What’s going on here?

After a tough two years, renewable energy stocks are back in favor, with investor money and share prices rising at their fastest clip since the early 2020s.

What does this mean?

Momentum is returning to clean energy, fueled by rising US power demand and clearer policy guidance. Investors poured nearly $800 million into renewable energy funds in September – the highest since April 2022, according to Lipper – and Morningstar data shows outflows hitting their lowest point since mid-2023. Leading firms are soaring: Bloom Energy’s shares surged 300% in four months after a major deal with Oracle, now making up the biggest chunk of the iShares Clean Energy ETF. First Solar popped 33% last quarter, and EDP Renovaveis gained 18%. Firms like BlackRock and Robeco say investor sentiment is picking up, helped by hints that the Federal Reserve could loosen monetary policy, lowering financing costs even as rates remain higher than years past. Recent tweaks to US tax credits landed more softly than expected, giving companies room to plan ahead. All in, the industry is starting to shake off its policy risk reputation and is now driven more by fundamental demand from data centers, grid upgrades, and electrified transport.

Why should I care?

For markets: Clean energy’s resurgence powers sector rotation.

Renewable energy stocks are outpacing legacy energy names this quarter, signaling a renewed shift as investors chase growth and stability in the sector. Standouts like Bloom Energy and First Solar are beating broader market returns, and big-name asset managers are seeing inflows back into clean energy funds. Private equity is jumping in too – AES is eyeing the sector’s largest deal with a possible takeover of Global Infrastructure Partners, pointing to rising long-term confidence. All this momentum means unwinding short bets and new acquisitions could keep prices moving, even as some risks stick around.

The bigger picture: US energy transition shows structural staying power.

US power demand is poised for rapid growth, with NextEra Energy forecasting 450 gigawatts of added generation by 2030, much of it from renewables. This isn’t just subsidy-fueled: companies behind grid upgrades and electrical infrastructure like Prysmian, Spie, Eaton, and Legrand are essential to making it all work. While risks like interest rates and policy shifts linger, the real drivers – AI, electrification, and modernization – keep building momentum. The pivot from policy-driven to demand-driven growth could mark a lasting turning point for clean energy.