Everyone funds generation. Almost nobody funds the substations, cabling and storage that make it work.
There is no shortage of capital for generation. Wind and solar projects of any reasonable size have a queue of funds willing to look at them, and the pricing shows it.
The middle of the system is a different picture. Substations, cabling, transformers, grid connections, storage siting, the civil works that connect a field of panels to something that can carry the power away — these are financed reluctantly, slowly and at a premium, if at all.
The reasons are structural rather than irrational.
These assets are unglamorous, so they do not fit a fund that has to describe its portfolio to its own investors. They are often owned by contractors and mid-sized industrial firms rather than by project vehicles, which means the credit question is about a company rather than a ring-fenced asset. And their revenue is frequently contracted with a utility on terms that are perfectly solid and completely unlike the power purchase agreements a project financier is set up to read.
The consequence is a bottleneck that shows up as delay rather than as a headline. A generation project is financed in months and then waits years for a connection that nobody would fund.
What we look for in this part of the market is narrower than a generalist would use.
- A contracted counterparty that survives a bad year, which usually means a regulated utility rather than a developer.
- An order book with more than one customer, because a single grid operator is a concentration risk however creditworthy.
- Equipment lead times written into the model rather than assumed away — a transformer ordered today may arrive in two years, and the facility has to survive that gap.
- Management who have delivered this kind of work before, not adjacent work.
It is slower to underwrite than a solar farm and it does not photograph as well. It is also where a great deal of the actual transition will be decided, and where a business with a real order book can still find that nobody will fund the working capital behind it.
Those are the files we want to see.