Yes, energy transition asset management can meaningfully reduce stranded asset risk for utilities — but only when it is applied proactively, not reactively. The key is integrating transition scenarios into asset lifecycle decisions before regulatory shifts, market changes, or technology displacement make those decisions for you. This article unpacks the most important questions utilities are asking about stranded asset risk and how to address it strategically.
What makes an energy asset ‘stranded’ during the transition?
An energy asset becomes stranded when it loses its expected economic value before the end of its technical service life. During the energy transition, this typically happens when policy changes, falling renewable costs, shifting demand patterns, or carbon pricing make a previously viable asset uneconomical to operate or impossible to recover through regulated returns.
Stranding is not always sudden. In most cases, it is a gradual erosion of value driven by structural market shifts. A gas peaker plant that was profitable under one regulatory regime may become a liability as battery storage captures more flexibility markets. A high-voltage transformer designed for centralized generation may be underutilized as distributed energy resources reshape grid flows.
What distinguishes transition-driven stranding from ordinary asset obsolescence is the pace and scale of change. The energy transition is compressing timelines that utilities historically planned around. Assets with 30 to 40-year design lives are now facing material value erosion within 10 to 15 years. That gap between expected and realized asset life is where stranded asset risk lives.
How does energy transition asset management reduce stranded asset exposure?
Energy transition asset management reduces stranded asset exposure by embedding transition scenarios directly into asset investment, maintenance, and retirement decisions. Rather than managing assets against a single baseline forecast, it requires utilities to evaluate each asset across a range of plausible futures and make decisions that remain defensible under multiple outcomes.
In practice, this means moving away from purely condition-based or age-based asset management toward a value-based approach. Our strategic asset management work with utilities demonstrates that key practices include:
- Scenario-weighted investment appraisal: Evaluating capital expenditure against multiple transition pathways, not just the most optimistic or most conservative
- Dynamic asset criticality assessment: Regularly reassessing which assets are critical to future network or generation configurations, not just current ones
- Flexible asset strategies: Designing maintenance and investment plans that preserve optionality — avoiding irreversible commitments where the transition trajectory is still uncertain
- Portfolio-level risk mapping: Identifying concentrations of stranded asset risk across the portfolio rather than managing each asset in isolation
The goal is not to eliminate uncertainty but to make better decisions under it. Utilities that integrate transition risk into their asset management frameworks are better positioned to allocate capital efficiently, avoid over-investing in assets with limited future value, and protect their regulatory and financial positions.
Which utility assets are most at risk of stranding by 2035?
By 2035, the utility assets most exposed to stranded asset risk are those tied to fossil fuel generation, inflexible grid infrastructure sized for centralized power flows, and long-lead capital investments in technologies that renewable alternatives are rapidly displacing.
Based on current transition trajectories, the highest-risk asset categories include:
- Coal and gas-fired generation: Particularly mid-merit and baseload plants with high operating costs that cannot compete with zero-marginal-cost renewables at scale
- Large-scale gas infrastructure: Transmission pipelines and storage assets whose long-term utilization depends on demand that may not materialize as electrification accelerates
- Distribution network assets sized for unidirectional flow: Infrastructure designed before distributed generation and electric vehicle charging fundamentally changed load profiles
- Thermal generation assets in regulated markets: Where regulatory frameworks have not yet adapted to reflect transition risk in allowed returns
Assets that serve multiple functions or can be repurposed for hydrogen, flexibility services, or grid support carry lower stranding risk. The distinction between stranded and adaptable often comes down to asset specificity and location within the network.
What’s the difference between asset repurposing and early retirement?
Asset repurposing means adapting an existing asset to serve a new function that remains economically viable under the energy transition. Early retirement means accepting that an asset has no viable future role and removing it from service before its technical end of life, absorbing the residual book value as a loss.
The choice between these two paths is rarely straightforward, and getting it wrong in either direction is costly. Repurposing carries the risk of investing in an asset that still has no viable future after conversion. Early retirement carries the risk of writing off value that could have been recovered through a different use case.
