National Grid (LSE: NG.) shares have long occupied a familiar place in the FTSE 100. Investors valued the regulated utility for its stability and income potential rather than its growth prospects.

That framing is starting to look less certain.

Rising electricity demand, electrification, and mounting pressure on grid capacity are beginning to reshape investor perceptions of the business. Instead of viewing it as a defensive utility, investors increasingly see it as a long-term infrastructure growth story.

The question is whether the market is now reassessing how this kind of utility should be valued going forward.

The traditional investment case

For decades, valuing National Grid was relatively straightforward.

Investors could make reasonable assumptions about future earnings, dividends, and regulatory returns. That reduced risk, but also limited growth expectations.

The company’s vast network assets created formidable barriers to entry, while regulation provided visibility that many businesses could only dream of. As a result, the infrastructure provider was often valued more like a dependable income vehicle than a company capable of delivering sustained growth.

The downside is that businesses expected to grow slowly rarely command premium valuations.

New growth era

What is changing is the scale of growth now being forecast. Bank of America believes National Grid could deliver annual earnings growth of 8%-10% through to 2031.

The key driver is a sustained rise in investment across the electricity network. At the centre is a multi-year programme to expand grid capacity, supported by regulated returns.

In simple terms, higher investment today feeds into a larger asset base and, ultimately, higher allowed earnings in future periods.

That is a very different dynamic to the traditional view of a defensive utility. It introduces something closer to a long-term compounding story, where growth is linked to infrastructure spending rather than simply stable cash flows and dividends.

This shift is why I am beginning to question whether the traditional way of valuing this business will make much sense in the future.

Key risk

The main risk to my thesis is regulation.

National Grid’s growth plans rely heavily on a regulatory framework that allows it to earn a return on billions of pounds of infrastructure investment. While that system has generally been supportive, it ultimately depends on political and public acceptance.

Recent events surrounding Thames Water have highlighted the growing scrutiny being placed on operators of critical national infrastructure. While I see little prospect of electricity networks facing the same challenges, the episode serves as a reminder that regulation can change.

If household energy bills remain high, future governments could come under increasing pressure to prioritise affordability over investor returns. That might mean lower allowed returns from Ofgem or tighter controls on how network costs are passed on to consumers.

For now, the investment case remains intact. But investors should remember that much of National Grid’s long-term growth story depends on regulatory decisions that are not entirely within management’s control.

While I remain mindful of regulatory risks, I think National Grid’s growth profile looks very different today than it did a decade ago. If earnings can compound at the rates some analysts expect, the market may eventually decide it deserves a higher valuation than a traditional utility. For that reason, it’s one to consider.

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Andrew Mackie owns shares in National Grid.