Energy security, not climate policy, is now driving institutional capital into European clean power and grid infrastructure, says NTR’s Roger Pim
While Canadian pension funds have historically been overweight in the US, one infrastructure specialist believes the combination of political stability and regulatory predictability is now steering institutional capital toward Europe.
What has shifted in the past year, says Roger Pim, is the driver. Where climate policy once led the push, energy security has now overtaken it.
“[With] all the trouble in the Middle East, the war in Iran, energy prices have suddenly made governments in Europe realize we don’t have any domestic or significant deposits of fossil fuels,” says Pim, managing director, strategy and capital formation at NTR, a Dublin-based specialist renewable energy asset manager. “Europe’s main opportunity is clean power. It’s cheapest, fastest to put in place.”
According to Pim, Asia remains too early-stage for most allocators. Europe, by contrast, offers a structural advantage: 29 countries generating thousands of smaller, country-level projects rather than a handful of mega-deals, giving investors better-sized entry points. Clean power and its associated infrastructure account for roughly two-thirds of the European market.
Electrification of transport, heating, and data centres requires vast amounts of capital, he adds. Not just for power generation but for the grid infrastructure that connects it.
“That sort of energy security, not relying on Russian gas or Middle Eastern oil and gas, is absolutely fundamental,” says Pim. “So, that's creating a really strong tailwind. But as an investment, the thing about infrastructure is you’ve got that long-term thematic behind you.”
European infrastructure’s regulatory edge
On a risk-adjusted basis, Pim contends European returns have been more stable and more predictable than their North American equivalents, noting the key difference is there’s materially less political risk or regulatory change, which leads to stronger downside protection. He pointed to the structural contrast between Europe’s regulatory mechanisms and the US model, which has leaned more heavily on tax credits and policy instruments that shift with administrations.
“Even if you look at the regulatory environment, Europe has favored a much more sort of predictable, stable mechanism, whereas the US is quite often, it’s more been around tax credits and other things as well,” he says.
To that end, Pim breaks the European infrastructure market into three layers based on where in the project lifecycle an investor enters, noting the returns shift accordingly at each stage.
Batteries and hybrid projects lead European infrastructure
Operational assets, which include existing wind farms, solar installations, batteries, and transport infrastructure, are in high demand but tightly priced, Pim notes. Returns at that end of the spectrum sit around 8 to 10 per cent, with predictable cash flows but limited upside. Much of the value creation there relies on financial engineering: buying at one price, applying leverage, and selling at a higher one.
But Pim emphasizes how the economics improve for investors willing to build. Those with the technical teams to develop new batteries, wind farms, grid systems, or transmission infrastructure can capture a development premium that pushes returns into the mid-teens.
Moving even further upstream into early-stage project planning and permitting unlocks additional value. He underscored that this doesn’t necessarily carry higher risk – provided the investor has the right expertise – but it does demand a specialised skill set that generalist allocators typically lack.
On sectors, battery storage stands out. Pim believes hybrid projects that pair solar or wind generation with on-site batteries are gaining traction across the continent, allowing operators to store energy during periods of high production and release it when demand and prices peak.
Looking across the geographic zone, however, the picture varies. For example, the UK and Germany have the most mature battery markets and are therefore the most competitive, while the Nordic countries offer earlier-stage opportunities driven by high renewable penetration and volatile pricing, Pim noted.
Solar is oversupplied in parts of southern Europe, particularly Spain, making Northern European markets or hybrid configurations more appealing. Wind remains jurisdiction-dependent, with attractiveness shifting from one country to the next based on local regulatory and market conditions.
Building European infrastructure assets, not just buying them
Yet, while Canada’s Maple Eight and their peers have spent decades building infrastructure expertise through independent investment offices, knowledge that can be applied at home just as readily as abroad, Pim argues the challenge in Europe is operational. After all, each of the continent’s 29 countries operates under a distinct legal system, regulatory framework, and language, and the most attractive deals tend to sit at the country or regional level.
“It’s not enough having one office in London,” Pim says. “You really need that sort of local knowledge and presence.”
That fragmentation also explains the sizing mismatch, he suggests. Most Canadian pension funds have concentrated on large-cap transactions worth $200 million or more, competing directly with sovereign wealth funds and mega infrastructure vehicles.
Why European infrastructure demands technical depth, not financial engineering
But that end of the market is crowded and risk-adjusted returns are compressing. The bulk of European deal flow – roughly 80 to 90 per cent of transactions – falls in the $50 million to $100 million range, he notes.
“The real challenge for Canadian investors in Europe is being able to find ways to tap into that small to mid-market, finding local partners that they can work with,” he says, adding “capturing some of the value chain in the development and ready-to-build phase, not just buying operational assets,” is equally important.
For Canadian pension funds looking to diversify into European infrastructure, Pim underscored that having a financial background isn’t enough. He makes the case that developing relationships with local partners who have deep technical knowledge – not just language skills – is essential, and the track record across global pension funds shows that infrastructure deals can go wrong without the right expertise on the ground.
“Infrastructure is not a simple financial investment,” he says. “It does require very specific expertise. But if you have that expertise, you can generate really attractive risk-adjusted returns.”
