Yes, utilities should restructure their asset portfolios to support the energy transition — and many are already doing so out of necessity, not choice. The economics of legacy generation assets are shifting fast, and portfolios built for a fossil-fuel world are increasingly misaligned with the regulatory, market, and operational realities of 2026. The questions below unpack what that restructuring looks like in practice and where the real decisions get hard.
What does restructuring an asset portfolio actually involve for utilities?
Restructuring a utility asset portfolio means deliberately realigning the mix of owned, operated, and invested assets to match a revised strategic direction. In the context of energy transition asset management, this involves assessing which assets generate value under future scenarios, which represent stranded asset risk, and where capital should be redirected to support a low-carbon operating model.
In practice, restructuring spans several dimensions:
- Asset valuation and scenario analysis: Reappraising existing assets under multiple regulatory, market, and technology scenarios to identify where value is eroding and where it remains defensible.
- Portfolio rebalancing: Shifting capital allocation away from declining asset classes toward renewables, grid infrastructure, storage, and flexibility assets.
- Operational model adjustment: Changing how assets are maintained, staffed, and dispatched as the role of each asset class evolves.
- Divestment and acquisition activity: Exiting assets that no longer fit the strategic direction and acquiring or developing those that do.
This is not a one-time exercise. Effective portfolio restructuring is an ongoing strategic process, not a project with a defined end date. The utilities that handle it well treat asset portfolio decisions as a continuous discipline rather than a response to crisis.
How is the energy transition changing the value of legacy utility assets?
The energy transition is eroding the value of legacy utility assets in two ways simultaneously: through falling utilization rates and through regulatory and market pressure that compresses margins. Assets that were once the backbone of reliable revenue — coal plants, large gas peakers, older transmission infrastructure — are increasingly operating in conditions they were never designed for.
Variable renewable generation has fundamentally changed dispatch patterns. Thermal assets that once ran as baseload now operate as balancing resources, cycling more frequently and at lower load factors. That increases wear, raises maintenance costs, and reduces the economic case for continued investment. At the same time, carbon pricing mechanisms and emissions regulations in many European markets are adding direct cost pressure to fossil-fuel-based generation.
The result is a structural compression of asset value that is not cyclical. Utilities waiting for market conditions to normalize are misreading the signal. The shift is directional, and portfolio strategy needs to reflect that.
Which utility assets are most at risk during the energy transition?
The assets most exposed to stranded asset risk during the energy transition are those with long remaining technical lifetimes but deteriorating economic cases. Coal-fired generation sits at the top of that list across most European markets. Large combined-cycle gas turbines face a more nuanced picture, but their long-term role is narrowing. Oil-fired peakers in most contexts have already passed the point of economic viability.
Beyond generation, certain transmission and distribution assets face a different kind of risk: not obsolescence, but underinvestment. Aging grid infrastructure that was not designed to handle bidirectional power flows, distributed generation, or high levels of intermittent supply is becoming a constraint on system performance. The risk here is not that these assets lose value — it is that failing to invest in them creates operational and regulatory exposure.
Water utilities face their own version of this challenge. Infrastructure built on decades-old design assumptions is increasingly mismatched with climate-driven demand variability and tightening environmental standards. The asset risk is real, even if the transition driver differs from power generation.
Should utilities divest fossil fuel assets or repurpose them?
The answer depends on the asset, the market context, and the utility’s strategic position — but the binary framing of “divest or keep” is often the wrong starting point. The more useful question is whether the asset has a credible future role, and if so, under what conditions and at what cost.
When divestment makes sense
Divestment is the right move when an asset’s remaining economic life is short, when the capital required to maintain or adapt it exceeds the returns it can generate, or when holding it creates regulatory or reputational risk that outweighs strategic value. For many coal assets in Western Europe, that calculation has already been made. The question is execution: finding buyers, managing workforce transitions, and handling decommissioning liabilities cleanly.
When repurposing is worth exploring
Some fossil fuel infrastructure has genuine repurposing potential. Gas pipelines and storage assets are increasingly relevant to hydrogen strategies. Large industrial sites with existing grid connections, water supply, and workforce infrastructure can be redeveloped for battery storage, green hydrogen production, or renewable generation. The economics of repurposing need rigorous stress-testing — not every asset is a viable candidate — but dismissing the option without analysis is as much a strategic error as holding on too long.
How do utilities prioritize new asset investments to support the energy transition?
Utilities should prioritize new asset investments based on three criteria evaluated together: strategic fit with the long-term portfolio direction, risk-adjusted financial return under multiple scenarios, and the asset’s contribution to system resilience and regulatory compliance. Applying these in sequence, rather than in isolation, produces more defensible investment decisions.
In practice, the investments that consistently justify priority are those that address multiple objectives simultaneously. Grid reinforcement and flexibility infrastructure, for example, supports renewable integration, improves system reliability, and often carries regulatory support or cost recovery mechanisms. Battery storage at scale is becoming a similar category — it addresses intermittency, provides ancillary services revenue, and reduces dependence on gas peaking capacity.
Utilities also need to be honest about sequencing. Not every transition-aligned investment can happen at once, and capital discipline matters. A prioritization framework that accounts for asset interdependencies, lead times, and regulatory timelines will outperform one that simply chases the most visible transition opportunity. Approaches grounded in strategic asset management provide the structured methodology utilities need to make these sequencing decisions consistently and defensibly.
What are the biggest risks of restructuring a utility asset portfolio too quickly?
Moving too fast on portfolio restructuring creates its own category of risk, and it is one that gets less attention than the risk of moving too slowly. The most significant dangers are operational continuity gaps, value destruction through rushed divestment, and workforce capability loss that cannot easily be rebuilt.
Operational continuity is the most immediate concern. Utilities carry system reliability obligations that do not pause for strategic transformation. Retiring or divesting assets before replacement capacity is in place — whether owned, contracted, or available through market mechanisms — creates supply security exposure that regulators and customers will not tolerate. The energy transition is not a reason to compromise on reliability; it is a reason to plan the transition sequence carefully.
Rushed divestment also tends to destroy value. Selling assets under time pressure, without adequate market preparation or a competitive process, systematically undervalues what is being sold. In some cases, the reputational and financial cost of a poorly executed exit exceeds the cost of holding the asset longer under a managed wind-down strategy.
Finally, the human dimension deserves more weight than it typically receives. Operational knowledge embedded in experienced workforces is not easily replaced. Restructuring that moves faster than workforce transition planning can execute creates capability gaps that affect both the assets being retained and the new ones being brought online.
How OHROS supports energy transition asset management
We work with utilities, TSOs, and asset-intensive energy companies at exactly the point where these decisions get hard: when the strategic direction is clear but the portfolio implications are not, or when the pressure to act is real but the roadmap is missing.
Our support in energy transition asset management typically includes:
- Asset portfolio diagnostics: Structured assessment of the current portfolio against transition scenarios, identifying value erosion, stranded asset risk, and investment gaps.
- Strategic asset management frameworks: Building the governance, methodology, and decision criteria that allow portfolio decisions to be made consistently and defensibly over time.
- Investment prioritization: Applying scenario analysis and performance benchmarking to rank competing investment options against strategic and financial criteria.
- Divestment and repurposing advisory: Supporting the analysis and execution of asset exits or transformation, including stakeholder management and workforce transition planning.
- Performance benchmarking: Drawing on our global benchmarking library to give clients an honest external reference point for where their portfolio and operations stand relative to industry peers.
If your organization is working through a portfolio restructuring decision and wants a grounded, experience-based perspective, we would be glad to have that conversation. Get in touch with our team to discuss where we can add the most value.
