Odd Lots

How to Make Money From the Booming Demand for Energy

January 15, 2026

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  • The massive, accelerating global energy demand, driven by population growth and economic activity (despite efficiency gains), is creating structural, long-lasting opportunities in energy and infrastructure investing, moving beyond the cyclical nature of the past. 
  • The investment landscape for utilities is highly dispersed, where data center integration can either strain affordability for existing ratepayers or, in specific regulatory environments, actually lower bills by shifting capital expenditure burdens onto the new high-consumption customers. 
  • Investor reluctance, stemming from past capital expenditure destruction (like in shale), is keeping valuations low for many essential 'picks and shovels' companies in natural resources and infrastructure, even as secular demand trends suggest higher, less volatile returns are possible. 

Segments

Infrastructure and Tech Disruption
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(00:01:03)
  • Key Takeaway: The integration of technology, like AI cooling needs, introduces volatility risk to traditionally stable infrastructure investments.
  • Summary: A comment regarding future data center cooling efficiency suggests that rapid technological upgrades can fundamentally change the investment equation for infrastructure tied to tech. Historically stable assets like toll roads and airports face new uncertainty due to this technological linkage. The build-out supporting AI also raises questions about whether cash flows will justify current investment spending.
Guest Introduction and Firm Focus
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(00:04:24)
  • Key Takeaway: Cohen & Steers focuses on real assets and alternative income, managing infrastructure exposure across communications (towers, data centers), utilities, transportation, and midstream energy.
  • Summary: Tyler Rosenlicht manages global listed infrastructure and natural resource equities for Cohen & Steers, a long-only asset manager specializing in real assets. Their infrastructure view covers communication assets like cell towers and data centers, utilities (electric, gas, water), transportation (tolls, ports, rails), and energy midstream pipelines. These areas are currently experiencing a surge in attention after a decade of being considered ‘old economy’ assets.
Utility Capital Needs and Dispersion
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(00:06:19)
  • Key Takeaway: Massive capital requirements in the utility sector are creating wide dispersion in outcomes, where some utilities face affordability crises while others benefit significantly from attracting data centers.
  • Summary: The acceleration of utility capital expenditure (CapEx) is now causing affordability problems for some utilities, leading to political challenges regarding customer bills. Conversely, inviting data centers into a service territory can lower bills for existing ratepayers if the data center consumes the new power generation capacity. This divergence means investment outcomes across the utility sector are wider than ever before.
Data Centers Impacting Utility Bills
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(00:07:48)
  • Key Takeaway: Data centers can lower residential utility bills by consuming power that was otherwise baked into the rate base calculation for existing customers.
  • Summary: In a simplified utility model, if a utility doubles its rate base without adding customers, costs can double for existing ratepayers. When a data center consumes power that was previously allocated to ratepayers, those ratepayers are no longer burdened by that cost in their monthly bill. The feasibility of this benefit depends heavily on local regulation, commission structure, and the utility’s existing generation and asset base.
Investment Research Process
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(00:11:31)
  • Key Takeaway: Cohen & Steers employs a boots-on-the-ground, fundamental research process, utilizing sector specialists to gain unique insights into local politics and regulation for infrastructure investments.
  • Summary: The firm maintains a large team of analysts who specialize in sectors like utilities to understand local politics and regulation, often touring assets to find unique insights. They characterize themselves as ’thematically informed relative value investors,’ seeking underappreciated and underpriced themes. As public markets investors, their opportunities arise from constant research identifying securities positioned well for the next one to five years.
Cyclicality vs. Secular Winners
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(00:15:32)
  • Key Takeaway: The natural resources sector is shifting from being purely cyclical to exhibiting secular growth characteristics due to consolidation leading to an ’era of scarcity’ in essential commodities.
  • Summary: In natural resources (energy, metals, agriculture), consolidation has reduced the number of key players, leading to persistent above-average returns and reduced volatility compared to a decade ago. The view is that the world has entered an ’era of scarcity’ where supply cannot easily meet growing demand. While cycles will always exist, the current secular growth and reduced competition suggest a longer period of favorable conditions.
Overcapacity and Infrastructure Cycles
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(00:17:50)
  • Key Takeaway: Overcapacity is an unavoidable outcome in commodity cycles, but infrastructure assets, often monopolistic, require investors to actively sidestep excessive market expectations rather than avoid the risk entirely.
  • Summary: The cure for high prices is high prices, meaning overbuild will eventually happen, as seen with shale pipelines in the mid-2010s. Infrastructure assets, being local monopolies (like freight rails or utilities), face competition primarily from new technologies rather than new builds. The investor’s job is to understand when market expectations become too excessive regarding these inevitable overbuilds.
