Themen:
Insights May 16, 2025

Energy Transition: Utilities and electricity grids

PERSPECTIVES Special | Authors: Markus Müller, Chief Investment Officer ESG & Global Head of Chief Investment Office - Daniel Sacco, CESGA Investment Officer EMEA

Key takeaways
 
• Increases in electricity consumption are reshaping power markets. Higher demand will need to be met by low-emission sources, but this will create challenges.
• Grids will need to be expanded to incorporate dispersed renewables generation, and
modernized to enhance efficiency, reliability and security.
• This creates a long-term investment case for Utilities, with potential re-rating vs. the overall market. Higher capital expenditure is likely to translate into substantial earnings growth.

CIO-Energy-Transition-mag2025

Contents

  • Introduction
  • Electricity demand and supply
  • Electricity grids
  • Grid investment
  • The investment case for Utilities
  • Key risks
  • Conclusions

Introduction

Electrical power consumption is now increasing at its fastest pace for many years, driven by factors including industrial electrification, data centre expansion and electric vehicle (EV) adoption. Meeting this increased demand will involve major changes to the electricity supply mix, with a greater contribution from renewable energy sources. But it will also involve updating and fundamentally reshaping the role of power grids to integrate new energy sources while maintaining system stability and resilience. This will require substantial investment in transmission infrastructure, digital grid modernization, and energy storage solutions.

Utilities have faced valuation pressure in recent years, in part due to higher interest rates and concerns around some renewable energy projects. But faster growth in electricity demand, combined with grid expansion, may now be changing investment dynamics. Utilities, if they can successfully finance infrastructure improvements, may enjoy higher earnings growth.

In this report, we first provide an overview of electricity and grid development, followed by a summary of investment trends in grid expansion, capital expenditure requirements and regulatory developments. We then set out the investment case for Utilities and the potential risks.

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