Warren Buffet once famously advised, “Be fearful when others are aggressive and be aggressive when others are fearful.” This principle applies across all asset classes and has withstood decades of market fluctuations since it was first introduced by the Oracle of Omaha back in the 1980s. It’s also especially relevant in today’s market for clean, distributed generation infrastructure (what I’ll refer to as ‘DG’) now undergoing a critical transition from a period of hype-fueled overinvestment to signs of dislocation. This shift presents a rare and timely opportunity for patient, capable operators to navigate current complexities and unlock long-term value on behalf of their customers and partners, and the communities they serve.

An aggressive industry and a skeptical MEI

Many investors got out over their skis during 2020–2022 in what, I think, we can safely call ‘the frenzy’, a period of widespread industry growth-chasing without the operational depth and rigor to sustain it. At Madison Energy Infrastructure (“MEI”), we weren’t entirely fearful during the frenzy—but we were skeptical. That skepticism centered on the asset-level returns we saw others accepting, and even pursuing, in the name of growth. DG is, after all, an infrastructure asset class and should generate contracted cash flows from creditworthy counterparties at infrastructure-like returns.

But DG is anything but uniform and inherently challenging to scale without the requisite experience, processes, and now digital capabilities in place. State and region-specific incentives, permitting, utility rules, labor costs, and financing structures—especially the more creative uses of the federal investment tax credit—all vary widely project by project and portfolio by portfolio. Most importantly, so do post-contract assumptions for what are, in effect, 35-year assets. In this context, it’s not uncommon to see a 500+ basis-point spread in return expectations for the same $10 million project, even among so-called ‘real players’ and those with the intention to hold and operate long-term. These varying dynamics don’t create a market; they are collective moments of mispricing.

In the frenzy, this mispricing resulted from returns being manipulated. Tax credits can be structured to inflate IRRs. Front-loaded state incentives can mask future operating risks. And uncontracted revenue can be modeled to turn a basic infrastructure project into what looks like a venture-backed unicorn to the untrained, or perhaps unwilling, eye. As one of my colleagues put it during a recent investment committee meeting: “The industry lost track of how cash eventually flows to equity.”

At the tail end of the frenzy, some in the market were still commanding ‘platform premiums’ based on a modest portfolio of operating assets and a spreadsheet pipeline accompanied by a team slide of bios and a few customer logos they likely overpaid to land. There was little regard for the fact that to capitalize on these pipelines—if they did indeed transpire—the platform would require a significant amount of flexible capital, legal expertise, engineering know-how, coordination of unmotivated parties, consent of communities, grid access, real estate knowledge, and much more. Pipelines were slow to advance, and even more widespread, operational excellence was seldom achieved.

This dynamic was especially pronounced among asset aggregators that reached deep into their creative toolkits and optimized for transaction-level economics. Without getting overly granular on the mechanics of the investment tax credit, there are pathways to inflate an asset’s fair market value to boost the credit—effectively over-levering the project. In many cases, most of the value was extracted upfront by short-term actors, leaving operators today in a position where cash flows are barely sufficient to meet debt-service requirements.

To be fair, infrastructure and DG weren’t alone in this frenzy; in fact, most would argue these sectors were some of the least frothy. There were of course the manic swings of crypto, the NFT and ‘Web 3.0’ craze, GameStop madness, and SPAC hysteria with pre-revenue companies trading at absurd multi-billion-dollar valuations. New flavors of EBITDA were created like the infamous ‘community-adjusted’ EBITDA of WeWork fame.

However, our sector stood apart in one notable way: just as interest rates started to creep up and a semblance of discipline was reintroduced to the market, the Inflation Reduction Act (IRA) passed. The IRA and its $400 billion in federal funding for clean energy not only offset concerns about the climb in interest rates, but gave permission to greedy players to go nuts, obfuscating underlying risks and pushing hopes and growth charts once again up and to the right. I wish I could say we felt smart and patient during the frenzy, but it was less obvious at that moment; we simply couldn’t figure out what we were missing. But our confusion gave way to patience.

