Sustainability Atlas
Climate Finance & Markets·15 min read··...

Case study: Infrastructure finance (transmission, storage, water) — a leading organization's implementation and lessons learned

A concrete implementation with numbers, lessons learned, and what to copy/avoid. Focus on duration, degradation, revenue stacking, and grid integration.

Global infrastructure investment reached unprecedented levels in 2024-2025, with grid and storage investments topping $470 billion for the first time in 2025 according to BloombergNEF, while water infrastructure alone requires $3.4 trillion over the next two decades in the United States. The convergence of decarbonization mandates, aging infrastructure, and surging energy demand from data centers has created a financing environment where private infrastructure fundraising hit $134 billion in the first half of 2025 alone—matching 2022 highs and surpassing all of 2024. Yet despite this capital influx, transmission line interconnection queues stretch close to a decade, over 70% of transmission assets exceed 25 years of age, and water receives only 3% of total climate finance despite being central to climate adaptation. This case study examines how leading organizations are navigating these challenges through innovative financing structures, strategic partnerships, and technology deployment.

Why It Matters

Infrastructure finance for transmission, storage, and water represents the critical backbone enabling the energy transition and climate resilience. Without adequate transmission capacity, renewable energy projects remain stranded in interconnection queues—currently 1,700 GW of renewable capacity awaits grid connection across 16 European countries alone. Without sufficient storage duration, grid operators cannot bridge multi-day gaps in wind and solar generation. Without modernized water systems, communities face cascading failures as climate change intensifies droughts, floods, and extreme weather events.

The economic stakes are substantial. The American Society of Civil Engineers estimates a $9.1 trillion investment requirement from 2024-2033 to achieve good repair across 18 infrastructure categories, against projected funding of just $5.4 trillion—leaving a $3.7 trillion shortfall. Each dollar invested in water infrastructure generates at least $2.50 in economic output and creates 16 or more jobs per million dollars deployed. In the energy sector, US investor-owned utilities project $1.4 trillion in grid investments from 2025-2030, with transmission spending already tripling since 2003.

The investment thesis extends beyond public goods. Brookfield Infrastructure has delivered 17 consecutive years of distribution increases through disciplined capital recycling, selling mature assets at 3-8.5x multiples while redeploying into higher-growth opportunities. BlackRock's acquisition of Global Infrastructure Partners for $12.5 billion in 2024 created a combined $150 billion infrastructure platform, signaling institutional conviction that infrastructure returns remain attractive through economic cycles.

Key Concepts

Transmission Finance and Revenue Stacking

Modern transmission finance requires understanding multiple revenue streams that extend beyond simple capacity payments. Revenue stacking combines regulated rate-of-return earnings with ancillary service markets, congestion revenue rights, and increasingly, renewable energy credit value capture. The U.S. Department of Energy's Transmission Facilitation Program provides $2.5 billion in capacity contracts and loans to derisk projects, while the Grid Resilience and Innovation Partnerships (GRIP) program committed $2.2 billion in 2024 alone.

European transmission operators face different dynamics. The European Grids Package (December 2025) identified €1.2 trillion in investment needs through 2040—comprising €472 billion for transmission and €730 billion for distribution networks. Cross-border interconnection investment must increase from €2 billion to €5 billion annually by 2030, with 151 GW of additional capacity needed by 2040. The European Investment Bank committed a record €11 billion for energy grids in 2025, nearly tripling 2023 levels.

Long-Duration Energy Storage Economics

Long-duration energy storage (LDES) economics differ fundamentally from lithium-ion batteries optimized for 2-4 hour discharge. Form Energy's iron-air batteries provide 100+ hours of storage at substantially lower cost per MWh for multi-day applications, while Hydrostor's advanced compressed air systems deliver 8+ hours with 50-year asset lifespans. The value proposition centers on grid reliability during extended renewable droughts rather than peak shaving.

Storage degradation profiles significantly impact project economics. Lithium-ion batteries typically degrade 2-3% annually, requiring augmentation investments mid-project-life. Iron-air and compressed air technologies promise lower degradation but lack operational track records at scale. Financing structures increasingly incorporate degradation guarantees and performance insurance to address investor concerns.

