Source: Google

So which were the worst performers? As the hydrogen bubble continued to deflate, many of them were hydrogen stocks. For example:

• Plug Power (NASDAQ: PLUG), the US fuel cell developer, fell 53%

• Ballard Power Systems (NASDAQ: BLDP) the Canadian fuel cell developer, fell 55%

• Green Hydrogen Systems (CPH: GREENH), the Danish electrolyser supplier, fell 51%

• These companies are all now trading at small fractions of their 2021 share price highs

But some solar and wind companies were heavily hit too, such as:

• Sunnova Energy (NYSE: NOVA), the Texas-based residential solar and storage company, fell 78%

• Vestas (CPH: VWS), the Danish wind turbine manufacturer, fell 54%

• Enphase Energy (NASDAQ: ENPH), the Californian provider of solar inverters, battery and EV charging systems, fell 48%

• iSun, the Vermont based solar installer, was delisted after going bankrupt in June 2024 (and was subsequently acquired by a private equity firm)

In total, last year saw almost $30bn of net withdrawals from climate-focused mutual funds. Even more telling, new clean energy equity raises (public and private) fell by 40%, to just over $50bn. Those are big shifts. And while in the long run it can pay to be contrarian, in the short term fighting that kind of trend can be ruinous.

So the evidence seems overwhelming: investing in clean energy is a mug’s game. End of story. Or is it? 

Why the underperformance?

Markets reflect investor sentiment, and investors tend to behave like herds, which amplifies shifts. The numbers above prove that investor sentiment has turned strongly against energy transition in recent years. The market seems to have predicted the current backlash against decarbonisation - or at least its expected costs. 

But markets are not just sentiment, of course. They reflect underlying industrial fundamentals too. Solar’s rapid growth has benefitted from ever cheaper modules due to growing manufacturing oversupply. Great for end users, but unsustainable for suppliers. But not all clean energies are getting cheaper. And besides cost, speed is also essential in the race to meet new demand. Can new nuclear or hydro plants taking 10+ years to build compete with solar and battery projects installed in under 3 years?

Clean energies are seen as either too capital intensive or not (yet) profitable enough, or both. That’s a fair critique for the non-electrification sectors. Meanwhile, electrification sectors may continue to drive down unit costs, but that doesn’t necessarily make them profitable or investible. Falling power prices following the European energy crisis have created a much tougher commercial environment.

Then there was the challenge of supply chain constraints and cost inflation following the pandemic. This hit wind developers particularly hard as they pushed ahead to produce ever larger turbines instead of maximising production of established sizes, thereby missing out on economies of scale.

The other key factor is of course interest rates. The change in sentiment in 2021 is not a coincidence: that’s when interest rates started rising rapidly to tackle said inflation. Higher rates tend to hit valuations disproportionately for industries with higher capital costs relative to operating costs, high financial leverage and long economic lives, like renewable energy projects.

Unsupportive policies is another widely cited factor. Newer industries typically need consistent state support and incentives to build critical mass. Governments may be more averse to these when either unpopular, cash-strapped or simply ideologically opposed. Trump’s re-election gave investors another strong signal to dump clean energy stocks. His second term could be the definitive case study of a battle between wilful policy obstruction and improving clean energy economics.

Finally, markets reflect evolving expectations of the future. Those expectations clearly got way ahead of themselves. Excessive optimism is a perennial, well-documented feature of markets. But the same can be true of pessimism. Markets tend to react and over-react, not just revert to the mean. So we also need to assess where we are now on that spectrum.

So which energy shares did do well in 2024?

There were some big energy successes last year, but they weren’t really a transition story, nor traditional oil and gas for that matter. They were utilities, infrastructure and equipment suppliers exposed to the dominant investment theme: AI.

Because, at least until 27 January, AI was also an energy play. If you believed the hype, power demand growth would go stratospheric as all-consuming data centres hoover up every new power source on earth.

That’s why not only chip providers soared, but also those either powering data centres or providing the equipment for new ones. Boring but essential stuff like transformers, turbines, heating, ventilation and airconditioning (HVAC) systems, etc:

• Vistra Energy (NYSE: VST), the US’ largest competitive power generator with a 39GW generation portfolio of gas, nuclear, solar and batteries (and also the US’ most polluting energy company, based on 2022 data), jumped by an eye-popping 4x from 1 January 2024 to 23 January 2025, substantially driven by data centre power demand.

• Siemens Energy (ETR: ENR) exploded similarly to its high of over €60 in January. That stellar growth was nothing to do with its wind turbine division. It was all about its grid technologies division, which supplies power transformers and switchgears to – you guessed it – data centres, as well as EV and grid customers. The current demand backlog for power transformers is estimated at 6 years.

