in upgrading and expanding power infrastructure over the coming
decades. According to IEA estimates, annual global energy supply investments need to rise to
$4 trillion by 2030 from current levels of about $2 trillion to put the world on a sustainable energy
path.
A significant portion of this estimated $2 trillion additional investment is needed for modernizing
electricity grids. The World Economic Forum pegs infrastructure investment requirements for
electrification and grid modernization at over $50 trillion between 2015-2050 globally. In the US
alone, upgrading aging transmission and distribution systems is estimated to require $2.5 trillion
over the next 25 years according to the American Society of Civil Engineers.
Grid modernization refers to upgrading existing transmission and distribution systems to make
them more resilient, digitally enabled, integrated with distributed energy resources, and capable
of handling high volumes of renewable power. Key areas of investment needs include:
- Upgrading T&D lines to increase capacity and utilize higher-capacity conductors for
transporting renewable power over long distances.
- Developing new high-voltage transmission lines to connect remote renewable energy zones to
population centers.
- Making subsystem upgrades like reconductoring, replacing poles and cross-arms, adding new
transformers and substations.
- Investing in 'smart grid' technologies like advanced metering, distributed energy management
systems, energy storage and microgrids.
- Modernizing distribution infrastructure for bidirectional power flows to accommodate rooftop
solar and electric vehicles.
- Hardening systems against extreme weather events through undergrounding of lines, storm
hardening of poles etc.
While government grants and public utilities shoulder some of these costs, the scale of financing
required is far more than what can be mobilized through traditional rate-based models alone.
Innovative financing that taps large pools ofprivate capital is urgently needed for modernizing
energy infrastructure.
2. Overview of Infrastructure Investment Trusts as a financing mechanism
Infrastructure Investment Trusts (InvITs) refer to trusts set up to own, operate and invest in
infrastructure assets. They provide an avenue to monetize operational infrastructure by pooling
multiple assets/projects into a single investment entity. Key features of InvITs include:
- InvITs are set up as trusts regulated by securities market regulators.
- Infrastructure projects/assets are contributed to the trust in return for trust units given to the
project developer.
- Units of the InvIT are issued to different classes of public/private investors to raise capital.
- Proceeds are utilized to acquire other assets or invest further in portfolio infrastructure assets.
- Cash flows from underlying assets are distributed to unit holders as dividends on a periodic
basis.
- Management of assets and fund deployment is handled by the Sponsor and Investment
Manager.
InvITs allow infrastructure assets to be pooled and monetized through capital markets, attracting
a wide variety of institutional and retail investors. The stable and long-term cash flows from
operating assets make InvITs an attractive investment proposition. Some key benefits include:
- Mobilizing large pools of long-term private/institutional capital for infrastructure modernization.
- Improving liquidity of infrastructure assets and allowing investors an ‘exit’ route.
- Reducing reliance on public funds and aids resource mobilization.
- Enabling efficient capital recycling for developers as assets get monetized.
- Offering yield-oriented investment avenues to large institutional investors.
Over time, InvITs have emerged as a popular structured financing instrument globally for
channeling investments into roads, power transmission and renewable energy projects.
3. Global experiences with InvITs in the energy sector
Several countries have already demonstrated the successful deployment of InvITs for raising
private capital to modernize energy infrastructure networks. A few prominent examples are
discussed below:
United States:
- US introduced Master Limited Partnerships (MLPs) in 1981 which facilitated asset
monetization in midstream energy.
- Since then over $400 billion has been raised through 30+ Listed MLPs for pipeline
construction.
- Emergence of YieldCos since 2012 provided a yield-focused vehicle for renewable energy
through platforms like NRG Yield, TerraForm Power.
- YieldCos have raised $40+ billion and today own/operate 31 GW of renewable assets in the
US.
India:
- SEBI notified InvIT regulations in 2014 paving way for energy sector investments.
- India Grid Trust (IndiGrid) launched in 2017 was Asia’s first power sector InvIT, raising $300
million.
- It now holds transmission assets worth $1 billion with portfolio of 13 projects spanning over 9
states.
- Several other InvITs have replicated this model, mobilizing billions in private capital for
transmission infrastructure.
United Kingdom:
- UK’s Green Investment Bank pioneered use of YieldCos like Green Investment Group in
offshore wind platforms.
- It has mobilized $6 billion of private capital through public-private Green InvITs.
