When the Texas power market went into a deep freeze earlier this year, it was not the first red-flag event U.S. power and utility markets had experienced. PG&E in California famously experienced its own wildfire-driven problems that resulted in bankruptcy. Utilities in Texas also suffered during the freeze, as prices for fuels skyrocketed. Globally, the story is the same, as more frequent severe weather and natural disasters are putting power and utility markets to the test.

For infrastructure investors who have been accustomed to utilities providing a relatively stable and certain market with reliable returns, these events have them re-evaluating the opportunity in the market.

“COVID and extreme weather has stress tested the utility model,” says Karine Rougé, director, direct infrastructure, with First Sentier Investors. “The lessons and impacts we’ll have to learn are that utilities are not as resilient as we want them to be.”

The utility market