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

Explainer: Infrastructure finance (transmission, storage, water) — a practical primer for teams that need to ship

A practical primer: key concepts, the decision checklist, and the core economics. Focus on duration, degradation, revenue stacking, and grid integration.

In 2025, global grid investment reached $470 billion for the first time in history, according to BloombergNEF—yet the International Energy Agency warns this must nearly double to $800 billion annually by 2030 to meet net-zero targets. Meanwhile, the world faces a $7 trillion water infrastructure funding gap by 2030, with U.S. utilities alone confronting a $194 billion annual shortfall. Energy storage deployment surged to 92 GW globally in 2025, a 22.7% increase over 2024, while 1,650 GW of renewable generation sits in interconnection queues awaiting grid connections. These numbers reveal both the unprecedented scale of capital flowing into infrastructure and the yawning gap between current investment and what climate targets demand. For teams building products, services, or platforms in this space, understanding infrastructure finance is no longer optional—it's the foundation upon which every project timeline, partnership, and go-to-market strategy must be built.

Why It Matters

Infrastructure finance for transmission, storage, and water represents the essential backbone of the energy transition and climate adaptation. Without adequate transmission capacity, renewable energy projects cannot deliver electrons to customers. Without storage, intermittent solar and wind generation cannot provide reliable baseload power. Without modernized water systems, communities cannot adapt to intensifying droughts, floods, and contamination challenges.

The financial stakes are staggering. Global clean energy investment exceeded $2.3 trillion in 2025, with grids and storage absorbing $483 billion of that total (BloombergNEF, 2026). The U.S. Infrastructure Investment and Jobs Act allocated $550 billion over five years, enabling 66,000+ projects across all 50 states by late 2024 (White House Infrastructure Report). Yet infrastructure investments remain constrained by permitting delays, supply chain bottlenecks for critical components like transformers and cables, and the poor financial health of utilities in emerging markets.

For product teams, these dynamics create both opportunity and risk. Projects with robust financing structures can scale rapidly; those without face multi-year delays or outright failure. Understanding the mechanisms—from green bonds and blended finance to project finance and public-private partnerships—determines whether a climate solution reaches market or languishes in development.

Key Concepts

Capital Expenditure (CapEx) vs. Operating Expenditure (OpEx)

Infrastructure projects are dominated by upfront CapEx: the cost of building transmission lines, battery storage facilities, or water treatment plants. A typical utility-scale battery storage project requires $200–400 per kWh in capital costs, while high-voltage transmission lines can exceed $3 million per mile. OpEx—ongoing maintenance, staffing, and consumables—typically represents 1–3% of asset value annually for grid infrastructure and 3–6% for water systems.

Revenue Stacking

Modern infrastructure assets rarely depend on a single revenue stream. Battery storage systems, for example, may earn income from energy arbitrage (buying low, selling high), frequency regulation services, capacity payments, and transmission deferral contracts. The ability to "stack" multiple revenue sources dramatically improves project economics and bankability. Projects achieving 3+ revenue streams typically demonstrate 15–25% higher internal rates of return than single-revenue counterparts.

Duration and Degradation

For storage assets, duration (hours of discharge at rated capacity) and degradation (capacity loss over time) fundamentally shape financial models. Lithium-ion batteries typically lose 2–3% capacity annually, while emerging technologies like iron-air or flow batteries offer lower degradation but higher upfront costs. Water infrastructure faces analogous challenges: distribution pipes experience 15–25% water loss in aging systems, and treatment facilities require capital-intensive upgrades every 20–30 years to meet evolving quality standards.

Blended Finance and De-risking Instruments

Public-sector capital increasingly catalyzes private investment through blended finance structures. First-loss tranches, credit guarantees, and concessional loans reduce risk for commercial investors. The World Bank approved $19.6 billion in water-related financing in 2024, with $14.4 billion directed to low- and middle-income countries (World Bank Water Security Report, 2024). These instruments are essential in markets where infrastructure projects cannot achieve investment-grade credit ratings on their own.

Interconnection and Grid Integration

Perhaps no bottleneck matters more than grid interconnection. The U.S. interconnection queue contains 1,650 GW of generation projects—more than the entire installed capacity of the nation. Average wait times now exceed 5 years, with costs for transmission upgrades often equaling 50–100% of generation project CapEx. Teams developing distributed energy resources or behind-the-meter solutions should model interconnection timelines as critical path constraints.