• GE Vernova (NYSE: GEV), the manufacturer of electrical and power equipment and gas turbines, rose 220% since being spun out of GE in late March 2024 up to late January. Both Siemens and GEV saw rising demand for their gas turbines to supply new power plants, driven in the US by data centres.

• Constellation Energy (NASDAQ: CEG), the Maryland gas and power utility, whose 2024 highlights included signing a new 20 year power purchase agreement (PPA) with Microsoft, saw its share price treble over the same period.

None of these are exactly the poster children for clean energy. Maybe you’d never even heard of them. But when the DeepSeek bombshell hit on 27 January, they were hit as hard as Nvidia, the darling of AI stocks.

This reflects an important conceptual shift. In the past, energy has been synonymous with physical commodities: oil, gas and coal. The future of energy is more about technologies. It’s an alluring yet simplistic narrative, as we’ve hardly weaned ourselves off those primary energies just yet. Plus, technologies are still built using commodities. But directionally it should get more true over time. The rise of those electric utilities and suppliers reflects the age of technology we now live in.

That in turn makes the power that technology runs on the ultimate commodity of the future. Globally, power is still mostly generated from fossil fuels. But that is evolving fast. Can it go fast enough to outpace demand growth? That is where the first market shock of 2025 comes in.

DeepSeek: Energy Efficiency strikes back

From an energy perspective, DeepSeek’s sudden emergence reveals the huge potential for efficiency gains, especially in an industry’s more embryonic stages. It’s reported to be an order of magnitude more energy efficient than ChatGPT. We were pleased to see one of our 2025 Predictions, “AI hardware will get more energy efficient, mitigating fears around its energy demand”, come true, but we’ll admit we didn’t see it happening that fast!

That’s why suddenly the flavour of the month is our old friend the Jevons Paradox, whereby greater efficiency increases overall consumption due to cost reductions and new use cases. Will greater efficiency drive higher AI usage, increasing its overall energy consumption, or will efficiency outpace demand growth? Relatedly, will it make other industries more energy efficient too?

For now, efficiency seems to have regained the upper hand – and it would be no surprise if it keeps it in the longer run. Fears that AI’s energy appetite will eat the entire transition already looked overdone even before DeepSeek shattered the US tech lords’ delusions of grandeur. In these relatively early stages of artificial (super-)intelligence, some may predict the next bounce of the ball, but no one really knows where the ball will end up. What we do know is that fears of spiralling energy demand at the dawn of the PC age ultimately proved unfounded.

The exploding power demand thesis may ultimately come true, but just take longer to play out, as per the dotcom bubble and the internet. If expectations have run ahead of reality for now, those utilities and electric suppliers could be vulnerable. Data centres are not their only market, but DeepSeek immediately hit their share prices by 20-25%.

Looking for the inflection

As for clean energy stocks, after 4 years of decline they are heavily out of favour. But markets are usually cyclical rather than one-way. So, is there now a long-term buying opportunity? What if the next “supercycle” is built on electrification? If so, which sectors, which parts of the value chain and which companies are most likely to lead the way? This is where we’ll be turning our attention next.

The first step is to identify the sectors that will play meaningful roles in the future energy system. Beyond the struggle between fossil fuels and clean energy, the latter is also split into “electrification” vs “other”. Commercial challenges in hydrogen and nuclear makes them unlikely to lead the way. If the “electrification of everything” become the central theme, then the focus turns more to sectors like solar, batteries, EVs and grids. Wind is also part of electrification but faces more cost and growth headwinds.

Rapid evolution within each of these sectors will likely create winners and losers. That requires deeper, more granular analysis of their competitive dynamics to identify the companies with most sustainable advantage. We can identify three broad categories within each industry value chain: 

1. Developers: project builders and operators

2. Suppliers: hardware and equipment providers

3. Optimisers and innovators: technology and software providers 

In solar, for example, will it be grid-scale developers, residential installers, inverter manufacturers, module suppliers or other associated technology providers who benefit most as the industry matures? What really drives profitability in all these sub-sectors? Likewise in batteries and wind, are the project developers, manufacturers or other parts of the supply chain best placed to succeed? What about for grids and the electrification of transport and heat? 

To invest profitably in the future of energy, we need to explore these questions more deeply.

Thanks for reading and stay tuned as the next editions do exactly that! 

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Picture of the week

The newly commissioned 500 MW / 2000 MWh Bisha BESS in Saudi Arabia, now the world’s largest operational single phase energy project. Why it matters: 

• Vision 2030: the Kingdom is aiming for 50% of its (historically highly carbon intensive) total energy consumption from renewable sources.

• Scaling up: Bisha is just the first of 5 Saudi storage mega-projects, providing the clean flexibility required to complement the renewables buildout

• Chinese dominance of the energy transformation mega-project supply chain: BYD is the lead battery supplier with Power China providing construction.