Industry fearful, MEI aggressive and built to capitalize on this opportunity

Today, it’s different. The frenzy has come to a grinding halt, the IRA’s passage is a distant point in time, and the market landscape has significantly shifted. Whether due to the clock ticking on fund life for a sponsor, LPs demanding distributions (DPI is in fact the new IRR!), or a preferred equity investment coming due, many in the industry are struggling.

The industry is now on the other side of previous mispricing and more in line with traditional infrastructure, which is a good thing. Financial engineering and the growth-at-any-cost story have given way to real value creation levers like digitalization and data analytics, machine learning, and AI-assisted processes that together improve everything from underwriting to construction sequencing to long-term O&M efficiency. Customer origination, acquisition valuations, pricing, and workflow automations are all being enhanced by AI. Bain’s podcast, Infrastructure’s New Playbook, offers a sharp take on this evolution.

Additionally, the dust has now settled following the passage of the OBBB. Trade and tariffs remain challenging, but they can be navigated by those with a long-term view, patient capital, deep partnerships, and a diversified pipeline. All around, the fundamentals of DG and its customer value proposition have never been stronger.

Energy prices and volatility within energy markets are increasing, reliability is decreasing, and grid access is tightening, all while energy demand is skyrocketing due to data center proliferation, the onshoring and electrification of several sectors including transport, and other modern factors. Internally we have referred to this as the ‘New Normal.’  Certain customer groups, such as public power providers and heavy industrials, are feeling these cost increases most acutely and need DG solutions quickly.

We cannot stress enough how significant this moment in time is. Infrastructure and energy are typically slowly evolving sectors, yet today this feels like a tectonic shift. For over a year now we’ve observed the DG market has been divided between the “haves” and “have-nots”, a separation between business builders and asset aggregators. The builders—those with long-term capital, real operational depth, and a disciplined approach to value creation —are the ones calling the shots in what is, in our view, the most compelling market in DG’s short history.

Within the DG sector, there are degrees of ‘the haves and have nots’. For starters, numerous strategics are simply spinning out non-core parts of their businesses. At Madison, we are the proud beneficiary of one of those deals with the recently closed acquisition of NextEra’s DG business. And as of this writing in December 2025, several more are currently in market, with others expected to launch shortly. Many of these platforms were built for aggregation rather than value creation and long-term operation, and as the industry becomes more data-driven and AI-enabled, this gap will quickly widen.

Other DG players have seen their cap tables change for the worse almost overnight. And some will just flat out go under. Finally, there are a few of us who have crossed the chasm. Our patience during the frenzy has given way to strength and the ability to be aggressive during this moment in time.

We at Madison undoubtedly feel a strong sense of urgency that can only be compared to the time when my co-founders and I walked away from a 'stable utility' to start MEI. We made a promise to our first partner that we’d fund their projects in a matter of weeks, and meeting that promise required, if I may, heroic urgency.

This time, the urgency around the opportunity is two-fold. First and most importantly, it is about creating value for and alongside customers in what is the most challenging and unique energy market since the Industrial Revolution. Our investment in digital tools, data infrastructure, AI-supported processes and accelerated decision-making positions us to serve customers in a way that simply wasn’t possible even just a year ago. Secondly, there is a clear opportunity to take advantage of market dislocation and scale faster than before through acquisitions of operating assets and de-risked pipelines that were not available previously.

For those of us who have built a business rather than an amalgamation of assets, this is an exciting time to be ‘greedy’ while others are fearful. A period like this rewards real operators, disciplined capital, strong partnerships, and increasingly, the ability to integrate technology and process into every part of the value chain.

So finally, to the sellers out there—whether driven by fear or anything more calculated—we’re excited to speak with you… and, yes, even your bankers, too.