- Infradebt Infracapital InvIT focuses on renewables and energy efficiency, raising $300 million.
- Recent initiatives like Open Energi are further scaling up private capital through regulated
asset-based models.
These examples demonstrate how InvITs have successfully provided an avenue for monetizing
operating energy infrastructure assets, unlocking large pools of institutional investment capital
required for transmission and renewable energy buildouts globally.
4. Challenges and opportunities for InvITs in grid decarbonization
While InvITs hold enormous promise as a financing tool, there are still regulatory, policy and
market-related barriers that need to be addressed to deploy them at scale for modernizing
energy grids:
- Regulatory impediments: Overly strict regulations can discourage participation. Simplifying
compliances for smaller projects and flexibility in governance structures is needed.
- Lack of size and scale: Most energy InvITs operate relatively small portfolios. Consolidating
assets is important to improve scale and market visibility.
- Absence of volume: Limited number of transactions restricts liquidity and risk appetite of
investors. Sustained deal volumes are required.
- Returns perception: Investors see InvIT returns as low compared to other infrastructure.
Incentivizing first-movers through returns enhancement is important.
- Policy push: Active government support in identification, aggregation and enabling of priority
asset pipelines is needed to catalyze the market.
- Credit enhancement: Mechanisms like partial credit guarantees can lower risks particularly for
transmission projects. This can boost investor confidence.
- Lack of standardized contracts: Contractual standardization of PPAs and market-linking of
tariffs reduces risks and improves monetization efficiency.
However, the coming decade also presents several opportunities for InvITs if these barriers are
addressed:
- Huge requirement for last-mile distribution network upgrades that can potentially be packaged
into InvITs.
- Emergence of new grid-edge technologies de-risk long term revenue streams, boosting yields.
- Increasing investor appetite for green and ESG-linked investments presents a suitable
targeted investor base.
- Growing role of renewable energy integration makes T&D modernization and system
balancing large addressable markets.
- Maturity of policies supporting renewable purchase obligations and market-determined tariff
structures.
- Increased focus on privatization of transmission assets globally opens up many brownfield
opportunities.
If structured properly with appropriate derisking measures, InvITs could play a leading role in
mobilizing investments into decarbonizing energy grids globally over the coming decade. The
scale of required financing provides a large addressable market opportunity.
5. Policy recommendations for scaling up InvIT financing
Based on the analysis, following key policy actions are recommended by governments and
regulators to optimize use of InvITs for grid modernization:
1) Develop priority asset pipelines: Governments must take the lead in identifying, aggregating
and readying bankable public and private transmission/distribution projects suitable for InvIT
structuring.
2) Simplify regulatory compliances: Regulators need to reduce unnecessary rigidities in InvIT
regulations, enable smaller retail sizes and provide flexibilities in governance without
compromising investor protections.
3) Enhance creditworthiness: Measures like partial credit guarantees, securitization against
regulated cash flows and achieving investment grade credit ratings can boost confidence in
asset-backed InvIT instruments.
4) Standardize contracting frameworks: Standard master service agreements, PPAs with pass-
through tariff determination and dispute resolution help monetize revenue streams efficiently
and derisk projects for infrastructure and institutional investors.
5) Develop specialized fund structures: Creation of publicly-sponsored green energy investment
vehicles or renewable-focused InvIT platforms with deep domain expertise and reach can
catalyze the market.
6) Provide tax incentives: Tax exemptions on InvIT dividend distributions and capital gains can
encourage higher participation of individual investors over time to build critical mass.
7) Mandate privatization through InvITs: Governments can direct strategic sale of public energy
assets through regulated InvIT structures to participate as sponsors while mobilizing private
capital at scale.
8) Develop secondary markets: Regulators need to facilitate listing of InvIT units with adequate
liquidity through recognized stock exchanges to enhance exit options and viability as an asset
class.
9) Strengthen market connectivity: Initiatives to link regional power markets through
augmentation/creation of transmission superhighways and advancing real-time balancing
mechanisms help increase tenor visibility of InvIT yields.
10) Conduct awareness programs: Regulators and industry associations need to undertake
investor awareness and education programs to popularize InvITs as a viable long term tool for
channeling ‘patient capital’ into large green infrastructure projects.
A comprehensive action plan with sustained focus on these policy measures could help
countries unlock vast pools of private investment through InvITs for urgently needed electricity
grid modernization. This in turn would go a long way in facilitating the accelerated energy
transition.
