Private credit’s role in a rapidly evolving energy landscape: An investor’s perspective
Ahead of SuperReturn Energy North America, Brian Wayne, Managing Partner, CurvePoint Capital, gives his take on private credit solutions for the energy transition, factors investors should consider when evaluating opportunities, and much more. If you’re an investor, or someone looking to understand the energy transition and private capital’s role to play, this article might just be for you.
Q: Why are private credit solutions increasingly relevant for the energy transition?
A: Recent data from the U.S. Energy Information Administration (EIA) underscores how quickly power markets are changing: Over the past two years, more than half of newly installed generation capacity in the U.S. has come from renewables, outpacing fossil fuels in several regions. This aligns with the broader shift toward low-carbon energy sources and the growing acceptance that renewable capacity—driven by cost declines in wind, solar, and energy storage—can compete with or exceed fossil fuel capacity in terms of economics. From a private credit angle, this situation creates new financing needs for firms that do not fit traditional asset-backed lending models but require capital to expand grid-scale projects, distributed energy systems, and related technologies.
Q: What factors should investors consider when evaluating decarbonization-focused opportunities?
A: Investors generally watch for proven technology performance, regulatory alignment (including subsidies or favourable policies), and clear revenue drivers—often in the form of long-term contracts or offtake agreements. That said, reliance on policy can be precarious, as illustrated by the “energy abundance” rhetoric in some political circles. One can critique how political promises to sustain cheap fossil fuels can ignore reality: Renewables’ downward cost trajectory and rising demand for clean power suggest these older business models may soon be outmoded. To be clear though, I’m of the view that we need to support our existing energy capacity, optimize infrastructure around it, and at the same time invest tremendously into more rapidly deployable energy mechanisms, queue in solar and battery storage, and efficiency technologies. From an investor’s perspective, the result is a dual emphasis on ensuring near-term cash flow stability (through carefully structured credit) and validating that a business can capitalize on the longer-term trend toward clean power.
Q: What role does ‘energy abundance’ play in shaping a private credit thesis?
A: The concept of “energy abundance” may appear to champion cheap hydrocarbons, but data increasingly shows that solar, wind, and battery solutions are steadily driving down overall energy costs. The notion of an “abundance” fuelled solely by oil and gas is arguably less tenable, especially as EIA figures suggest renewables have captured the lion’s share of new generating capacity in recent years. From a private credit perspective, that opens the door to financing models that take advantage of stable or declining marginal costs for clean energy, supporting companies that can achieve strong profitability once they reach scale.
Q: Grid resilience has become a hot topic—why does it matter to investors?
A: Extreme weather events and the proliferation of intermittent renewables can stress aging grid infrastructure. The grid must be more flexible—capable of balancing variable supply and demand—to maintain reliability. This can involve advanced demand-response systems, battery storage, microgrids, or improved transmission solutions like high-capacity lines and dynamic line ratings. The EIA’s recent data on heightened electricity demand (thanks in part to heat waves and electrification trends) further illustrates why grid resilience technologies are vital. From an investment standpoint, this need translates into credit opportunities that feature long-term contracted revenues or rate-base returns, thus providing secure cash flow while enabling upgrades critical to the energy transition.
Q: How do enablement technologies integrate with renewable generation assets?
A: Having ample renewable generation is only half the battle; we also need software and analytics to optimize the flow of energy across the grid. For instance, advanced sensors, AI-based demand forecasting, and predictive maintenance tools can help operators balance the grid in real time, which is becoming essential as renewable penetration grows. A perspective piece in The Wall Street Journal also highlighted how cheaper renewables—especially solar—have reached a point on the cost curve where integration technologies now dictate the pace of adoption, further emphasizing the importance of solutions like virtual power plants and building automation. Those investing in private credit can find stable, subscription-based revenue models when financing companies that develop or deploy these capabilities.
Q: Early-stage commercialization presents both risk and opportunity. How can private credit help?
A: Innovations in industrial decarbonization, grid monitoring, or advanced battery chemistries may not fit the stringent requirements of traditional lenders. A private credit approach allows more flexible structures, such as milestone-based repayment or asset-backed financing using equipment or intellectual property. Given the robust growth projections for renewables, reflected in EIA and independent analyses, early-commercial-stage companies that successfully scale can offer considerable upside. That said, it’s crucial to protect the downside, often by ensuring collateral or a convertible option that secures the lender if market conditions shift or if technology adoption lags.
Q: Where are the most impactful decarbonization opportunities outside of renewables?
A: While solar and wind often grab headlines, significant decarbonization must also occur in hard-to-abate sectors like steel, cement, shipping, and chemicals. Technologies like green hydrogen and carbon capture face cost and policy obstacles but could be transformative over the coming decade. Private credit can provide financing for pilot facilities or scale-up projects in these areas. The impetus is reinforced by a steady drumbeat of research—like the EIA’s projections showing rising global energy demand and the associated need to drastically cut emissions—that underscores the magnitude of the decarbonization challenge.
Q: How do private credit players differentiate themselves in sustainable finance?
A: Many large institutional investors favour well-known renewable projects or standard green bonds. Private credit managers can step into the gap for mid-sized industrial applications, next-generation energy technologies, or specialized infrastructure upgrades. Their value proposition lies in deep sector expertise, engineering insight, and flexible deal structures. This capacity to underwrite complex or atypical projects can yield higher returns, provided rigorous due diligence is in place. Moreover, being early to finance emerging solutions positions private credit funds to shape or capture new market segments as renewable energy and grid modernization continue to accelerate.
Q: In practice, what might these strategies look like?
A: One could imagine a credit provider that focuses on bridging short-term financing gaps for technology developers deploying advanced battery storage, or for an industrial plant installing carbon capture solutions. Instead of requiring a five-year operating history, they might structure deals with stepwise repayment triggers tied to project milestones or capacity additions. This approach recognizes that the broader market is shifting quickly: as the Latitude Media article notes, the illusions of endless cheap fossil fuel are increasingly contradicted by data on renewable cost curves and energy demand trends. Successfully navigating that gap requires both openness to innovation and a clear-eyed approach to underwriting.
A forward-looking perspective
The march toward cleaner energy is relentless, driven by declining costs and technological gains. At CurvePoint Capital, we invest in structured private credit opportunities that can serve as a crucial funding mechanism along this journey, especially for companies that are high-impact but don’t qualify for conventional lending. Whether funding grid digitization, financing industrial decarbonization, or underwriting the next wave of battery technology, a well-structured private credit strategy can bolster returns while underpinning a more resilient, lower-carbon energy system. Far from being an illusion, the modern vision of “energy abundance” increasingly revolves around scalable and cost-competitive renewables—an evolution that private credit can help accelerate.
