Energy security is becoming one of the world’s hottest topics as constrained supply pushes oil prices higher.
You’d be forgiven for thinking US president Donald Trump’s return to the White House in January 2025 would have spelled the end of the sector. ‘Drill, baby, drill’ was a cornerstone of Trump’s re-election campaign, and he has been proactive in promoting fossil fuels over renewables – even going so far as to halt the development of several renewable energy projects that were already under construction, citing ‘security concerns’.
“The administration has directly paid developers to simply stop: close to $4 billion across deals with TotalEnergies, Golden State Wind, Bluepoint Wind, Invenergy and RWE since March 2026,” said Angeline Ong, senior investment analyst at trading platform IG. “The main aim, as it is understood by the markets, is to discourage the expansion of wind energy in favour of fossil fuels.”
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This has led to corporate retreat from renewable energy projects. “BP cut annual transition spending to $1.5-2 billion, more than $5 billion below prior guidance, and scrapped its target to shrink oil and gas output by 2030,” said Ong. “Shell has leaned harder into liquid natural gas while holding oil output flat and trimming low-carbon spending.”
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However, the S&P Global Clean Energy Transition Index returned 9.3% in the 12 months to 7 October, and 5.3% in 2026 to date. These figures mask a decline since 2 June, at which point the index was up 43.9% year-to-date, but the potential, at least, for a rally is there.
The International Energy Agency says renewables are on track to overtake coal and become the largest source of electricity generation in 2026, and projects that renewables’ share of global electricity generation will increase from 33% in 2025 to 37% in 2027.
So is the investment case for renewables over, or do its recent struggles present a buying opportunity?
Why have renewables risen this year?
Ironically, another Trump policy decision has put renewable energy back on the agenda this year.
“The conflict [in Iran] reminded everyone of how the theme has developed over the last few years,” said Charlie Wright, investment director at energy investment specialists Foresight Group.
“The primary objective of renewables is decarbonisation, and that is still obviously very important,” he continued. “But in the aftermath of the Ukraine conflict and now [the conflict in Iran] reminds everyone that building domestic renewables is also about energy security and reducing our reliance on imported fossil fuels, whose prices can be affected by events far outside our control.”
Energy prices have risen dramatically in the UK this year. Between 27 February (immediately before the Iran war) and 6 October, the price of Brent Crude oil rose by 38.8%. This has led to diesel prices breaching £2 per litre for the first time in recent days.
“Just from an energy security perspective, the more domestic, low-cost generation we have can only be a good thing,” said Wright.
Renewable energy is a broad category, and different components might be set differently from others. Solar power could, for example, be more resilient than other forms due to its centrality to artificial intelligence (AI) infrastructure.
“Solar and battery storage is likely to be built because they’re the fastest thing to bolt onto a data centre that needs power yesterday,” said IG’s Ong. “This is why the S&P Global Clean Energy Transition Index is up over the past year even as US offshore wind developers are being paid to stop building.”
Is now a good time to invest in renewable energy?
The rally over the first five months of the year shows that there is still life in renewable energy. Since 2 June, though, the S&P Global Clean Energy Transition Index has fallen 26.8%.
Renewable energy is undoubtedly facing challenges, not least higher inflation and interest rates – which according to Ong are particularly challenging for capital-intensive projects like wind farms, which have long construction timelines. Ong added, though, that “solar and battery storage are comparatively insulated because build times are much shorter, which is part of why they’re thriving on the AI-demand tailwind”.
Foresight’s Wright says that in the UK over the last two years “there have been more headwinds within core renewables (wind and solar) than at any time over the last 10-15 years”. These include lower power prices than had been assumed when many historical projects were assessed, as well as some weaker years for wind and solar generation.
“There’s been a combination of both project-specific underperformance issues as well as more macro, power price-related issues that have generally meant the asset classes perhaps haven’t performed as well as investors would have liked,” said Wright.
Regulatory changes have also provided headwinds. In January, the UK government announced that the renewables obligation (RO) scheme, which incentivises energy companies to use renewable energy sources, will account for inflation using the consumer prices index rather than the (usually higher) retail prices index it had previously used. This means the subsidies that renewable energy projects will receive will be lower over the long term.
Wright views these setbacks as minor though.
“Wind and solar are still absolutely fundamental asset classes for decarbonisation in the UK,” he said. “Whether it’s hitting net zero targets or getting anywhere near it, a lot of wind and solar still needs to be built.
“So it’s still an enormous investment opportunity, but along the way there will be some peaks and troughs in investor sentiment to those asset classes.”
How to invest in renewable energy
Renewable energy investments share many of the advantages of traditional infrastructure or utilities investments, but given the sector is still in a relatively early stage, there is the potential for greater growth over the long term than these sectors are known for.
Whether any given renewable energy project would function as an income investment or a growth investment depends, in Wright’s view, on the point at which you invest.
“If you’re buying into an operational wind or solar project, that would be a greater focus on income,” he said. “You’d be buying into the yield that asset is going to produce over a number of years, but I don’t think you would really look at that as a growth opportunity.”
Investing earlier in the project’s life cycle, though, offers greater opportunity for capital growth – though there is of course greater risk the earlier you invest.
If you decide to invest in renewable energy, there are two main routes in.
One of these is through listed companies directly involved in the sector. Some of the largest of these are Vestas Wind Systems (COPENHAGEN:VWS), First Solar (NASDAQ:FSLR) and Nextpower (NASDAQ:NXT).
You could alternatively invest in the renewable energy sector via funds or investment trusts that target it.
There are various tracker funds and exchange-traded funds (ETFs) that track the S&P Global Clean Energy Transition Index, such as the iShares Global Clean Energy Transition UCITS ETF (LON:INRG).
Actively-managed funds tracking the sector include Guinness Sustainable Energy or the Polar Capital Smart Energy Fund.
Wright is co-lead manager of Foresight Environmental Infrastructure (LON:FGEN), an investment trust that invests in private renewable energy infrastructure projects. It holds 39 assets located across the UK and mainland Europe.
Other investment trusts such as Greencoat UK Wind (LON:UKW) or NextEnergy Solar Fund (LON:NESF) can offer targeted exposure to specific forms of renewable energy.