6. Conclusion
Transitioning to a low-carbon economy requires unprecedented investments in upgrading aging
energy infrastructure. Public financing alone falls far short of what is needed making innovative
sources of private capital indispensable. As the world steps up climate action ambitions,
innovative financing tools that can channel large institutional money into grid modernization
needs to be scaled up rapidly.
Infrastructure Investment Trusts have emerged as an attractive mechanism worldwide for
monetizing infrastructure assets and raising institutional investment for the energy sector.
Countries that have used regulated InvIT structures have successfully demonstrated the ability
to unlock billions in private capital for transmission and clean energy projects.
However, continued progress is dependent on adopting policies that address existing barriers
around regulatory clarity, risk mitigation measures, standardized contracts and market
development support. With the scale of green infrastructure investment needs looming larger
than ever, governments must play a proactive role in developing bankable projects and fostering
an enabling environment for InvITs to flourish.
Overall, if policy frameworks optimize InvITs as an asset class, they have tremendous untapped
potential to mobilize large pools of long-term private capital required for overhauling electricity
grids to support low-carbon economies of the future. Their deployment holds the key to
accelerating progress on clean energy transitions globally. Working to realize this potential
should be a high priority policy agenda for countries serious about achieving their
decarbonization goals.
As the world works towards transitioning to renewable and cleaner sources of energy,
modernizing our aging energy infrastructure has become an urgent priority. Decarbonizing the
electric grid requires massive investments in transmission and distribution systems in order to
connect renewable energy sources located far from demand centers as well as make the grid
more resilient, flexible and intelligent. However, traditional utility financing through rate hikes can
only go so far given the enormity of infrastructure needs. Innovative financing mechanisms are
needed to unlock large pools of private capital for grid modernization.
One such financing tool that has gained traction globally is Infrastructure Investment Trusts
(InvITs) in the energy sector. InvITs allow pooling of infrastructure assets into a trust structure
which issues units to investors, thereby monetizing infrastructure assets to raise capital. Several
countries, including the US, UK and India, have already successfully used InvITs to channel
significant private investments into modernizing energy infrastructure. However, there are still
challenges that need to be addressed for InvITs to be deployed at a scale needed for grid
decarbonization.
This paper aims to analyze the potential of InvITs for financing grid modernization in the context
of the massive investments needed to transition to a clean energy future. It examines the
experiences of countries that have utilized InvITs so far, identifies challenges still remaining and
provides policy recommendations for fully unlocking the potential of this financing tool. The
discussion is structured as follows:
1. Investments needed for a clean energy transition and grid modernization
2. Overview of Infrastructure Investment Trusts as a financing mechanism
3. Global experiences with InvITs in the energy sector
4. Challenges and opportunities for InvITs in grid decarbonization
5. Policy recommendations for scaling up InvIT financing
6. Conclusion
1. Investments needed for a clean energy transition and grid modernization
Transitioning to renewable energy at the scale needed to achieve climate targets requires
immense investments in upgrading and expanding power infrastructure over the coming
decades. According to IEA estimates, annual global energy supply investments need to rise to
$4 trillion by 2030 from current levels of about $2 trillion to put the world on a sustainable energy
path.
A significant portion of this estimated $2 trillion additional investment is needed for modernizing
electricity grids. The World Economic Forum pegs infrastructure investment requirements for
electrification and grid modernization at over $50 trillion between 2015-2050 globally. In the US
alone, upgrading aging transmission and distribution systems is estimated to require $2.5 trillion
over the next 25 years according to the American Society of Civil Engineers.
Grid modernization refers to upgrading existing transmission and distribution systems to make
them more resilient, digitally enabled, integrated with distributed energy resources, and capable
of handling high volumes of renewable power. Key areas of investment needs include:
- Upgrading T&D lines to increase capacity and utilize higher-capacity conductors for
transporting renewable power over long distances.
- Developing new high-voltage transmission lines to connect remote renewable energy zones to
population centers.
- Making subsystem upgrades like reconductoring, replacing poles and cross-arms, adding new
transformers and substations.
- Investing in 'smart grid' technologies like advanced metering, distributed energy management
systems, energy storage and microgrids.
- Modernizing distribution infrastructure for bidirectional power flows to accommodate rooftop
solar and electric vehicles.
