All roads lead to power
Infrastructure investment is vital for the success of the digitalisation and energy transition megatrends. But how intertwined are the two megatrends? And does one depend on the other? PATRIZIA Head of Fund Management Infrastructure Graham Matthews and Head of Fund Management RE-Infra Phoebe Smith consider these questions.
Graham Matthews,
PATRIZIA Head of Fund Management Infrastructure
Phoebe Smith,
PATRIZIA Head of Fund Management RE-Infra
The digital and energy transitions – two of the DUEL megatrends (urbanisation and modern living the others) guiding PATRIZIA’s long-term investment strategy – are unstoppable.
Digitalisation is being entrenched deeper into every facet of society, while the move away from fossil fuels and towards renewables may have its high-profile detractors, but is inevitable as renewable energy is now the lowest cost form of energy production.
The below graph illustrates the rise of one of the most talked-about subjects when it comes to the digital transition: data centres.
Data centres can help unlock the most transformative advances in artificial intelligence (AI) and help meet the ever-growing demand for digital services.
As for the energy transition, global renewable power output overtook coal for the first time in the first half of 2025. Solar and wind continue to lead from the front in this transition, which gives cause for optimism in the journey towards a more sustainable energy mix, wresting control from the traditional finite and environmentally harmful means of energy production. Additionally, more efficient use of solar and wind power is supported by the growth of the global battery storage market, with cumulative energy storage capacity expected to reach 2 terawatts by 2035 – eight times that in 2025.
The interdependency of digital and energy infrastructure
Two separate transition themes, but each relies upon the other: digitalisation relies upon energy sources to power its growth while data insights are essential for benchmarking energy transition progress and enabling the technologies that make renewables a reality and for them to function optimally within energy networks.
Digital technology enables the energy transition operationally with smart grids using sensors and other tools to balance wind and solar generation with demand, AI and forecasting models predicting renewable output, weather and electricity demand, and digital twins can simulate systems to enhance performance. Digital technology also improves energy efficiency through smart buildings, smart mobility tools and industrial optimisation. And digital technology enables electrification and grid decentralisation through EV charging management, off-grid energy distribution such as rooftop solar and batteries, and energy trading markets.
On the other side of the coin, the energy transition enables digitalisation both in terms of renewable energy powering the growth of data centres, AI, cloud computing and telecom networks efficiently and resilient energy networks providing the foundation for smooth-running digital services.
Friction between the two megatrends
While the digital and energy transitions rely upon one another, there are scenarios whereby one weakens the other. For example, if the energy transition doesn’t keep pace with digitalisation then this could increase emissions, strain grids and pull power away from other societal needs in favour of digital aspirations. The two megatrends also rely upon critical minerals and a similar supply chain, which could see competing interests as opposed to collaboration and a concentration of supply in certain markets, which could widen inequality gaps across different markets.
It is therefore imperative to incorporate both considerations when investing in these sectors. The ideal scenario sees clean energy fuelling digital growth, with digital tools optimising energy systems creating more efficiencies driving down costs, increasing adoption and boosting productivity.
Neither can succeed globally without the other. So, this needs to be the foundation when assessing digital and energy infrastructure investment opportunities and what is possible now and in the future.
And when it comes to powering societies, electricity grids play a pivotal role, but are not keeping pace with growth in power generation and the changing nature of electricity markets including the much more distributed and intermittent generation capacity.
Grid spending not keeping pace
As noted in the International Energy Agency’s World Energy Outlook 2025, published in November 2025: ‘Investments in electricity generation have charged ahead by almost 70% since 2015 to reach USD 1 trillion per year, but annual grid spending has risen at less than half the pace to USD 400 billion. This increases congestion, delays the connection of new sources of electricity generation and demand, and pushes up electricity prices.’
So, renewable energy production may be on the rise but energy networks lack the means to effectively manage and distribute this power, leading to waste and inefficiencies.
Batteries and other storage are one solution to avoid wasting energy but cannot solve this alone. In fact, connecting battery storage to the grid is a further challenge for grid operators, and again this comes with new challenges, as batteries are both receiving and injecting electricity from the network.
