Challenges of Investment in Infrastructure Assets

Investing in infrastructure assets involves significant challenges primarily due to the volatility of energy prices and the inherent uncertainty associated with returns. Investors often face a stark contrast between occasional high returns stemming from market spikes and the pervasive risks that lead to lower profitability most of the time. This unpredictability makes it difficult to present a viable case to investment committees, as such committees typically prioritize stability and low risk. Investors seek smoother revenue profiles rather than erratic fluctuations. Additionally, risks such as development, permitting, construction, and interconnection add layers of complexity to investment propositions. To mitigate these challenges, there is a growing need for mechanisms that provide revenue stabilization, allowing investors to exchange volatile cash flows for more predictable outcomes, which ultimately makes infrastructures investments more appealing in a turbulent market environment.