Europe has entered the defining investment cycle of its energy transition. From now until 2050, hundreds of billions of euros will pour into renewable generation, electricity infrastructure, storage and interconnection. Across the board, governments, utilities, investors and developers are jointly working toward one of the largest industrial upgrades in modern history: replacing fossil-fuel dependence with a low-carbon electricity system. Deploying the necessary capacity at pace is a challenge. However, a greater challenge will be ensuring that the infrastructure being financed today can continue to operate effectively under climate conditions we haven’t yet experienced. For decades now, major infrastructure developments have relied on historical, backward-facing weather observations to make environmental risk calculations. The assumption behind this process was simple enough: While weather fluctuates, long-term patterns remained sufficiently stable for the past to provide a sufficient basis for future decisions. However, today, that assumption no longer reflects reality.Climate change is altering operating conditions for energy assets far more rapidly than traditional planning methods can accommodate. This is not a hypothetical challenge. We recently undertook research that showed 45% of Spanish organizations have already experienced financial disruption due to extreme climate events, but only 29% had completed climate-related physical risk assessments. The gap between experience and planning shows just how much current decision-making continues to rely on outdated assumptions.This isn’t simply a question of environmental concern. Instead, it’s having an increasing impact on project economics, system reliability, insurance costs, financing conditions and ultimately how resilient Europe’s future energy system may, or may not, be.Viewing the Climate as an Investment VariableEnergy markets inherently have to manage uncertain conditions. Commodity prices fluctuate, demand forecasts can be unpredictable and the cost of technology swings up and down. Investors have always needed to develop sophisticated methods to both quantify and price these risks.Climate, on the other hand, has traditionally been treated differently. Rather than designing models based on how the climate itself could evolve, infrastructure has been built based on historical averages and statistical probabilities derived from backward-looking observations. The issue is that this is becoming less and less reliable.Across Europe and beyond, extreme weather conditions are occurring more frequently: Rainfall patterns are evolving, droughts are lasting ever longer, floods are increasing in severity and storms are causing greater physical damage than ever before. These are not cases of infrequent anomalies, but part of a much broader trend that is reshaping the conditions under which energy infrastructure must deliver.Meanwhile, the European energy system is becoming more and more dependent on electricity. Transport, heating and industry are all in the midst of electrification, meaning reliability requirements will continue to increase at the same time climate hazards are becoming increasingly disruptive.In summary, climate change is affecting both sides of the electricity equation: supply and demand.The Effects Are Already ApparentThe consequences of changing climate conditions have, for the most part, been discussed in terms of future resilience, when in reality, they’re no longer theoretical. In our recent research, we found nearly half of the organizations surveyed reported losses linked to extreme weather events, with several organizations experiencing single-event losses exceeding €500,000 ($572,000).High temperatures reduce how efficiently photovoltaic systems are able to function while also increasing electricity demand for cooling. Heat also decreases the current-carrying capacity of transmission lines, ultimately reducing network efficiency just as demand is at its highest.Wind generation is also impacted. Long-term changes in atmospheric circulation can affect resource availability over time, affecting expected production and, consequently, investment returns. Severe storms are increasing operational risk and maintenance requirements, while lightning continues to strike wind turbines.Hydropower is another area already exposed. Changing rain patterns, reduced snowfall and prolonged periods of drought affect the way reservoirs are managed. Simultaneously, substations, transmission corridors and other such vital network infrastructures face increased exposure to flooding, wildfires and other extreme weather events.None of these scenarios are occurring in isolation. A combined, cumulative impact is being felt across entire systems, just as electricity assumes a larger role within Europe’s economy.The objective is no longer simply generating electricity at scale; it is to ensure that generation remains reliable as climate conditions continue to change.How Climate Modeling Needs to ChangeOne of the key reasons these changes continue to be underestimated is that many existing climate assessments operate at a scale insufficient for successful future infrastructure planning.Historically, climate models provide information across grids covering tens or even hundreds of square kilometers. While sufficient for understanding