In recent years the global commitment to decarbonization has seen a push to increase renewable power generation, but it has been the geopolitical turmoil that has now given the transition an additional impetus to accelerate, particularly in Europe. For investors looking to tap into this transition, the secondaries market offers increasingly interesting opportunities to take a more diversified and de-risked approach.
The push to increase the proportion of the world’s power that is generated by renewable sources has been a theme across the infrastructure markets for decades. Since the Paris Agreement was signed 10 years ago, there has been a real focus on building out sustainable energy assets as part of efforts to decarbonize and move towards net zero.
There has already been notable progress across Europe. In 2023, the EU declared its intention to increase the share of renewables in the bloc’s overall energy consumption to 42.5% by 2030.¹ Last year, the region’s wind and solar generation capacity reached 846 terawatt-hours (TWh), a 54% increase in just four years.²
But the case for renewables isn’t just about moving towards net zero. In Europe, which had always relied on importing fossil fuels for power generation for much of the twentieth century, the ability to generate electricity locally, reliably, and without depending on external players is now central to its energy security. Since Russia’s invasion of Ukraine and the disruption of key gas supply routes in 2022, this is a topic that has taken on more urgency, while the recent crisis in Iran, the stymying of supplies of carbon-based fuels from the Middle East, and the resulting rise in energy costs for consumers means it is now at the forefront of political conversations.
Europe can no longer talk in the abstract about being on a journey towards decarbonizing its energy production; faced with the instability of global trade routes and rising consumer energy bills, it is increasingly stark that it needs to arrive at its final destination as soon as possible.
UK Prime Minister Keir Starmer emphasized this need for countries in the region to end their reliance on importing carbon-based fuels and the requirement for home-grown renewable energy production in a speech at the beginning of April.
“I am sick and tired of your energy bills fluctuating up and down because we are on the International Market,” he said. “If we took control of our energy and had home grown renewables, we could stabilise your bills.”³
Later in April, the European Commission launched its AccelerateEU program to build the region’s resilience through energy transition, with president Ursula von der Leyen saying, “We must accelerate the shift to homegrown, clean energies. This will give us energy independence and security, and mean we are better able to weather geopolitical storms.”⁴
An electrified world: rising electricity demand is reshaping Europe’s energy mix
The need for reliable, cost-effective, and scalable energy has become even more important as the power demands of all parts of society increase. The proportion of electric cars in the region is growing, with battery-electric cars accounting for 18.8% of the European Union market share in the first two months of the year, a 15.2% year-on-year increase.⁵ Alongside the uptick in the number of heat pumps used in domestic properties, the electrification of industry, and the expansion of the digital infrastructure landscape, Europe is stepping up its reliance on electricity.
The rising use of artificial intelligence makes up a large part of this demand, although this also has its own particular challenges introducing acute bottlenecks in the energy system. To date, data centers have mainly been concentrated in geographies with the best connectivity, focusing on high-density metropolitan areas such as the FLAPD region – Frankfurt, London, Amsterdam, Paris, and Dublin. However, as operators crowd in to take advantage of the high-density infrastructure in these regions, capacity constraints mean that operations are being pushed out to regions with less developed grids. However, these data centers require near-perfect uptime, meaning that reliability of their power supply is crucial to their operation.
Whilst renewables on their own produce intermittent power, coupling their generation with Battery Energy Storage Systems (BESS) can provide the type of clean electricity the technology companies rolling out AI seek. Microsoft, for example, matched 100% of its electricity needs for the first time in 2025, with the firm’s cloud operations chief stating, “as we continue to grow we want to maintain that 100%.”⁶
Why Europe’s renewable energy market remains fragmented
When discussing the continent’s power market, it is important to remember that there is no single European entity for energy generation, distribution, and usage. Rather, the region remains highly fragmented. Each country manages its own policy for renewable energy, so there can be dramatically different profiles for power production even within small geographical areas.
