Introduction

As the world shifts toward a low-carbon economy to stem the effects of climate change, decarbonizing the global energy sector will be critical. The clean energy, clean transport, and electricity sectors will likely experience unprecedented growth as demand for conventional, hydrocarbon-based energy wanes. While renewables like wind and solar have so far attracted the most attention from investors seeking to capitalize on this secular trend, we believe electric utilities are a less obvious, underappreciated opportunity that merit closer inspection.

As distributors of power, electric utilities are essential for enabling the energy transition. In the coming decades, trillions of dollars in investment capital will be spent modernizing the grid to incorporate the increasing share of renewables. And critically, because they are regulated entities, electric network utilities offer investors the potential to earn attractive, stable returns for years to come. While renewables and utilities are both energy-transition plays, here’s how, in our view, the two industries stack up from an investment perspective:

The shifting global energy mix 

The world’s energy consumption is changing, with electricity expected to gain significant share of the energy mix over the next two decades, mostly at the expense of…