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Private Equity in the Energy Transition
The global energy transition marks a fundamental shift in how the world produces, distributes, and consumes energy.
This transformation is driven by the urgent need to reduce greenhouse gas emissions, address climate change, and build resilient, sustainable economies. At its core, the energy transition involves moving away from fossil fuels and toward clean, renewable energy sources, as well as investing in supporting technologies and infrastructure.
Recent years have seen an unprecedented acceleration in this transition. According to BloombergNEF, global investment in the energy transition reached a record $2.1 trillion in 2024, climbing 11% from the previous year. For the first time, annual investment surpassed the $2 trillion mark, reflecting both the scale of the challenge and the growing commitment from governments, corporations, and investors worldwide. Notably, the Asia Pacific region, led by Mainland China, accounted for over half of total global investment, underscoring the region’s pivotal role in shaping the future energy landscape.
The largest sectors attracting capital in 2024 were electrified transport ($757 billion), renewable energy ($728 billion), and power grids ($390 billion). Each of these sectors set new investment records, illustrating the broadening scope of the transition beyond power generation to include transportation and grid modernization. However, emerging sectors such as hydrogen, carbon capture and storage (CCS), clean shipping, and clean industry together represented just 7.4% of total investment, highlighting the ongoing challenges in scaling up these critical technologies.
Despite this impressive growth, current annual investment levels are only about 37% of what is required to keep the world on track for net zero emissions by 2050. This gap underscores the need for continued and accelerated capital deployment, innovation, and policy support.
Private equity (PE) is uniquely positioned to play a transformative role in this landscape. By providing flexible capital, strategic expertise, and a long-term investment horizon, PE firms can help scale innovative solutions, bridge funding gaps, and drive value creation across the energy value chain. As the energy transition continues to evolve, private equity’s involvement will be essential to unlocking the next wave of growth and impact.
A closer look at the data reveals a “two-speed” energy transition. In 2024, 93% of global energy transition investment ($1.93 trillion, up 14% year-on-year despite recent macroeconomic headwinds) was concentrated in “mature” sectors, including renewables, energy storage, electrified transport, and power grids, where technology is proven and business models are scalable.
In contrast, “emerging” sectors, such as electrified heat, hydrogen, carbon capture and storage (CCS), nuclear, clean industry, and clean shipping, accounted for just 7% of total investment (∼$160 billion in 2024, a 20% year-on-year decline). These sectors, while critical for long-term decarbonization, still face significant barriers related to cost, technological maturity, and commercial scalability.
Investment Trends by Sector: Energy Efficiency Leads the Way
Recent data from the International Energy Agency (IEA) highlights a clear trend in the allocation of capital within the energy transition: energy efficiency investments have emerged as the most popular area over the past two years. As shown below, 64% of investment focus has been on energy efficiency, including electrification, reflecting a growing recognition that improving efficiency is one of the fastest and most cost-effective ways to reduce emissions, lower energy costs, and enhance system resilience.
Following closely, renewable and low-carbon energy has attracted 56% of investment interest, underscoring the continued momentum behind wind, solar, hydro, and other clean power sources. Energy storage and grid infrastructure (54%) also rank highly, reflecting the critical need to modernize electricity networks and integrate variable renewable generation at scale.
Transport and related infrastructure (51%) and critical minerals and materials (45%) round out the top five investment priorities, highlighting the importance of decarbonizing mobility and securing the raw materials essential for batteries, wind turbines, and other clean technologies.
In contrast, investment in carbon capture, utilization and storage (CCUS) remains comparatively limited at 31%, while fossil fuels with offsets or decarbonization strategies account for just 26% of investment focus. This indicates that, while these areas are recognized as part of the broader transition, the majority of capital is flowing toward solutions that directly reduce energy demand and accelerate the shift to renewables.
Leading Countries in Energy Transition Investment
Before analyzing investor preferences by region, it is crucial to highlight where the largest flows of capital are actually being deployed. As shown below, the global landscape of energy transition investment in 2024 is dominated by a handful of countries, with China standing out as the clear leader.
According to BloombergNEF, China invested an impressive $818.4 billion in energy transition initiatives in 2024, more than double the amount of the next country on the list. The United States follows with $338.3 billion, while Germany ($109.3 billion), the United Kingdom ($65.3 billion), and France ($50.3 billion) round out the top five. Other notable contributors include India, Brazil, Canada, and Italy, each with investments ranging from $30 billion to $47 billion.