What's Working

Unprecedented Private Capital Mobilization

Private infrastructure funds raised $134 billion in the first half of 2025 alone, matching the H1 2022 high watermark and exceeding all of 2024 (Hyde Park Capital, 2025). Major asset managers including Brookfield Infrastructure Partners and BlackRock's Global Infrastructure Partners are deploying billions into transmission, storage, and data center power infrastructure. Brookfield's 2025 capital recycling program realized $3.1 billion in asset sales—a record—while deploying $1.5 billion into new infrastructure acquisitions.

Energy Storage Cost Curves

Lithium-ion battery pack prices have declined 97% since 2010, enabling storage economics that were unimaginable a decade ago. U.S. energy storage installations reached 12.6 GW in the first nine months of 2025, already surpassing the 12 GW deployed in all of 2024 (Wood Mackenzie, 2025). Corporate funding for energy storage approached $20 billion across 116 deals in 2024, with debt and public market financing growing 65% year-over-year as technology risk perceptions declined.

Federal Policy Momentum

The Inflation Reduction Act's Investment Tax Credit (ITC) for standalone storage, combined with domestic content bonuses, has accelerated project development timelines. Utilities forecast record capital expenditure of $212.1 billion in 2025, with grid reliability, transmission upgrades, and distributed energy resources as priority categories (S&P Global, 2025).

Water Investment Acceleration

Ninety-six percent of water sector decision-makers plan to maintain or increase investments in 2025 versus 2024, with approximately 75% expecting spending increases up to 50% (White & Case Currents of Capital Report, 2025). Infrastructure funds now match public sector water investment at $1.3 billion each, signaling growing private appetite for a traditionally public-dominated sector. New York State's record $2.2 billion investment in water infrastructure in 2024 demonstrates what scaled public commitment can achieve.

What's Not Working

Permitting and Interconnection Bottlenecks

The average U.S. transmission project now requires 10+ years from conception to operation, with permitting representing the majority of that timeline. Only 14% of projects entering interconnection queues ultimately achieve commercial operation. These delays strand capital, increase costs, and force developers to abandon otherwise viable projects. Despite bipartisan acknowledgment of the problem, permitting reform has advanced slowly at the federal level.

Water Infrastructure Funding Gap

While investment sentiment is positive, structural funding gaps persist. The U.S. water utility sector faced a $110 billion funding gap in 2024—nearly 60% of utilities' overall spending needs (McKinsey, 2024). Federal funding has declined from 47% of water infrastructure spending in 1981 to just 7% in 2021. IIJA funding of approximately $8 billion annually provides only temporary relief, with reauthorization uncertain beyond 2026. Globally, blended finance for water and sanitation represents just 5% of transaction volume and less than 1.5% of mobilized commercial finance.

Emerging Market Utility Creditworthiness

In many developing economies, utilities cannot achieve investment-grade credit ratings due to inadequate tariffs, political interference, and currency risks. Budget execution rates for water infrastructure globally average only 72%—the sector cannot spend all allocated funds due to capacity constraints. These structural barriers limit private capital deployment precisely where infrastructure needs are greatest.

Supply Chain Constraints

Lead times for high-voltage transformers have extended to 2–4 years, creating binding constraints on transmission project timelines. Specialized cables, switchgear, and grid control equipment face similar bottlenecks. While domestic manufacturing incentives are expanding capacity, supply-demand imbalances will persist through at least 2027.

Key Players

Established Leaders

Brookfield Infrastructure Partners operates a globally diversified infrastructure portfolio with $145 billion in assets under management spanning utilities, transportation, midstream energy, and data infrastructure. Their transmission assets include over 12,000 km of high-voltage lines across Brazil, Chile, and India, with recent capital recycling demonstrating 45% IRRs on transmission divestitures.

NextEra Energy is the world's largest producer of wind and solar energy, operating through its regulated utility subsidiary Florida Power & Light and its competitive energy subsidiary NextEra Energy Resources. The company has deployed over 30 GW of renewable capacity with integrated storage solutions.

American Water Works merged with Essential Utilities in 2025 to create a $63 billion combined entity serving over 14 million customers, making it the largest publicly traded U.S. water utility. The company invests approximately $2.5 billion annually in infrastructure improvements.

Ørsted transitioned from a fossil fuel-based utility to become the world's largest offshore wind developer, demonstrating how incumbent energy companies can pivot to climate-aligned infrastructure investment.