Insufficient grid capacity and inefficient grid connectivity also stifle the growth of EV charging infrastructure necessary to decarbonise transportation – an essential energy transition area of focus with transport responsible for 30% of global energy demand.
Without government setting the right policies and frameworks, digital and energy transition targets (set at national, continental and global levels) will not be met.
Positive signals in Germany and the UK
Fortunately, change is afoot. Focusing on Germany and the UK – our home market and second largest market, respectively – the appetite to boost digitalisation and the energy transition is strong and being followed by actions.
Domestically, Germany has rapidly expanded its electricity grid capacity in recent years – up to 275 GW in 2023 – while its renewable power capacity is forecast to reach 509.9 GW in 2035.
And investment programmes are well underway in supporting this growth, most notably through the EUR 500 billion infrastructure investment fund set up in March 2025. The fund was enshrined in law in September with detailed plans to follow this year.
From the information shared so far, digital and energy infrastructure are set for a large boost through the fund, with electricity grid modernisation listed alongside renewable energy expansion and data centre investment.
In the UK, the queue of clean energy projects being put on hold due to a lack of grid capacity has prompted action. In November, it was announced that household energy bills would be increased to fund a GBP 28 billion investment into energy grid investment while it was revealed in December that more than 300GW of capacity was removed from the connections queue in the country to make room to deliver on clean energy projects. This followed the June 2025 announcement of the UK’s GBP 725 billion 10-year infrastructure plan, with digital and energy infrastructure investment featuring heavily.
PATRIZIA’s role
At PATRIZIA, we are ready globally to play a role in the digital and energy transitions, using our 42 years of real assets’ investment experience to work with and towards the digitalisation and renewable transitions.
We have an investment track record in data centres, fibre connectivity and smart city technology on the digitalisation, while we have a broad experience in facilitating the energy transition, from investments in solar and wind to bio-LNG and district heating solutions, and battery storage and EV charging stations through to energy-from-waste platforms and even hydrogen storage. In particular, we take a holistic view of our investments and look to bring digital and energy expertise to any investment opportunity.
We are invested globally and know that the right digital and energy infrastructure solutions have to meet the needs in different markets. Take energy infrastructure, for example. Australia’s energy transition is mature so battery storage investments suit that market, while in the Philippines, the energy market is more nascent and rooftop solar investment makes a strong case for investment. In Italy, the market conditions suit bio-liquefied natural gas (LNG) investment, while district heating investment is an area of greater focus in the Nordics.
And while we have the know-how and expertise in infrastructure – primarily focused on mid-market, scalable opportunities – we also have a wealth of real estate knowledge across the business, which we have and will continue to utilise for even better outcomes. We see this trend growing as the merging of real estate and infrastructure becomes more common in realising the potential of real asset investment – what we refer to as RE-Infra where the complementary elements of both asset classes can be consolidated for even better, holistic outcomes for our investors.
There isn’t just one solution in realising the potential of digitalisation and the energy transition – a variety of solutions are required with governments and investors working together to invest in and grow these industries. But in 2026, we’ll be keeping a close eye on grid and generation capacity which needs to happen to turn the ripples of progress into waves.
PORTFOLIO INSIGHTS
Pioneering technology reducing water wastage in the UK
PATRIZIA portfolio company Connexin – a smart technology firm in the UK – uses smart sensors to detect leaky pipes, which can help prevent water wastage at a staggering scale; more than a trillion litres of water was lost by water companies in England and Wales in 2024 for example. A fundamental infrastructure requirement, the technology has been rolled out by several regional water companies, helping them operate more efficiently and limit the impact on taxpayers’ bills. This same approach can also be applied to leak detection, waste water monitoring and other smart water management solutions.
More sustainable energy generation in the Nordics and Italy
PATRIZIA manages several businesses in the Nordics and Italy which handle more than 1.5 million tonnes of material (e.g. waste) annually, recovering around 2,000 GWh of energy per year for district heating, electricity generation and industrial power. The company adopts a mid-market buy-and-build strategy, with this put into practice across leading European platforms, such as SAREN Energy and Greenthesis, which help to advance the circular economy.
