In 2025, alternative energy stocks saw a sharp comeback, outperforming the broader stock market due to improved fundamentals and easing financing pressure. The Morningstar Global Renewable Energy Index had a 10.0% gain in euro terms, compared to 8.0% for the Morningstar Global TME Index.

While some investors believe the rally was due to cheaper valuations, others like Roman Boner from Robeco see it as a fundamental shift. Stable interest rates and improved clean-energy economics boosted the sector, with US electricity demand set to quadruple by 2026.

Renewable energy stocks face risks such as boom-and-bust cycles, driven by changes in interest rates and policy frameworks. While valuations have normalized, concerns remain about rising rates, grid underinvestment, and major policy reversals affecting project economics and valuations.

Investors are drawn back to the sector despite its volatility, as performance has improved significantly in 2025. European investors have poured almost EUR 900 million into clean energy funds in the last quarter of the year, driven by greater policy clarity and confidence in the positive outlook for clean energy.

Looking ahead to 2026, clean energy stocks face a test of discipline, fundamentals, and selectivity. Despite the rebound seen in 2025, investors need to remain cautious of risks such as rising rates, grid underinvestment, and potential policy reversals that could impact project economics and valuations.

Read more at Morningstar: Are Renewable Energy Stocks a Buy in 2026?