For example, more than 50% of Italy and Malta’s total electricity generation is still derived from imported fossil fuels.⁷ Italy also relies on liquefied natural gas (LNG) supplies coming via the Strait of Hormuz for around 10% of its total gas usage.⁸
By contrast, countries in the Nordic region have strong renewables penetration, while Spain has invested heavily in its solar capabilities in recent years.⁹
This investment has a direct effect on consumers. Households in countries that have higher renewable energy generation capabilities have utilities bills that are more decoupled from the volatility of carbon commodities markets. Over the first 16 days of the blockade of the Strait of Hormuz, the region’s average hourly spot prices for electricity were the highest in Italy (€142.08/MWh) and the lowest in Finland (€35.72/MWh), Sweden (€54.20/MWh), and Spain (€58.79/MWh).¹⁰
Secondaries: sparking new renewables growth
Such a fragmented landscape – and one that can quickly shift when political developments change a country’s policies – can make it difficult for investors looking to tap into the region’s renewable power story. Investors must ensure that their exposure is widely diversified not only across different projects, geographies, and technologies, but also across fund managers.
Investing across technologies and geographies reduces exposure to any single resource risk (for example, in years when there is low wind). This also allows the capture of different pricing periods, which can improve portfolio-level predictability. Meanwhile, exposure across both renewable-focused and generalist managers that invest in renewables as part of their diversified funds allows investors to benefit from a wider origination funnel and varying investment and asset management toolkits, with the entry point into these assets being critical.
Renewable assets are not all created equal, and the same companies can exhibit widely varying performance under different fund managers. A secondary direct strategy has the unique ability to underwrite businesses with greater visibility on execution risk. By the time a platform reaches the stage where it is seeking additional secondary growth capital, key elements of the strategy such as site origination capability, permitting track record, grid access, and early asset performance under that specific fund manager have often been proven. This allows investors to move beyond underwriting a new business plan on paper and instead assess a more proven operating model.
Rather than committing to a business plan before it has taken shape, Pantheon’s secondaries strategies¹¹ can choose platforms that are already demonstrating success in converting pipeline into real cashflow. In a direct M&A process, the new buyer has to rely on their own diligence and assumptions without the benefit of prior ownership and knowledge of the asset. As a secondaries investor, Pantheon can actively align existing fund managers who know the asset best to invest their own personal capital alongside us.
There can also be an advantage in backing continuity, as the existing manager remains in place and continues to lead the platform which preserves local relationships, execution knowledge, and market understanding that are often critical to success. This also leads to more disciplined capital deployment and better alignment between what is underwritten and what is actually happening on the ground. In a sector where timelines can be extended and outcomes highly dependent on asset-specific execution, that additional visibility can be invaluable.
Secondary growth capital is also especially powerful at this stage. Renewable platforms often reach an inflection point where additional capital accelerates build-out, deepens pipelines, or can enable storage alongside generation. In those cases, secondary investment not only provides liquidity, but also can help to unlock the next phase of value creation.
One part of the puzzle: the grid, storage, and infrastructure Europe still needs
In a time of rising demand for electricity and an increased focus on the need for energy reliability and security, developing Europe’s capacity of renewable electricity generation alone is not enough. Power must be dispatched across the region and effectively managed, and capital is needed across all stages of the process to ensure that the system works smoothly. A highly diversified investment approach – across grid, storage, distribution networks, sub-stations, renewables, and non-renewable generation – most efficiently manages investors’ exposure and ensures that they are able to diversify whilst tapping into all aspects of the energy transition.
The coming decade is likely to see a huge evolution in the European electricity market, with the need for energy security continuing to drive the focus on renewables. The infrastructure secondaries market offers an effective and potentially attractive way of accessing this growing story alongside de-risked platforms.
An American tale: how US renewable energy compares to Europe’s
In the US, the landscape for energy security and power generation is very different, but renewable energy is still key to meeting soaring demand from AI data centers and industrial electrification. While the policy environment for sustainable energy has shifted in different political regimes, renewables are still likely to continue expanding given underlying unit economics and demand. Although domestic gas reserves mean that the US has less of a pressing, immediate concern to build large renewable capabilities than Europe, there are still large-scale shifts underway. Notably, wind energy surpassed coal-fired generation in Texas in 2020,¹² while solar production in the Southeast region is projected to double by 2030, led by huge new photovoltaic deployment across Florida and Georgia.¹³
But in the US, the challenge is centered on the need to improve power infrastructure, particularly around transmission and the grid. New renewables projects can face costs of hundreds of dollars per kilowatt just to connect to the grid. This is an increasingly complex power landscape, but renewables are central to increasing power generation to meet rising demands, and there are opportunities here for long-term investment.