Regional Perspectives: Where Are the Most Attractive Opportunities?
The global landscape for energy transition investment is shaped by a complex interplay of market potential, policy environments, infrastructure readiness, and local expertise. Over the past two years, investor interest has concentrated primarily in three regions: East Asia, Europe, and North America. Just over half of all energy transition investors are actively pursuing opportunities in these regions, with East Asia leading at 54%, followed closely by Europe and North America at 52% each.
What Makes a Region Attractive?
Investors in energy transition assets evaluate a wide range of factors when assessing countries or regions. These include regulatory support, market potential, political stability, infrastructure maturity, environmental policies, legal frameworks, available skills and resources, and the presence of reliable local partners. Regions that have successfully cultivated a blend of these elements are seeing the most investment, as they offer an attractive risk–reward proposition for both private and institutional capital.
The Established Leaders: East Asia, Europe, and North America
Parts of Asia (especially East Asia), Europe, and North America offer favorable conditions across most of these factors. These regions benefit from large market potential, robust infrastructure, stable regulatory environments, and a deep pool of technical skills. However, even in these mature markets, investment interest can be affected by issues such as political risks, evolving regulations, or infrastructure bottlenecks.
Within these regions, certain countries stand out due to their proactive policy frameworks, ambitious decarbonization targets, and strong public-private collaboration. For example, Mainland China has become a global leader in renewable energy deployment and electrified transport. In Europe, the EU’s Green Deal and Fit for 55 packages have galvanized investment, while North America, particularly the United States, continues to attract capital through incentives like the Inflation Reduction Act.
Rapidly Maturing Regions and New Opportunities
Beyond the established leaders, several regions are rapidly maturing and becoming increasingly attractive to investors. Recent surveys indicate growing interest in the Middle East and North Africa (20%) and Southeast Asia (20%). These regions are enhancing transparency and credibility for capital providers through new sustainable finance taxonomies and regulatory reforms. For instance, the ASEAN Taxonomy for Sustainable Finance has given organizations in Southeast Asia greater confidence to advance their transition plans, as seen with Malaysia’s Tenaga Nasional pioneering sustainability-linked debt frameworks.
In the Middle East, countries with significant oil and gas reserves are now advancing major investments in renewables and green hydrogen. Saudi Arabia and the UAE, for example, have set ambitious targets for renewable energy capacity and carbon capture, aiming to diversify their economies and play a leading role in the global energy transition.
The Importance and Challenges of Emerging Markets
Despite these positive trends, only 15% of all clean energy investment globally occurs in emerging and developing countries (excluding China), even though these nations are home to about 67% of the world’s population. Regions such as South Asia, Latin America, and Sub-Saharan Africa are only in focus for a minority of investors. This is despite the fact that these markets offer enormous potential for growth, urbanization, and industrialization.
The main barriers holding back investment in these regions are policy and market uncertainty, underdeveloped or aging infrastructure, and fragmented regulatory environments. These challenges make it more difficult for variable energy sources like renewables to be adopted at scale. However, as sustainable finance taxonomies and local regulatory frameworks mature, and as governments work to mitigate risks such as currency fluctuation and supply chain disruptions, these markets are expected to become more attractive.
The Next Frontier: Big Barriers, Vast Opportunities
Africa and South Asia, despite accounting for less than 10% of global energy consumption in 2023, are poised to drive future energy demand as their populations urbanize and industrialize. Yet, one in ten people globally, about 750 million, still lack access to electricity at home. Unlocking investment in these regions is not just an economic imperative, but a climate and social priority.
Sustainable finance taxonomies are being developed globally to help define and standardize green and transition finance, providing frameworks for assessing the environmental credentials of companies and supporting new reporting requirements. These initiatives are expected to further catalyze investment flows into emerging and developing markets.
Outlook: Private Equity’s Role in the Next Phase of the Energy Transition
Looking ahead, the global energy transition will remain one of the defining investment themes of the coming decades. According to BloombergNEF, annual investment needs to nearly triple from current levels to meet net zero targets by 2050, requiring not only more capital but smarter, more strategic deployment.
As highlighted by the International Energy Agency (IEA), energy efficiency, renewables, and grid modernization will continue to attract the lion’s share of investment. This is consistent with recent findings on investor sentiment: energy efficiency (including electrification) is considered the most attractive area for investment in the next two years (36%), followed by renewable and low-carbon energy (34%), and transport and related infrastructure (32%). Other emerging areas gaining traction include critical minerals, energy storage, and carbon capture and storage, underscoring a broadening of investment interest across the energy value chain.