regional climate trends or informing policy development, they aren’t nearly specific enough to decide where to invest hundreds of millions of euros for a particular renewable energy project.Importantly, small variations can have significant financial implications. What seem like minor changes in long-term wind conditions, for example, can notably impact energy production over a project’s operating life. Over a multidecade investment horizon, even fractional changes in annual output can translate into millions of euros.If you multiply that impact across Europe’s entire renewable portfolio, these deviations become extremely significant.Designing for the FutureOne of the vital characteristics of a successful energy infrastructure deployment is longevity. Many key components commonly operate for multiple decades. Facilities being built today are designed to last deep into the second half of this century.This alone fundamentally changes how climate needs to be incorporated into investment decisions. A transmission line commissioned this year won’t ever experience the climate of 2026. Instead, it will operate under climate conditions that evolve year on year moving forward.Therefore, the design cannot make assumptions about operational conditions as the very environment around it continues to change. Several recent events reinforce this point.Flooding as a result of Storm Dana caused real damage to electricity infrastructure in eastern Spain, which demonstrated exactly how vulnerable existing infrastructure can be to rapid physical climate events. More recently, a widespread electricity blackout impacted the Iberian Peninsula, highlighting the interconnected nature of electricity networks. The outage wasn’t directly related to a climate event, but it underscored how disturbances can cause a domino effect across integrated systems.As electricity is being relied upon to be the backbone of Europe’s decarbonized future, resilience becomes as integral as energy security.Markets Are Beginning to AdaptImportantly, regulators are starting to recognize that climate risk is no longer only an environmental disclosure issue. Financial supervisors are placing more and more emphasis on how organizations can identify, quantify and manage physical climate risks. The direction of travel is plain to see. In a sense, this is no surprise given that weather and climate-related events caused more than €738 billion in losses across the EU between 1980 and 2023, with over €162 billion occurring in just the last three years. Investors, too, are asking more sophisticated questions about long-term asset viability. Insurers, especially, are reassessing their exposure as the protection gap widens. In most European countries, more than half of climate-related losses now go uninsured. Meanwhile, lenders are becoming increasingly concerned with understanding how climate assumptions affect the chances of success during the decades ahead. This is an important evolution.Understanding climate risk no longer cuts it. Organizations instead need to demonstrate how climate information influences investment decisions. This means moving from awareness alone to demonstrable operational intelligence.Combining Climate and Infrastructure IntelligenceThe tools required to make this transition already exist. Thanks to advances in climate science, computational modeling and artificial intelligence, it is completely possible to generate projections that are directly relevant to successful infrastructure planning.Rather than a reliance on historical datasets, developers are able to evaluate how multiple climate hazards might impact individual assets under different emissions scenarios across their expected operational lives. This changes the nature of the required investment analysis.Now, instead of asking whether climate change may affect an asset, investors should begin by asking how much, when, through which hazards, and with what financial consequences. This creates a level of understanding that enables better site selection, improved design, more effective maintenance planning and overall stronger long-term financial performance.Vitally, it also helps prevent avoidable vulnerabilities being baked into infrastructure that Europe will be reliant on for decades to come.The Next Phase of Europe’s Energy TransitionSo far, the debate around Europe’s energy transition has understandably been focused on the speed of deployment. This is no longer sufficient.If we continue to rely on dated climate assumptions, it won’t matter how quickly we build infrastructure; the resulting output is at risk of being progressively less resilient throughout its operational life.The energy transition is essentially an investment in the future. It is therefore necessary to utilize information that reflects future operating conditions rather than historical averages. Climate resilience can no longer be viewed as only a sustainability objective or a box-ticking compliance exercise. Instead, it must become a prerequisite for our energy security, infrastructure reliability and investment performance.The clean energy transition and climate adaptation are no longer parallel challenges. They have become the same challenge.Dr. Alejandro Marti is the CEO and co-founder of climate data and analytics specialist Mitiga Solutions. The views in this article are those of the author.