Emerging Startups

Form Energy raised $405 million in 2024 to commercialize iron-air battery technology offering 100+ hours of duration at one-tenth the cost of lithium-ion for long-duration applications. Their first commercial deployment—a 10 MW system in Minnesota—began operations in 2025.

Gradiant secured $225 million in Series D funding to scale industrial wastewater treatment solutions for semiconductor fabs, pharmaceutical manufacturing, and mining operations—sectors with acute water quality requirements and ability to pay premium pricing.

120Water raised $43 million in growth funding to expand its water safety compliance software platform, addressing municipal utilities struggling to meet PFAS testing requirements under new EPA regulations.

Oxyle secured €15.2 million in seed funding to commercialize PFAS treatment technology using advanced catalytic oxidation, targeting a $2+ billion remediation market driven by U.S. and European regulatory mandates.

Key Investors & Funders

BlackRock Global Infrastructure Partners (GIP) manages over $100 billion in infrastructure assets and led a consortium acquiring Aligned Data Centers for $40 billion in 2025—demonstrating the convergence of energy infrastructure and digital infrastructure investment themes.

Breakthrough Energy Ventures has deployed over $3 billion into climate technologies including 12 water-focused investments. Their investment in Source Global ($130 million) supports solar-powered atmospheric water generation for off-grid communities.

Emerald Technology Ventures manages €1 billion+ in assets with a dedicated €150–180 million Water Fund II targeting water resilience, quality, and conservation technologies across the innovation lifecycle.

The World Bank approved $19.6 billion in water-related financing in 2024, serving as the de facto anchor investor for water infrastructure in low- and middle-income countries where private capital remains scarce.

Sector KPIs

KPITransmissionStorageWaterBenchmark Range
CapEx ($/unit)$2–4M/mile (HV)$200–400/kWh$500–2,000/connectionVaries by region
Project IRR8–12%12–18%6–10%Investment grade >8%
Payback Period15–25 years7–12 years20–40 yearsSector-dependent
Annual Degradation0.5–1%2–3% (Li-ion)1–2% capacityTechnology-specific
Capacity Factor40–60%15–30%70–90%Utilization target
Queue Wait Time5+ years2–4 yearsN/AU.S. average
Revenue Streams1–23–51–2Stacking potential

Examples

1. Brookfield Infrastructure's Brazil Transmission Portfolio

Brookfield Infrastructure built one of Brazil's largest electricity transmission portfolios spanning 1,200+ kilometers of high-voltage lines connecting remote renewable generation to load centers. The company announced in early 2026 the divestiture of this concession at a 45% internal rate of return and 8.5x capital multiple—demonstrating how patient capital deployment in emerging market transmission can generate superior risk-adjusted returns. Key success factors included securing long-term concession agreements, building local regulatory relationships, and maintaining operational excellence to maximize tariff revenues.

2. Form Energy's Minnesota Iron-Air Deployment

Form Energy's partnership with Great River Energy to deploy a 10 MW / 1,000 MWh iron-air battery system in Cambridge, Minnesota represents the first commercial-scale deployment of multi-day storage technology. The system can discharge for 100 hours at rated capacity—compared to 4–6 hours for typical lithium-ion installations—addressing the "dunkelflaute" challenge when solar and wind generation simultaneously decline during multi-day weather events. The project received support from the Department of Energy's Loan Programs Office and demonstrates how blended finance can accelerate first-of-a-kind infrastructure deployments.

3. New York State's Record Water Infrastructure Investment

New York's $2.2 billion water infrastructure investment in 2024—the largest in state history—demonstrates what coordinated public commitment can achieve. Governor Hochul's Clean Water Infrastructure Act channeled funds to over 400 municipal systems for pipe replacement, treatment plant upgrades, and lead service line removal. The program achieved 18-month project timelines from funding commitment to construction start—compared to 3–5 year national averages—through streamlined environmental reviews and standardized procurement contracts. Early results show 25% reductions in water main breaks and 15% improvements in distribution system efficiency.

Action Checklist

  • Map interconnection requirements: Identify grid connection costs, timelines, and upgrade obligations before committing capital to generation or storage projects. Model interconnection as a critical path constraint with 30–50% cost contingency.

  • Structure revenue stacks: Design projects to capture 3+ revenue streams where possible (energy arbitrage, ancillary services, capacity payments, avoided transmission). Model sensitivity to each revenue stream declining 20–30%.

