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Utilities and energy producers face a daunting challenge: meeting huge new electricity demand in an affordable and reliable manner without reversing progress on cutting carbon emissions or raising customer bills. Electricity providers also face major constraints, from limited availability of key equipment and raw material—natural gas turbines are booked through the decade—to the mammoth task of modernizing and expanding aging grid infrastructure. In the short term, solar and other clean energy sources remain the cheapest and quickest to build, but they face political headwinds in some regions and require significant accompanying investment in energy storage and can take time to connect to grids.
Key takeaway: The friction between AI and energy constraints presents an opportunity for a new asset class of “sustainable digital infrastructure”—potentially rewarding firms that deliver efficiency and reliability within constrained grids.
Climate Adaptation – Weathering the Storms
Worsening physical climate events globally translate directly into financial costs (see Display 2) that affect valuations across real estate assets, electric utilities, insurance and other sectors. In real estate, developers and asset owners are integrating climate adaptation measures—from flood-resilient materials to elevated foundations and enhanced water systems—into new builds and retrofits. These measures can also create investment alpha by reducing stranded asset risk and operational expenses while attracting greater leasing demand as climate protected assets can be more appealing to tenants.