Global Energy Demand Modeling
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(00:19:42)
  • Key Takeaway: Global energy demand is projected to rise significantly by 2040 (to 220,000 TWh) based on population and economic growth, even assuming increased energy efficiency, necessitating massive renewable build-out.
  • Summary: Global energy demand projections rely on three factors: population growth (decelerating but positive), economic growth (slowing but positive), and energy intensity of growth (improving efficiency). Even with comfortable assumptions for efficiency improvements, total energy demand is projected to increase substantially by 2040. This growth requires adding supply equivalent to recreating the entire global crude oil industry in the next 16 years, with renewables needing to supply 55,000 TWh.
Energy Priorities Shift: More, Stable, Clean
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(00:22:57)
  • Key Takeaway: The priority for the energy system has shifted from ‘clean, stable, more’ to ‘more, stable, clean,’ forcing a pragmatic approach to energy sources like natural gas and nuclear.
  • Summary: The current energy focus prioritizes ensuring supply (‘more’) and reliability (‘stable’) over immediate cleanliness, as the demand surge is paramount. Hyperscalers require baseload power, making nuclear attractive because it is 24/7, low-cost, and relatively clean, serving both reliability and environmental goals. This shift means transitioning dirtier sources like coal to natural gas while simultaneously reindustrializing nuclear capacity.
Nuclear Renaissance Trajectory
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(00:29:00)
  • Key Takeaway: A US nuclear renaissance is likely by 2040, but it will be phased, starting with halting shutdowns, then restarting idled plants, followed by brownfield builds around 2032-2035, and SMRs later.
  • Summary: The nuclear renaissance involves halting the decades-long trend of shutting down capacity, which is currently flattening out. Phase two involves restarting recently closed facilities, which is already underway. New greenfield builds are expected to come online between 2032 and 2035, but this will require direct government intervention to backstop cost overrun risks, as utilities will not undertake this alone.
Investor Reluctance in Mining Supply
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(00:33:14)
  • Key Takeaway: Mining companies are cutting CapEx despite high commodity prices because investors punish supply increases due to historical value destruction experienced during the shale boom.
  • Summary: Major miners are reducing 2026 CapEx expectations even with record copper and gold prices because investors demand discipline following poor returns in the 2010s. The market is not naturally signaling a supply response through increased capital expenditure from miners. Government intervention, seen in critical minerals and nuclear contracts, is necessary to catalyze the required supply build-out.
Regulatory Risk in Infrastructure Investment
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(00:36:11)
  • Key Takeaway: For infrastructure investors, regulatory risk—specifically the potential for surprise changes in returns or expropriation—is a primary concern, especially in politically volatile regions like Venezuela.
  • Summary: Infrastructure investors prioritize understanding the legal and regulatory constructs governing assets like utilities, as surprise regulatory decisions can impair asset value. In politically unstable environments, the risk of expropriation or nationalization is high, delaying significant foreign direct investment until legal frameworks are stabilized. This regulatory focus applies even domestically, such as monitoring commission decisions in states like Illinois.
Pipeline Economics and Natural Gas Focus
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(00:38:32)
  • Key Takeaway: Pipeline construction is shifting from oil to natural gas, driven by the high willingness-to-pay from data centers needing reliable power sources, signaling a move out of the ‘BANANAS’ era.
  • Summary: The political environment is shifting away from the ‘BANANAS’ (Build Absolutely Nothing Anywhere Near Anything) era, allowing pipeline construction certainty to return pragmatically. Current pipeline activity is dominated by natural gas lines feeding data centers, whose high willingness to pay makes these projects economical even with moderate gas prices. Oil pipelines are less favored currently due to lower oil differentials.
Utility Valuation Disconnect
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(00:40:40)
  • Key Takeaway: The fastest-growing utilities are trading at lower relative multiples than in the past, presenting an opportunity because the market is underappreciating their superior growth potential relative to the average utility.
  • Summary: US electricity demand growth is expected to rise to 2.5% annually, driven by EVs and industry, not just data centers. Best-in-class utilities are trading at only a 6% multiple premium for 2% higher growth, compared to an 11% premium paid eight years ago for less growth differential. This compression suggests investors are overly worried about regulation and affordability, creating a separation opportunity as execution separates the pack.
Data Center Backlash and Local Politics
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(00:45:00)
  • Key Takeaway: Local political backlash against data centers is reasonable in areas where bills have spiked significantly (e.g., 15% increases) without corresponding local job benefits, making elected utility commissioners sensitive to ratepayer concerns.
  • Summary: Utilities in the Midwest are seeing projected data center demand (15 GW) that dwarfs their historical 100-year build-out (11 GW), leading to massive CapEx and potential bill hikes. Elected utility commissioners are highly sensitive to these increases, especially when data centers provide few local employment benefits post-construction. Investors must analyze commission structures (elected vs. appointed) to gauge regulatory risk.