- Hardening systems against extreme weather events through undergrounding of lines, storm
hardening of poles etc.
While government grants and public utilities shoulder some of these costs, the scale of financing
required is far more than what can be mobilized through traditional rate-based models alone.
Innovative financing that taps large pools ofprivate capital is urgently needed for modernizing
energy infrastructure.
2. Overview of Infrastructure Investment Trusts as a financing mechanism
Infrastructure Investment Trusts (InvITs) refer to trusts set up to own, operate and invest in
infrastructure assets. They provide an avenue to monetize operational infrastructure by pooling
multiple assets/projects into a single investment entity. Key features of InvITs include:
- InvITs are set up as trusts regulated by securities market regulators.
- Infrastructure projects/assets are contributed to the trust in return for trust units given to the
project developer.
- Units of the InvIT are issued to different classes of public/private investors to raise capital.
- Proceeds are utilized to acquire other assets or invest further in portfolio infrastructure assets.
- Cash flows from underlying assets are distributed to unit holders as dividends on a periodic
basis.
- Management of assets and fund deployment is handled by the Sponsor and Investment
Manager.
InvITs allow infrastructure assets to be pooled and monetized through capital markets, attracting
a wide variety of institutional and retail investors. The stable and long-term cash flows from
operating assets make InvITs an attractive investment proposition. Some key benefits include:
- Mobilizing large pools of long-term private/institutional capital for infrastructure modernization.
- Improving liquidity of infrastructure assets and allowing investors an ‘exit’ route.
- Reducing reliance on public funds and aids resource mobilization.
- Enabling efficient capital recycling for developers as assets get monetized.
- Offering yield-oriented investment avenues to large institutional investors.
Over time, InvITs have emerged as a popular structured financing instrument globally for
channeling investments into roads, power transmission and renewable energy projects.
3. Global experiences with InvITs in the energy sector
Several countries have already demonstrated the successful deployment of InvITs for raising
private capital to modernize energy infrastructure networks. A few prominent examples are
discussed below:
United States:
- US introduced Master Limited Partnerships (MLPs) in 1981 which facilitated asset
monetization in midstream energy.
- Since then over $400 billion has been raised through 30+ Listed MLPs for pipeline
construction.
- Emergence of YieldCos since 2012 provided a yield-focused vehicle for renewable energy
through platforms like NRG Yield, TerraForm Power.
- YieldCos have raised $40+ billion and today own/operate 31 GW of renewable assets in the
US.
India:
- SEBI notified InvIT regulations in 2014 paving way for energy sector investments.
- India Grid Trust (IndiGrid) launched in 2017 was Asia’s first power sector InvIT, raising $300
million.
- It now holds transmission assets worth $1 billion with portfolio of 13 projects spanning over 9
states.
- Several other InvITs have replicated this model, mobilizing billions in private capital for
transmission infrastructure.
United Kingdom:
- UK’s Green Investment Bank pioneered use of YieldCos like Green Investment Group in
offshore wind platforms.
- It has mobilized $6 billion of private capital through public-private Green InvITs.
- Infradebt Infracapital InvIT focuses on renewables and energy efficiency, raising $300 million.
- Recent initiatives like Open Energi are further scaling up private capital through regulated
asset-based models.
These examples demonstrate how InvITs have successfully provided an avenue for monetizing
operating energy infrastructure assets, unlocking large pools of institutional investment capital
required for transmission and renewable energy buildouts globally.
4. Challenges and opportunities for InvITs in grid decarbonization
While InvITs hold enormous promise as a financing tool, there are still regulatory, policy and
market-related barriers that need to be addressed to deploy them at scale for modernizing
energy grids:
- Regulatory impediments: Overly strict regulations can discourage participation. Simplifying
compliances for smaller projects and flexibility in governance structures is needed.
- Lack of size and scale: Most energy InvITs operate relatively small portfolios. Consolidating
assets is important to improve scale and market visibility.
- Absence of volume: Limited number of transactions restricts liquidity and risk appetite of
investors. Sustained deal volumes are required.
- Returns perception: Investors see InvIT returns as low compared to other infrastructure.
Incentivizing first-movers through returns enhancement is important.
- Policy push: Active government support in identification, aggregation and enabling of priority
asset pipelines is needed to catalyze the market.
- Credit enhancement: Mechanisms like partial credit guarantees can lower risks particularly for
transmission projects. This can boost investor confidence.