Water Infrastructure Finance Challenges

Water infrastructure finance faces unique obstacles rooted in the sector's structure. Municipal water utilities typically operate as regulated monopolies with limited capital market access. Water tariffs cover only 70% of service costs in OECD countries, with public funds covering the remainder. Unlike energy projects with clear offtake agreements, water infrastructure benefits are largely public goods—complicating private investment models.

The sector attracted significant institutional interest in 2024-2025, with 96% of surveyed investors planning to maintain or increase allocations and 30% of organizations deploying over $500 million each. Blended finance structures combining public capital, development finance institution participation, and private investment offer pathways to scale, though water-related blended finance still represents only 5% of transaction volume and less than 1.5% of mobilized commercial finance.

What's Working

Integrated Asset Platforms

Brookfield Infrastructure demonstrates the value of integrated platforms spanning transmission, storage, and water assets. Their portfolio approach allows capital recycling from mature assets into growth opportunities—the Q3 2025 sale of 1,200+ km of Brazilian transmission concession generated $150 million at an 8.5x return, funding investments in data center power infrastructure and compressed natural gas storage. This model provides stable regulated cash flows alongside selective exposure to higher-growth segments.

Government Anchor Investment

Federal and multilateral anchor investments have proven essential for derising first-of-kind projects. Form Energy received $150 million from the DOE's Advanced Energy Manufacturing and Recycling Grant Program, plus state grants totaling $189 million across California, New York, and Maine. Hydrostor secured a $1.76 billion conditional DOE loan commitment for its 500 MW Willow Rock project in California. These public commitments enabled private capital to follow—Form Energy's $405 million Series F in October 2024 came after federal support was secured.

Utility Partnership Models

Strategic utility partnerships reduce offtake risk while accelerating deployment. GE Vernova's investment in Form Energy's Series F came alongside a collaboration agreement for grid integration services. Puget Sound Energy, Great River Energy, and Central Coast Community Energy have all signed long-term purchase agreements for LDES projects, providing revenue certainty that enables project finance at scale.

Sector-Specific KPI Benchmarks

MetricTransmissionStorage (LDES)Water
Typical Project IRR8-12% (regulated)10-15% (merchant risk)6-10% (regulated)
Development Timeline7-12 years3-6 years5-10 years
Asset Life40-60 years20-50 years50-100 years
Annual Degradation<1%0.5-3%<0.5%
Capacity Factor35-65%15-40%80-95%
Revenue VisibilityHigh (regulated)Medium (contracted)High (regulated)
Permitting ComplexityVery HighMedium-HighHigh
Federal Support AvailableDOE TFP, GRIPIRA ITC, DOE loansSRF, IIJA

What's Not Working

Permitting Bottlenecks

Transmission permitting remains the binding constraint on deployment. The National Renewable Energy Laboratory's National Transmission Planning Study found that even optimal investment scenarios require regulatory reform to accelerate permitting from the current 7-12 year timeline. FERC Order 2023 attempts to address interconnection queue management, but state-level siting authority remains fragmented. The 2024 ENTSO-E analysis found €7.2-8.9 billion in annual curtailment costs across Europe due to grid bottlenecks—money lost while projects await connection.

Water Finance Structural Gaps

Despite growing investor interest, fundamental structural barriers limit water infrastructure investment at scale. Developing country governments spend less than 2% of budgets on water (under 0.5% in Africa), while water receives only 3% of climate finance despite being central to climate impacts. The recommendation that one-third of international climate finance target water-related projects remains far from reality. Municipal fragmentation across 50,000+ water utilities in the United States alone creates transaction costs that deter institutional investment.

Technology Risk in LDES

First-of-kind technology deployment carries substantial performance risk. Form Energy's iron-air batteries have demonstrated performance at pilot scale, but the 85 MW Maine project represents a 50x scale-up from the 1.5 MW Great River Energy pilot. Hydrostor's Willow Rock project will be among the largest advanced compressed air installations globally. Financing structures struggle to price novel technology risk, leading to higher costs of capital that undermine commercial competitiveness against mature lithium-ion systems.

