Are renewable investments still worth making?

US policy and higher interest rates have made conditions tougher for the renewable energy sector. Even so, does the investment case remain sound?

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Energy security has become one of the world's hottest topics. Tight supply is pushing oil prices higher.

You could hardly be blamed for assuming that Donald Trump's return to the White House in January 2025 would cripple the renewable-energy sector. "Drill, baby, drill" was central to his reelection campaign, and since taking office he has openly favored fossil fuels over renewables. In some cases, his administration halted renewable projects that were already being built, citing security concerns.

"The administration has paid developers nearly £4 billion to halt projects, according to deals with TotalEnergies, Golden State Wind, Bluepoint Wind, Invenergy and RWE since March 2026," said Angeline Ong, a senior investment analyst at the trading platform IG. Markets widely interpret the policy as an effort to curb wind-energy expansion and favor fossil fuels.

The S&P Global Clean Energy Transition Index gained 9.3% in the 12 months through 7 October and was up 5.3% in 2026 so far. That headline hides a sharp retreat: on 2 June, the index had risen 43.9% year-to-date. Still, another rally remains possible.

The International Energy Agency projects that renewables will account for 37% of global electricity generation in 2027, up from 33% in 2025. It also expects them to overtake coal as the world's largest source of electricity in 2026.

So, has the investment case for renewables run its course, or have the sector's recent problems created an opportunity to buy?

Why have renewables risen this year?

The irony is that a policy decision by Trump has pushed renewable energy back into focus this year.

"The conflict in Iran showed how much this issue has changed in recent years," said Charlie Wright, investment director at Foresight Group, which specializes in energy investment.

"Decarbonisation remains the main reason to expand renewables, and that matters greatly," he continued. "Yet the aftermath of the Ukraine conflict - and now the conflict in Iran - has reminded people that producing more energy at home also strengthens energy security. It reduces dependence on imported fossil fuels, with prices vulnerable to events far beyond our control."

UK energy prices have climbed sharply this year. Brent Crude rose 38.8% between 27 February - just before the Iran war - and 6 October. Diesel has now topped 2 per litre for the first time in recent days.

"From an energy-security standpoint, having more low-cost generation at home can only help," Wright said.

Renewable energy covers many different technologies, so their settings and performance may not match. Solar power, for instance, might prove more resilient than other sources because AI infrastructure depends heavily on it.

"Solar paired with batteries will probably get built first," said IGs Ong. "For a data centre that needed power yesterday, nothing is quicker to add. That helps explain why the S&P Global Clean Energy Transition Index has risen over the past year, even while US offshore wind developers are being paid to halt construction."

Is now a good time to invest in renewable energy?

Renewable energy still has momentum: the S&P Global Clean Energy Transition Index rallied during the first five months of the year. Since 2 June, however, it has fallen 26.8%.

Renewable energy still faces serious obstacles. Ong points to higher inflation and interest rates as especially difficult for capital-heavy projects such as wind farms, where construction can take years. Solar and battery storage have fared better because they can be built much faster; as Ong put it, that shorter timeline helps explain why they are benefiting from rising AI-related demand.

Foresights Wright reports that UK renewables have faced unusually strong headwinds over the past two years, with wind and solar encountering more difficulty than at any point in the previous 1015 years. Power prices have fallen below the assumptions used to assess many older projects, while wind and solar generation also had several weaker years.

"There's been a mix of project-level underperformance and broader problems tied to power prices, so these assets generally haven't performed as well as investors had hoped," Wright said.

Regulation has created another obstacle. In January, the UK government said the renewables obligation (RO) scheme would measure inflation with the consumer prices index instead of the retail prices index, which is usually higher. The scheme encourages energy companies to use renewable sources, so the change means renewable energy projects will receive smaller subsidies over the long term.

Wright views these setbacks as minor though.

"Wind and solar remain essential to the UK's decarbonisation efforts," he said. "The country will need to build far more of both to meet its net zero targets - or even come close."

It remains a huge investment opportunity, though investor enthusiasm for those asset classes will rise and fall along the way.

How to invest in renewable energy

Renewable energy can offer many of the same benefits as infrastructure and utility investments. The sector remains relatively young, though, so it may have more room for long-term growth than those established areas.

In Wrights' view, a renewable energy project can provide income or growth, depending on when you invest.

"If you're investing in an operating wind or solar project, the main appeal is income," he said. "You're buying the returns that asset should generate over several years, not what you'd typically consider a growth opportunity."

Investing earlier in a project's life cycle can produce stronger capital growth, but the risk rises the earlier you enter.

For renewable energy, investors generally have two main routes.

Listed companies offer one direct route into the sector. Major names include Vestas Wind Systems (COPENHAGEN:VWS), First Solar (NASDAQ:FSLR), and Nextpower (NASDAQ:NXT).

Funds and investment trusts focused on renewable energy provide another option.

Several tracker funds and exchange-traded funds (ETFs) follow the S&P Global Clean Energy Transition Index. One example is the iShares Global Clean Energy Transition UCITS ETF (LON:INRG).

Among actively managed options, investors can find Guinness Sustainable Energy and the Polar Capital Smart Energy Fund.

Wright co-manages Foresight Environmental Infrastructure (LON:FGEN), an investment trust focused on private renewable-energy infrastructure. Its portfolio includes 39 assets across the UK and mainland Europe.

Greencoat UK Wind (LON:UKW) and NextEnergy Solar Fund (LON:NESF) are examples of investment trusts focused on particular renewable-energy sectors.