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as for higher returns. It might be oil and gas vessels which are transitioning to maintenance for offshore wind farms. Even in the battery storage sphere, some infrastructure investors are going straight to the optimisers who do not own the assets but run the revenue operations and take a share of revenues. So you can participate in investments adjacent to the renewa- bles build-out and the energy security side of things. Lloyd: We are seeing more interest in transition assets than tra- ditional renewable assets. It is seen as the more exciting part of the space. Romashkan: It is due to return compression. We have seen returns in the renewable space come down to levels where the underlying risk of owning a wind farm can make it uneconom- ical in some cases.


Long-term pension funds have to be selective on where they come in. When we were doing the Hornsea One deal [a wind farm off the Yorkshire coast] it was a syndicated play, so we did not have to compete on price.


There are certain characteristics you need to pick out rather than everyone piling in, which makes it too competitive.


Vanstone: Even within the UK contract for difference (CfD) regime, risk allocations are shifting. We have gone from the first allocation round where there was little negative price risk, so you get your CfD support in most circumstances, to one where if the day ahead price is negative then that support has gone. You need to forecast that in terms of impact on returns, which is difficult. Then you need the ability to switch off, so you are not taking on negative revenue and cost. Dusch: What is important to consider when talking about the energy transition is the word “transition” itself which also cov- ers the transformation of assets. Equally, within the renewable energy sector, we now have assets reaching a 15-year lifespan, begging the question of whether to upgrade them or decom- mission them with the related impact. Regarding the transformation of brownfield assets, utilities are an example of where we are seeking to decarbonise existing infrastructure. This is an important part of implementing the energy transition. The EU’s “Fit for 55”, for example, seeks a 55% decrease in C02


December – January 2023 portfolio institutional roundtable: Infrastructure 15


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