- Lack of standardized contracts: Contractual standardization of PPAs and market-linking of
tariffs reduces risks and improves monetization efficiency.
However, the coming decade also presents several opportunities for InvITs if these barriers are
addressed:
- Huge requirement for last-mile distribution network upgrades that can potentially be packaged
into InvITs.
- Emergence of new grid-edge technologies de-risk long term revenue streams, boosting yields.
- Increasing investor appetite for green and ESG-linked investments presents a suitable
targeted investor base.
- Growing role of renewable energy integration makes T&D modernization and system
balancing large addressable markets.
- Maturity of policies supporting renewable purchase obligations and market-determined tariff
structures.
- Increased focus on privatization of transmission assets globally opens up many brownfield
opportunities.
If structured properly with appropriate derisking measures, InvITs could play a leading role in
mobilizing investments into decarbonizing energy grids globally over the coming decade. The
scale of required financing provides a large addressable market opportunity.
5. Policy recommendations for scaling up InvIT financing
Based on the analysis, following key policy actions are recommended by governments and
regulators to optimize use of InvITs for grid modernization:
1) Develop priority asset pipelines: Governments must take the lead in identifying, aggregating
and readying bankable public and private transmission/distribution projects suitable for InvIT
structuring.
2) Simplify regulatory compliances: Regulators need to reduce unnecessary rigidities in InvIT
regulations, enable smaller retail sizes and provide flexibilities in governance without
compromising investor protections.
3) Enhance creditworthiness: Measures like partial credit guarantees, securitization against
regulated cash flows and achieving investment grade credit ratings can boost confidence in
asset-backed InvIT instruments.
4) Standardize contracting frameworks: Standard master service agreements, PPAs with pass-
through tariff determination and dispute resolution help monetize revenue streams efficiently
and derisk projects for infrastructure and institutional investors.
5) Develop specialized fund structures: Creation of publicly-sponsored green energy investment
vehicles or renewable-focused InvIT platforms with deep domain expertise and reach can
catalyze the market.
6) Provide tax incentives: Tax exemptions on InvIT dividend distributions and capital gains can
encourage higher participation of individual investors over time to build critical mass.
7) Mandate privatization through InvITs: Governments can direct strategic sale of public energy
assets through regulated InvIT structures to participate as sponsors while mobilizing private
capital at scale.
8) Develop secondary markets: Regulators need to facilitate listing of InvIT units with adequate
liquidity through recognized stock exchanges to enhance exit options and viability as an asset
class.
9) Strengthen market connectivity: Initiatives to link regional power markets through
augmentation/creation of transmission superhighways and advancing real-time balancing
mechanisms help increase tenor visibility of InvIT yields.
10) Conduct awareness programs: Regulators and industry associations need to undertake
investor awareness and education programs to popularize InvITs as a viable long term tool for
channeling ‘patient capital’ into large green infrastructure projects.
A comprehensive action plan with sustained focus on these policy measures could help
countries unlock vast pools of private investment through InvITs for urgently needed electricity
grid modernization. This in turn would go a long way in facilitating the accelerated energy
transition.
6. Conclusion
Transitioning to a low-carbon economy requires unprecedented investments in upgrading aging
energy infrastructure. Public financing alone falls far short of what is needed making innovative
sources of private capital indispensable. As the world steps up climate action ambitions,
innovative financing tools that can channel large institutional money into grid modernization
needs to be scaled up rapidly.
Infrastructure Investment Trusts have emerged as an attractive mechanism worldwide for
monetizing infrastructure assets and raising institutional investment for the energy sector.
Countries that have used regulated InvIT structures have successfully demonstrated the ability
to unlock billions in private capital for transmission and clean energy projects.
However, continued progress is dependent on adopting policies that address existing barriers
around regulatory clarity, risk mitigation measures, standardized contracts and market
development support. With the scale of green infrastructure investment needs looming larger
than ever, governments must play a proactive role in developing bankable projects and fostering
an enabling environment for InvITs to flourish.
Overall, if policy frameworks optimize InvITs as an asset class, they have tremendous untapped
potential to mobilize large pools of long-term private capital required for overhauling electricity
grids to support low-carbon economies of the future. Their deployment holds the key to
accelerating progress on clean energy transitions globally. Working to realize this potential
should be a high priority policy agenda for countries serious about achieving their
decarbonization goals.