  • Engage blended finance providers: For projects in challenging credit environments, approach development finance institutions, export credit agencies, and climate funds early. First-loss capital or credit enhancement can reduce private capital costs by 200–400 basis points.

  • Secure supply chain early: Place orders for long-lead-time equipment (transformers, specialized cables, treatment membranes) 18–36 months before needed. Consider consortium purchasing to improve priority with manufacturers.

  • Build regulatory relationships: Invest in permitting expertise and early stakeholder engagement. Projects with community benefit agreements and environmental justice commitments increasingly receive expedited review.

  • Model degradation and duration: For storage investments, build asset degradation curves into financial models. For water infrastructure, model system losses and treatment capacity decline to size capital reserves appropriately.

  • Monitor policy windows: Federal ITC extensions, state-level storage mandates, and PFAS compliance deadlines create time-limited opportunities. Build policy monitoring into strategic planning processes.

FAQ

Q: What financing structures work best for first-of-a-kind infrastructure technologies?

A: First-of-a-kind (FOAK) projects typically require blended finance structures combining concessional capital with commercial investment. The Department of Energy Loan Programs Office, state green banks, and development finance institutions provide debt at below-market rates or credit enhancement for technology risk. Strategic corporate offtakers can further de-risk projects through long-term purchase agreements. Form Energy's Minnesota deployment, for example, combined DOE loan support with a utility power purchase agreement. FOAK projects should target 30–40% concessional capital participation to achieve commercial viability, with pathways to reduce this share as technology matures.

Q: How should teams model interconnection risk in project financial models?

A: Interconnection risk requires scenario analysis across three dimensions: timeline (base case, 2-year delay, 5-year delay), cost (estimated upgrades, 50% overrun, 100% overrun), and completion probability (historically ~14% of queue entrants reach operation). Conservative models should assume 24-month delays beyond stated utility timelines and 30–50% cost contingency on network upgrade estimates. Projects with viable behind-the-meter or distributed deployment alternatives should quantify these optionality values. Consider interconnection deposits as at-risk capital until construction actually begins—queue position does not guarantee project completion.

Q: What KPIs do infrastructure investors prioritize when evaluating water sector opportunities?

A: Infrastructure investors focus on regulatory stability (rate-setting predictability), customer concentration (diverse municipal vs. single industrial), capital efficiency (revenue per dollar invested), and ESG metrics (water loss reduction, treatment compliance, lead remediation). Target metrics include: unlevered project IRRs of 8–12%, debt service coverage ratios above 1.4x, and regulatory allowed returns on equity of 9–11%. Investors increasingly require climate resilience assessments covering flood, drought, and extreme heat exposure. Customer affordability metrics matter for social license—water bills exceeding 2.5% of median household income face political pushback and rate case risk.

Q: How is PFAS regulation affecting water infrastructure investment decisions?

A: The EPA's 2024 national drinking water standards for PFAS compounds are driving an estimated $15–30 billion in remediation and treatment capital expenditure over the next decade. Utilities must install granular activated carbon, ion exchange, or advanced oxidation treatment systems—with costs ranging from $500,000 for small systems to $50+ million for large utilities. This regulatory mandate is creating a surge in water tech investment: PFAS-focused startups like Oxyle and 120Water have raised significant capital, and established treatment providers are expanding capacity. For investors, PFAS compliance represents both a liability (for utilities facing remediation costs) and an opportunity (for technology providers and infrastructure funds financing upgrades).

Q: What role do digital technologies play in infrastructure finance?

A: Digital technologies—including IoT sensors, AI-powered optimization, and predictive maintenance—are becoming essential to infrastructure asset valuation. Grid digitalization now represents approximately 12% of transmission and distribution capital expenditure globally. For storage assets, advanced battery management systems can extend useful life by 15–25%, improving IRRs by 200–300 basis points. In water systems, smart metering and leak detection can reduce non-revenue water from 25% to under 10%, directly improving utility cash flows. Investors increasingly require digital monitoring as a condition of financing, both for operational optimization and ESG reporting. Teams building infrastructure software platforms should target integration with asset finance workflows, as digital performance data is becoming integral to refinancing and secondary market transactions.

Sources

Topics

infrastructurefinancecapexscenario analysiscomplianceSEC climate rulesScope 3

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