You'd think energy infrastructure would be a mess right now. It's heavily reliant on commodity prices and often uses a lot of debt, which is a classic recipe for trouble when inflation is running hot. But according to David Altshuler, a partner at Cresta Fund Management, the asset class is basically doing what it said it would do. The world's appetite for power just doesn't quit.

"Whether the stock market is up or down, demand for energy has continued to increase – we are all hearing about the demand from data centers and AI but it's also driven by people turning on their lights, heating and cooling their homes, commuting to the office, and ongoing domestic and global industrial production," he told MarketDash. "So there is to some extent built-in demand durability, pricing power and contractual or regulated revenue frameworks that provide investors with visibility and downside protection."

Throw in a dose of geopolitical tension, and the focus on building resilient, domestic infrastructure only gets stronger. "Governments, but also the private sector, are increasingly focused on redundancy and localization," Altshuler added. The problem is, the current U.S. energy grid isn't built for this moment. The breakneck expansion of data centers and AI is creating a "very significant gap" between power demand and the resources needed to meet it.

Cresta doesn't invest directly in power generation, but it does invest in fuels—a closely related field. Altshuler thinks it could take 10 to 20 years for investment to fully catch up to this new demand reality. In the meantime, everyone in the industry sees a "real compelling opportunity" to invest, upgrade, and make data center power more efficient.

So, Where's the Market Missing the Point?

Here's where it gets interesting. For the last few years, the energy transition money has poured into obvious places: electrification, renewables, batteries, transmission lines, EV chargers, and yes, data centers. Altshuler calls those sectors "absolutely critical," but he points out a blind spot.

What about heavy transport, aviation, industrial heat, and other "hard-to-abate" industries? They're going to be burning fuels for a long, long time. Decarbonizing them requires very specialized expertise, and frankly, the market isn't putting enough money there yet.

"There is a gap not only in expertise but also in capital that's focused on carbon molecules and fuel within the energy transition segment," Altshuler noted. This is where the risk profile for investors like Cresta has evolved. The market is now more segmented by risk. Investors want more predictable returns and clear value-creation plans, not just speculative bets on the future.

This shift plays right into the hands of middle-market firms. "Much of the infrastructure needed to support the transition still needs to be built and often requires smaller upfront dollars. This is where middle-market firms like Cresta can step in to build the necessary assets, optimize operations, and scale platforms. This is a big opportunity from our standpoint," he said. Their playbook now is to find hard assets that offer stability and less risk, even when the broader economy gets wobbly.

The One Thing Investors Want From Regulators

If you talk to anyone in this space, the conversation eventually turns to regulation. Altshuler's take is that the industry doesn't necessarily need more rules—it needs better, clearer, and more consistent ones.

"Our view is that what markets need most is clarity and consistency: shifting rules, delayed guidance, and inconsistent implementation contribute to uncertainty [around the regulatory environment]," he said.

Investors are watching regulatory changes at every level, from federal down to state. Altshuler sees a role for both: federal policy can create national consistency and scale, while state programs can be more innovative and targeted. "It's not so much a question of less or more, but how regulation and policies are rolled out and supported," he explained.

For Cresta, this means hunting for investments backed by bipartisan, long-standing regulatory frameworks. They're wary of shiny new incentives that are narrow in scope or could vanish after the next election.

"Our base case is typically to underwrite an investment to meet our return, even without incremental regulatory upside, such that any increases in support or improvement in policy and regulation become a tailwind," Altshuler said. In other words, they make the numbers work assuming the regulatory help *doesn't* get better. Any improvement is just icing on the cake.

Looking ahead, Cresta isn't planning any major pivots. The strategy is to keep finding attractive opportunities to build and scale within the middle market, especially in the technically complex corners of the energy transition that others might find too daunting. The gaps in the market, it seems, are where the real opportunities are hiding.