Interconnection Queue Dysfunction

Grid interconnection queues have become dysfunctional barriers to clean energy deployment. The average wait time now exceeds 5 years in the United States, with only 14% of projects ultimately reaching operation. Speculative queue positions and inadequate grid planning studies create feedback loops that extend timelines further. FERC reforms are beginning to address these issues, but relief will take years to materialize.

Key Players

Established Leaders

Brookfield Infrastructure manages $188 billion in infrastructure assets across utilities, transport, midstream, and data infrastructure. Their 2025 portfolio includes the largest North American gas storage platform, 1,200+ km of Brazilian transmission, and global water utilities. They achieved $3.1 billion in asset sale proceeds in 2025 while maintaining 6-9% organic growth.

BlackRock Infrastructure operates a $150 billion platform following the Global Infrastructure Partners acquisition. Key investments include $500 million in Recurrent Energy (solar and storage), the Evergreen Infrastructure Fund targeting $1 billion in energy transition assets, and the AI Infrastructure Partnership deploying $100 billion (including debt) for data centers and supporting power infrastructure.

NextEra Energy owns the largest transmission and distribution utility in Florida plus the nation's largest portfolio of wind and solar generation. Their development pipeline exceeds 30 GW, with substantial investment in battery storage co-located with renewable projects.

Emerging Startups

Form Energy (Somerville, MA) has raised $1.2 billion to commercialize iron-air batteries providing 100+ hours of storage. Their West Virginia factory targets 20 GWh annual capacity by 2027, with 14 GWh of projects already announced across utilities in Minnesota, Maine, California, and New York.

Hydrostor (Toronto) raised $520 million for advanced compressed air energy storage providing 8+ hours duration. Their 7 GW development pipeline includes the 500 MW Willow Rock project (California) and the 500 MW Quinte project (Ontario).

Xylem (Washington, DC) has emerged as a leader in smart water infrastructure following its 2023 merger with Evoqua Water Technologies. Their digital solutions for leak detection, treatment optimization, and network management address efficiency gaps that reduce capital requirements.

Key Investors and Funders

U.S. Department of Energy deployed over $16 billion in transmission and storage programs through the Transmission Facilitation Program ($2.5B), GRIP ($2.2B), and loan programs supporting projects like Hydrostor's Willow Rock ($1.76B conditional commitment).

European Investment Bank committed €11 billion for energy grids in 2025 as part of a €100 billion annual clean energy investment target—representing the largest multilateral grid finance commitment globally.

CPP Investments (Canada Pension Plan) has invested in both Form Energy and Hydrostor alongside Brookfield Infrastructure, reflecting pension fund appetite for long-duration infrastructure assets.

Examples

1. Brookfield's Brazilian Transmission Exit

Brookfield Infrastructure acquired Brazilian transmission concessions during the 2015-2016 economic crisis at distressed valuations. Over the subsequent decade, they optimized operations, extended concession terms, and captured value from Brazil's renewable energy buildout. The Q1 2026 sale of 1,200+ km of transmission lines generated $150 million in proceeds at an 8.5x return on invested capital. Lessons learned: patient capital in regulated infrastructure can generate exceptional returns when entry valuations reflect temporary distress rather than fundamental impairment. The exit demonstrates that infrastructure returns compound over decades, rewarding investors who can commit through economic cycles.

2. Form Energy's West Virginia Manufacturing Scale-Up

Form Energy's decision to locate its first commercial factory in Weirton, West Virginia illustrates the interplay between federal incentives, labor availability, and supply chain considerations. The $150 million DOE grant plus state incentives offset first-of-kind manufacturing risk. By late 2025, the factory expanded from 550,000 to 850,000 square feet with 900+ employees. The strategic partnership with GE Vernova provides integration expertise and potential distribution channels to GE's utility customer base. Lessons learned: domestic manufacturing incentives under the Inflation Reduction Act fundamentally altered site selection economics, while strategic corporate partnerships provide validation and market access that pure financial investors cannot offer.

3. Hydrostor's Willow Rock Conditional Loan Guarantee

Hydrostor's $1.76 billion conditional DOE loan commitment for the 500 MW Willow Rock project demonstrates how federal credit enhancement can derisk novel technologies. The 25-year power purchase agreement with Central Coast Community Energy provides revenue certainty, while the compressed air technology's 50+ year asset life matches long-duration infrastructure investment horizons. The project creates 700+ construction jobs and will generate $500 million in local economic impact. Lessons learned: conditional loan guarantees structured as credit support rather than direct subsidy preserve commercial discipline while enabling technologies that would otherwise face prohibitive financing costs.

