After years of being treated as the ever-shiny promise of the future, renewable energy was thrown out of portfolios as soon as interest rates shot up. Headlines heralded “the death of the clean-tech bubble”, and this fall from grace coincided neatly with the US anti-woke movement. Yet behind that scepticism lies a paradox: a looming power shortfall, surging demand from AI and electrification, and the fact that large-scale alternatives (nuclear, gas, new grids) take years or even decades to deliver. As I met with BNP Paribas Asset Management’s Ulrik Fugmann during his visit to Stockholm this week, I couldn’t help but wonder if, as he suggested, the time hadn’t come for renewables again. Is this the time to jump back into this green energy trend, or is it only wishful thinking? Ex-post, we all wish we had bought more gold and bitcoins at the moment…
Once, renewable energy stocks and infrastructure were the poster child of ESG-driven capital flows. Solar and wind were synonymous with optimism and growth. But rising interest rates, inflation in materials and labour, supply chain bottlenecks, and policy uncertainty have battered returns. Investors have turned towards AI and defence, leaving green-focused strategies struggling to track the global indices.
Part of that underperformance was due to a correction, of course. As Fugmann reminisces, inflows into his renewable strategy at the time were so high that he had to close the fund. Enthusiasm was exuberant, subsidies generous, despite some of the technical, regulatory or financing execution risks many projects faced. Today, many of those excesses have been unwound, and what remains looks like a discounted offering. In short, renewables may now be cheap in relative terms, especially versus their embedded optionality in world energy systems.
That cheapness, of course, invites scepticism. If it were such a bargain, especially in the realm of energy, which is the one thing the world’s nations are trying to grab as much of as possible, wouldn’t everyone already be snapping it up?
Indeed, “power over power” is the name of the game. As much as the late 20th and early 21st century geopolitics were about controlling energy sources, such as coal and oil, the focus has now shifted towards power generation more generally. Electrification of transport is now running in parallel with the surge of AI and the electricity hunger of large data centres. Meanwhile, stimulation from economic growth, recovering post-pandemic consumption, and digital infrastructure push demand upward across geographies. The result is a widening “power gap”, a structural mismatch between demand growth and the ability of traditional generation and grid systems to keep pace.
One of the major problems western countries face is that conventional options are slow. Nuclear plants take a decade or more from licensing to commissioning (if they succeed at all). Large thermal plants face permitting, environmental opposition, fuel supply constraints, and capital cost inflation. Even upgrading transmission lines and grid backbones often moves glacially in democratic, multi-stakeholder settings. Renewables, on the other hand, particularly solar, with modular design, minimal permit hurdles in many places, and falling cost curves, can deploy faster. Add wind where favourable, and pair with battery storage to smooth intermittency, and you start to see a flexible, responsive “power kit” that can be scaled more nimbly. This is precisely Fugman’s argument; renewables are uniquely positioned right now to fill this gap. They may no longer be speculative growth plays, but essential infrastructure assets, trading below the true value of what they deliver.
Of course, the equation isn’t that simple. You can’t just drop a field of solar panels and call it a day. The intermittency challenge is real. But there is a hope that battery storage and grid technology innovations (smart inverters, demand response, microgrids, aggregation) could rise to the occasion. Storage closes the reliability gap, allowing solar generation to serve peak afternoon demand (or even evening) rather than being cast off when it’s abundant. As costs for lithium-ion, solid-state, flow batteries and other storage technologies continue to decline, the renewable dream could become reality.
On the grid side, better forecasting, power routing, digital coordination and flexible demand (EV charging schedules, smart loads) make the “renewables + storage + grid” package more robust. Policymakers and regulators are slowly catching up, though not uniformly. Thus, the investment isn’t purely in solar farms. It’s in integrated systems: storage, controls, software, transmission, and balancing capacity. The winners will be those who can combine these pieces into scalable, low-risk, low-cost bundles.
But again, renewables are cheap for a reason. The path forward is strewn with risks that investors and policymakers alike should not underestimate. Policy uncertainty remains one of the biggest threats: renewable projects often depend on subsidies, feed-in tariffs, tax credits, and predictable grid access rules, any of which can shift with a change in political priorities, derailing project economics overnight. Look at the recent woes of Danish wind darling Ørsted. Even when policy support is stable, physical infrastructure can be a bottleneck. In many jurisdictions, transmission capacity is already stretched, interconnection queues are years long, and permitting delays add friction, slowing deployment and creating regional power bottlenecks.
Meanwhile, the materials that make renewables possible (lithium, cobalt, nickel, and rare earths) expose the industry to the same geopolitical and supply chain vulnerabilities that fossil fuels once did. Market dynamics add further complexity. In some regions, an excess of solar capacity can depress local power prices or force curtailment when the sun shines brightest, eroding returns unless storage and demand flexibility evolve in tandem.
Finally, execution risk should not be underestimated; building and operating solar-plus-storage projects at scale requires technical precision, disciplined logistics, and robust financing, and delays or underperformance can quickly erode margins.
Renewables may not succeed everywhere nor without friction, but their combination of option value, strategic urgency, and relative cheapness makes them a higher-conviction bet than most investors realise at the moment.
