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Is private capital the missing piece in $125 trillion energy-transition puzzle?
https://pitchbook.com/news/articles/is-private-capital-the-missing-piece-in-125-trillion-energy-transition-puzzleThe UK is almost a microcosm of a worldwide energy transition quandary—where the amount of investment needed, globally, is closer to $125 trillion. While each market faces its unique set of circumstances and advantages, the same structural trends and questions remain: Where do we get the money?
That dilemma can be seen in two ways. First, there’s the question of how to fund new sources of renewable energy and build the accompanying storage infrastructure to support those new sources. Second, the world must modernize power grids to handle more demand stemming from things like the proliferation of electric vehicle charging networks and power-hungry data centers fueling digitalization and AI adoption.
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Private capital has already honed in on the world’s growing energy need, with several of the largest managers launching strategies targeting energy infrastructure. For example, KKR is currently in the market with a $7 billion fund targeting energy transition investments. As of April, Blackstone had raised $1 billion for its latest energy transition vehicle.
While fundraising activity has dipped in the past year, infrastructure investors are sitting on about $334 billion of dry powder. PitchBook data shows that the total capital raised by infrastructure funds reached a peak in 2022 with about $138.5 billion raised across 122 globally. The previous year, 2021, saw a peak in the total number of fund closes, with 146 closing on $132.7 billion.
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Two of the largest fundraising hauls came at the end of the 2023, with Brookfield Asset Management gathering $28 billion for its fifth infrastructure fund in December. Around the same time, the United Arab Emirates announced $30 billion vehicle with the backing of BlackRock, TPG and Brookfield.
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“Society depends on a digital economy and it wants very clearly an economy where energy is abundant and cleaner, and this creates great investment opportunities,” he said. “The private capital sector is extremely well positioned to meet those demands and the government’s role is not to fund it, but to put the right playing field in place.”