Convergence of renewable energy and urban landscapes, symbolizing the energy transition.

Decoding the Energy Transition: How Business Models and Financing are Converging

Avery Sinclair in Climate & Environment August 2025 • 3 min read.

"Navigating the Crossroads: Innovative Finance and Business Models Powering the Future of Energy"

The energy sector is undergoing a seismic shift, driven by technological advancements, evolving consumer behaviors, and pressing environmental concerns. Traditional infrastructure financing models are struggling to keep pace with this rapid transformation. To bridge the infrastructure gap and foster sustainable growth, a convergence of innovative business models and long-term financing strategies is crucial.

Across Latin America, cities face increasing pressure on energy and urban services, compounded by regulatory frameworks that may be inadequate to address current challenges. The rise of smart city concepts and the need for extensive infrastructure projects highlight the urgency of securing adequate investment. However, neither public funds nor traditional Public-Private Partnerships (PPPs) alone can provide all the answers.

This article examines how emerging technologies, such as the electrification of transport, decentralized power systems (DERs), and grid digitalization, are disrupting established energy models. These trends blur the lines between producers, distributors, and consumers, necessitating new approaches to regulation, investment, and value creation.

Emerging Business Models and Value Capture in the Evolving Energy Market

Convergence of renewable energy and urban landscapes, symbolizing the energy transition.

The energy sector is no longer defined by the traditional, linear model of generation, transmission, and distribution. Instead, new business models are emerging, driven by market disruptions and technological advancements. These models focus on:

To fully understand how emerging business models are capturing value, it's essential to address the following key questions:

Which business models and players are emerging in response to market disruptions?
What policies and regulations are needed to enable and guide the market effectively?
How can regulators adapt to ensure value creation for all stakeholders?
How can long-term financing challenges be addressed to support new energy initiatives?

Traditional infrastructure investors, like pension funds and institutional investors, seek long-term, stable returns. However, the high-risk perception in some regions can hinder their ability to attract capital for network industries. The shift toward decentralized energy conflicts with conventional asset-based business models, which rely on agreed costs of assets, debt, and equity. It's critical to explore alternative financing structures and innovative approaches that align with the evolving energy landscape.

Adapting to the New Energy Ecosystem

The energy industry is in a state of constant flux, driven by technological advancements and evolving consumer needs. By embracing new business models, adapting regulatory frameworks, and fostering innovative financing approaches, we can navigate the energy transition successfully and unlock new opportunities for growth and sustainability.

About this Article -

This article was crafted using a human-AI hybrid and collaborative approach. AI assisted our team with initial drafting, research insights, identifying key questions, and image generation. Our human editors guided topic selection, defined the angle, structured the content, ensured factual accuracy and relevance, refined the tone, and conducted thorough editing to deliver helpful, high-quality information.See our About page for more information.

This article is based on research published under:

DOI-LINK: 10.1177/1783591718784743, Alternate LINK

Title: The Convergence Of Business Models And Long-Term Financing In The Energy Transition

Subject: Management Science and Operations Research

Journal: Competition and Regulation in Network Industries

Publisher: SAGE Publications

Authors: Joisa Dutra, Antonio Barbalho

Published: 2017-09-01

Everything You Need To Know

What are the key drivers behind the shift in the energy sector?

The energy sector is undergoing a major shift due to technological advancements, changing consumer behaviors, and increasing environmental concerns. These factors are pushing the sector away from traditional models. The electrification of transport, decentralized power systems (DERs), and grid digitalization are some of the specific technologies that are disrupting established energy models. These disruptions necessitate new approaches to regulation, investment, and value creation.

Why are traditional financing models insufficient for the current energy transition?

Traditional infrastructure financing models are struggling to keep pace with the rapid transformation in the energy sector. The convergence of innovative business models and long-term financing strategies is crucial because traditional models, such as those used for Public-Private Partnerships (PPPs), are not sufficient to address the infrastructure gap. The shift towards decentralized energy conflicts with conventional asset-based business models. The high-risk perception in certain regions can also hinder attracting capital from traditional investors, like pension funds and institutional investors, who seek long-term, stable returns.

How do emerging technologies impact the traditional energy model?

Emerging technologies like the electrification of transport, decentralized power systems (DERs), and grid digitalization are significantly disrupting the traditional, linear energy model. These technologies blur the lines between energy producers, distributors, and consumers. This disruption necessitates new approaches to regulation, investment, and value creation. The focus is shifting away from the traditional model of generation, transmission, and distribution, to new business models.

What are some of the challenges faced in financing new energy initiatives, and how can they be addressed?

One of the main challenges is attracting long-term financing for new energy initiatives. Traditional infrastructure investors, like pension funds and institutional investors, often seek long-term, stable returns, but they might perceive higher risk in some regions, limiting their investment. To address this, alternative financing structures and innovative approaches must be explored. These must align with the evolving energy landscape, which includes the use of decentralized power systems (DERs).

How can the energy sector successfully navigate the energy transition and unlock new opportunities?

The energy sector can successfully navigate the energy transition by embracing new business models, adapting regulatory frameworks, and fostering innovative financing approaches. By exploring the convergence of business models and long-term financing strategies, the sector can drive investment and address challenges. Furthermore, it's crucial to understand how emerging technologies like the electrification of transport, decentralized power systems (DERs), and grid digitalization are changing the industry. Adapting to these changes is key to unlocking new opportunities for growth and sustainability.