Action Checklist

  • Evaluate revenue stacking opportunities beyond primary capacity or rate-based returns, including ancillary services, congestion rights, and renewable energy credit value capture
  • Structure federal incentive applications (DOE loan programs, IRA tax credits, state grants) early in project development to establish anchor commitments that attract private capital
  • Develop strategic utility partnerships that provide both offtake certainty and technical validation for novel storage or transmission technologies
  • Model degradation scenarios explicitly in project finance structures, including performance guarantees and insurance products that address investor concerns
  • Engage permitting processes 2-3 years before construction targets, recognizing that regulatory timelines rather than capital availability often determine project schedules
  • Consider platform approaches that enable capital recycling from mature assets into growth opportunities, maintaining portfolio diversification across risk profiles
  • Build blended finance structures for water projects that combine public anchor investment with private capital, recognizing that pure commercial returns are often insufficient

FAQ

Q: How do long-duration storage projects compete with lithium-ion batteries that have lower upfront costs?

A: Long-duration storage (8-100+ hours) addresses fundamentally different grid needs than 2-4 hour lithium-ion systems. While lithium-ion excels at peak shaving and frequency regulation, LDES provides multi-day reliability during extended periods of low renewable generation. The value proposition centers on avoiding transmission buildout and fossil peaker plants rather than direct cost competition. Form Energy's iron-air batteries target levelized costs below $20/kWh for multi-day applications—economically unachievable with lithium-ion at those durations. Utilities increasingly recognize they need both technologies in their portfolios.

Q: What explains the disconnect between strong investor interest in water and the persistent infrastructure financing gap?

A: Three structural factors limit water infrastructure investment despite abundant capital seeking deployment. First, municipal fragmentation across 50,000+ utilities creates transaction costs that exceed project economics for individual investments. Second, water tariffs covering only 70% of costs mean returns depend on public subsidy continuity. Third, water infrastructure benefits (public health, ecosystem services) accrue broadly rather than to project investors, limiting willingness-to-pay for private returns. Blended finance structures that layer public, concessionary, and commercial capital offer the most promising pathway, though scaling these structures remains challenging.

Q: How should project developers evaluate the tradeoff between regulated and merchant revenue models?

A: Regulated transmission and water assets offer lower returns (6-12% IRR) but with high revenue visibility, long asset lives, and limited technology risk. Merchant storage projects can achieve 10-15%+ returns but face capacity market design uncertainty, technology evolution risk, and shorter effective asset lives as markets evolve. Most successful infrastructure platforms maintain exposure to both—using regulated cash flows to support debt service while capturing upside from merchant opportunities. The optimal mix depends on sponsor risk tolerance and access to operational expertise in merchant markets.

Q: What permitting reforms would most accelerate transmission deployment?

A: Three reforms would have outsized impact. First, establishing federal backstop siting authority for interstate transmission projects—currently lacking under the 2005 Energy Policy Act's limited provisions. Second, implementing construction work in progress (CWIP) cost recovery that allows utilities to earn returns during construction rather than only after energization, reducing financing costs. Third, adopting proactive transmission planning that identifies and permits transmission corridors before generation interconnection requests, reversing the current reactive paradigm where transmission follows generation by a decade or more.

Q: How are AI and data center demand reshaping infrastructure investment priorities?

A: Data center electricity demand could reach 12% of U.S. consumption by 2030, fundamentally altering infrastructure economics. BlackRock's $100 billion AI Infrastructure Partnership (with Microsoft, MGX, and others) specifically targets data centers and supporting power infrastructure. This demand surge creates both challenges—extended transmission queues, competition for clean energy—and opportunities. Data center operators increasingly co-invest in dedicated generation and transmission to secure power supply, creating new partnership structures between infrastructure investors and technology companies. Water demands for data center cooling are also emerging as a constraint in water-stressed regions.

Sources

Topics

infrastructurefinanceSEC climate rulestraceabilitybenchmark KPIsopexadditionality

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