Recent market trends reinforce this momentum. Supply chain pressures have eased, contributing to falling prices for key materials such as lithium, cobalt, and nickel. Additionally, the cost of solar panels is now at record lows, to the point where their affordability is driving unconventional applications, like garden fencing in parts of Europe.
Private equity is uniquely positioned to drive this next phase. With its appetite for risk, flexible capital, and operational expertise, PE can accelerate the commercialization of breakthrough technologies and help bridge the gap between innovation and large-scale deployment. As regulatory frameworks mature and sustainable finance taxonomies become the norm, new opportunities will arise in both established and emerging markets.
However, success will depend on forging strong public-private partnerships, navigating regulatory complexity, and ensuring that investments deliver both financial returns and measurable climate impact.
Emerging markets, in particular, represent both a challenge and an opportunity. While only 15% of global clean energy investment currently flows to these regions (BloombergNEF), their rapid urbanization and industrialization will drive future energy demand. Unlocking this potential will require targeted de-risking mechanisms, robust policy support, and creative financing solutions, areas where private equity can play a catalytic role.
In summary, the energy transition is at a critical juncture. Private equity, by leveraging its strengths in capital allocation, risk management, and value creation, can help shape a more sustainable, resilient, and inclusive global energy system.
Case Study: BlackRock & Global Infrastructure Partners (GIP) – Creating the World’s Largest Energy Transition Infrastructure Platform
Context and Scale
In January 2024, BlackRock, the world’s largest asset manager, announced the acquisition of Global Infrastructure Partners (GIP) for approximately $12.5 billion (in a mix of cash and stock). This transaction is one of the largest in private equity and infrastructure history, instantly creating the world’s largest infrastructure and energy transition investment platform, with over $150 billion in assets under management (AUM) focused on renewables, power grids, energy storage, hydrogen, and carbon capture.
Investment Details
Transaction Value: $12.5 billion (cash and stock)
Combined AUM: Over $150 billion dedicated to infrastructure and energy transition assets
Global Reach: Investments span more than 40 countries, with flagship projects in offshore wind (UK), solar parks (US), and transmission assets in Latin America and Asia.
Impact and Results
Scale and Reach: The new platform can finance and manage some of the world’s largest energy transition projects, including gigawatt-scale renewables, green hydrogen, and smart grid infrastructure.
Returns: GIP’s infrastructure funds have historically delivered net annual returns above 12%
Growth: In 2023 alone, GIP invested over $10 billion in clean energy and energy transition projects, including major stakes in offshore wind farms and hydrogen assets.
Decarbonization: The assets managed by GIP and BlackRock are estimated to avoid more than 30 million tons of CO₂ emissions annually, according to their sustainability reports.
Sector Leadership: The combined entity leverages BlackRock’s global capital base and GIP’s operational expertise, positioning it as a leader in financing and scaling the global energy transition.
Strategic Initiatives
Platform Effect: The combined scale allows for investment in larger, more complex projects and helps mitigate regulatory and execution risks through geographic and sectoral diversification.
Financial Innovation: By merging BlackRock’s institutional capital with GIP’s real assets know-how, the platform can structure innovative financing solutions to accelerate the energy transition.
Global Impact: This transaction demonstrates private equity’s ability to mobilize massive capital flows into green infrastructure, with tangible climate and social benefits worldwide.
Lessons for Private Equity
Scale Matters: Large-scale platforms can drive down costs, access better deal flow, and manage risk more effectively than smaller players.
Catalyst for Change: Private equity, when combined with global asset management, can be a catalyst for the rapid deployment of clean energy and infrastructure at unprecedented scale.
Sustainability and Returns: The deal underscores that strong financial returns and sustainability impact can go hand in hand in the energy transition.
Sources and References:
Energy transition investment outlook 2025: key insights and analysis
https://assets.bbhub.io/professional/sites/24/951623_BNEF-Energy-Transition-Trends-2025-Abridged.pdf
Energy transition investment outlook 2024: opportunities and challenges
Five essential lessons for energy transition in 2025
Global energy transition investment: current status and future projections
Mapping the future: energy transition investment outlook for 2025 and beyond
Responsible investing in infrastructure: strategies and impact
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