When repurposing makes sense
Repurposing is viable when the asset’s core infrastructure retains value in a new configuration. Gas pipelines being assessed for hydrogen blending or pure hydrogen transport are a clear example. Thermal power station sites being converted to battery storage or grid-scale solar benefit from existing grid connections and land rights. The economic case depends on conversion costs relative to the value of the new service, and on the regulatory treatment of that conversion.
When early retirement is the better decision
Early retirement becomes the rational choice when continued operation or conversion costs exceed the recoverable value of the asset under any plausible transition scenario. Delaying retirement to avoid recognizing a loss is one of the most common and costly mistakes in utility asset management. The sooner a utility can identify assets that fall into this category, the more options it has for managing the financial and operational consequences.
How should utilities integrate stranded asset risk into investment planning?
Utilities should integrate stranded asset risk into investment planning by treating transition scenarios as a core input to capital allocation decisions, not as a sensitivity analysis added after the main appraisal is complete. This requires a structured methodology that connects asset-level risk assessment to portfolio-level investment prioritization.
The most effective approach involves three connected steps. First, map transition exposure across the asset portfolio by assessing each major asset category against plausible regulatory, market, and technology scenarios through 2035 and beyond. Second, quantify the financial exposure — the gap between book value and recoverable value under each scenario — so that investment decisions can be made with a clear understanding of the downside. Third, build that risk assessment into the capital planning cycle, adjusting investment thresholds, hurdle rates, and maintenance strategies for assets with elevated stranding risk.
Utilities that treat stranded asset risk as a balance sheet issue rather than an operational one tend to act too late. The decisions that determine whether an asset becomes stranded are made years in advance — in investment committees, regulatory submissions, and long-term maintenance plans. That is where the risk needs to be addressed.
What role does performance benchmarking play in managing stranded asset risk?
Performance benchmarking plays a critical role in managing stranded asset risk because it provides the external reference points needed to assess whether an asset is genuinely competitive or simply performing adequately relative to an outdated internal baseline. Without benchmarking, utilities risk making investment decisions based on relative performance within their own portfolio rather than against where the industry is heading.
Benchmarking contributes to stranded asset risk management in two specific ways. On the operational side, it reveals which assets are underperforming against industry peers on cost, reliability, and utilization — early indicators that an asset may be approaching the point where continued investment is difficult to justify. On the strategic side, it provides insight into how comparable utilities are repositioning their asset portfolios in response to the transition, which helps identify whether a utility’s current approach is aligned with emerging best practice or lagging behind it.
The most valuable benchmarking data for this purpose is not generic industry averages but granular, asset-class-specific comparisons that account for network topology, regulatory context, and transition stage. That level of specificity is what makes the difference between benchmarking as a reporting exercise and benchmarking as a genuine decision support tool.
How OHROS helps utilities manage stranded asset risk
We work with utilities, transmission system operators, and asset-intensive energy businesses to build the analytical foundations and strategic frameworks needed to manage stranded asset risk with confidence. Our work in this area is grounded in nearly two decades of benchmarking experience across global energy and utility markets, which means we bring real reference points to the table, not just methodology.
Specifically, we help clients with:
- Transition-integrated asset management frameworks: Designing asset management approaches that embed scenario analysis and transition risk into investment and maintenance decisions
- Stranded asset exposure mapping: Assessing portfolio-level risk across asset classes, identifying where capital is most exposed to transition-driven value erosion
- Repurposing and retirement strategy: Evaluating the economic and operational case for asset conversion versus early retirement, with clear criteria for each decision
- Performance benchmarking: Providing granular, asset-class-specific benchmarking data to assess competitive position and inform capital prioritization
- Investment planning support: Integrating stranded asset risk into long-term capital allocation frameworks and regulatory submissions
If your organization is navigating investment decisions where transition risk is a material factor, we would welcome a direct conversation about how we can help. Get in touch with our team to discuss your specific asset management challenges.
Related Articles
