Key takeaways:
- Renewable outperformance reflects a structural shift: Expanded auctions in Europe, sustained clean-energy investment in China, and targeted US incentives show that firm, domestically sourced renewable power has value – giving rise to a “green reliability premium” as renewables paired with storage compete favourably with gas.
- Falling costs and scale benefits support renewables, but higher interest rates, input-cost inflation and execution risk mean not all projects or subsectors can succeed. The most compelling opportunities lie in enabling technologies – battery storage, grid infrastructure and utility-scale solar energy – where electrification, AI-driven demand growth and complexity create durable, system-level growth.
- Natural gas retains strategic value in the US and as global backup, while long-cycle upstream oil outside North America faces weaker structural appeal. At the same time, nuclear power and critical metals are emerging as key beneficiaries of energy security and electrification, with tightening supply-demand dynamics pointing to supportive long-term pricing and investment opportunities.
A turning point for energy markets
The outperformance of renewable equities in 2025 reflected genuine shifts in policy priorities and economics that have continued into 2026. Recent and long-standing geopolitical tensions have reinforced a reality that many countries are now confronting directly: energy security matters.
Across Europe, the €300 billion (US$353 billion) REPowerEU initiative – launched in 2022 in the wake of the energy crisis caused by the war in Ukraine – has been strengthened by additional measures aimed at reducing reliance on imported fossil fuels in response to the conflict in the Middle-East. Germany has committed an additional 12 gigawatts (GW) of onshore wind auctions in March1, whilst France launched 10 GW of offshore wind tenders in April2, explicitly tied to European manufacturing. Meanwhile, the UK has brought forward its Allocation Round 8 auction to July3 – the scheme is the government’s main mechanism for supporting low-carbon electricity generation.
Elsewhere, China continues its strong clean energy investment, confirming its intention to double renewable capacity by 2035 from an already high base, while the US retains an incentive framework for certain renewable technologies, such as solar and battery storage despite more muted headline ambitions.
Higher gas prices and geopolitical uncertainty have combined to remind countries of the merits of reliable renewable power, for example through solar paired with battery storage. A “green reliability premium” is emerging in markets where firmed renewable power now commands higher prices than unabated natural gas.
As costs continue to come down through technological development and larger scale production the unit economics of renewable energy improve. This creates a virtuous cycle that, in the case of battery storage, is driving massive growth in capacity transforming intermittent renewables into dispatchable reliable power.
The risks investors still need to respect
This is not a risk‑free transition. Against this structurally positive backdrop there are still some risks to consider. Renewable projects remain sensitive to changes in interest rates, due to their higher upfront capital intensity compared to fossil fuel alternatives, making the Levelized Costs of Energy (LCOE) more vulnerable to more expensive financing. Input cost inflation, particularly for steel, copper, lithium and other critical materials, also has the potential to erode project economics if not carefully managed.
These factors demand selectivity. Not all renewable technologies, developers or markets are equally attractive, and capital discipline remains essential. In our experience, investors who focus only on capacity growth rather than balance sheets, contracts and cost structures risk disappointment.
Why enabling technologies may offer the most resilient long-term returns
From an asset allocation perspective, we see the most compelling opportunities where the energy transition intersects with electrification and artificial intelligence (AI)‑driven demand growth. Battery storage, grid infrastructure and utility‑scale solar stand out as areas with durable structural growth and visible catalysts.
The energy system of the future will be more electrified, more distributed and significantly more complex than today’s. Companies that enable that transformation – whether through storage, networks or enabling technologies – are, in our view, those that are best placed to deliver durable long‑term returns.
Rethinking ‘traditional’ energy
The outlook for oil and gas is increasingly region‑specific. In the US, natural gas retains strong strategic value given abundant domestic reserves and competitive economics. Outside the US, however, the structural investment case for traditional hydrocarbons is weakening.
The EU’s continued sensitivity to imported energy prices underscores this point, with the bloc importing €337 billion4 of energy products in 2025. EU member states that have lower fossil fuel demands to generate electricity such as France and Spain have generally weathered recent price shocks better than those that have not – Italy being one notable example.
Similar dynamics are evident in parts of Asia, where rapid solar deployment in countries like Pakistan have helped insulated its economy from oil price volatility, while Bangladesh and other import-dependent peers have felt price spikes acutely. These examples reinforce our conviction that indigenous renewable capacity is strategically attractive for energy‑importing regions.
Natural gas retains strategic value in the US and as backup capacity globally. Oil faces demand growth5 of approximately one million barrels per day (bpd) a year through 2030, but capital discipline and geopolitical volatility as well as and long‑cycle project risks mean selectivity is crucial – particularly outside North America.
Nuclear, metals and the infrastructure behind electrification
Beyond renewables and hydrocarbons, we see significant opportunity in nuclear power and critical metals. Nuclear energy is re‑emerging as both a climate and energy security solution, with major economies accelerating reactor programmes. Japan targets 22% nuclear generation by 2030 (from 8% today)6, China aims for 110 GW by 20307 (from approximately 62 GWe at the end of 2025), and the US has announced plans to build 10 new reactors by 2030.8
Whilst uranium demand is forecast to rise, mine supply is expected to contract and the resultant deficit suggests uranium prices will be strong for the foreseeable future. Further, given that hyperscalers are willing to pay 60-100% premiums above market rates for nuclear power, it suggests a favourable backdrop for producers.
Critical metals are equally central to this story. China’s dominance in processing has created geopolitical dependencies that are now reshaping trade and investment flows. Copper, lithium, rare earths, graphite and other materials are not being supplied quickly enough to meet electrification timelines. In our view, a period of “higher‑for‑longer” prices is required to unlock the investment needed to close that gap. It is not just producers of critical metals that stand to benefit but also the maker of the mining and drilling equipment required to produce them. A multi-year cycle lies ahead.
Where we are bullish — and where we remain cautious
We remain most constructive on subsectors linked to electricity infrastructure, competitiveness and energy resilience. Battery storage stands out across a wide range of scenarios, supported by grid stability needs, renewable firming economics and rising electricity demand. Transmission and distribution investment is also critical to resolving grid bottlenecks and enabling both renewable integration and data‑centre expansion.
By contrast, we are bearish towards subsectors such as ex‑US upstream oil producers. The Organization of the Petroleum Exporting Countries’ (OPEC) spare capacity dynamics and a stark underinvestment in refining are supportive arguments for integrated oil producers. However, energy import dependency and stranded asset risks arguably weigh on long-cycle upstream oil projects outside the US. Further, the balance of risk and reward is less compelling for parts of the offshore wind sector, where execution risk and margin pressure remain elevated – requiring external support to make the economics work.
A system‑level investment opportunity
Looking ahead, we believe energy investing in 2026 is less about choosing sides between renewables and traditional energy, and more about understanding how a complex system is evolving. Reliability, resilience and competitiveness are becoming the defining investment criteria.
The companies that enable electrification be they metals producers, project developers or equipment providers – and can do so at scale, securely and profitably – are likely to shape and reap the rewards of changing energy markets for years to come.
1 Source: Clean Energy Wire, ‘Onshore wind tenders heavily oversubscribed in Germany as average bid price hits 7-year low’, 31 March 2026.
2 Source: Reuters, ‘France launches 12 GW of renewable tenders, champions ‘Made in Europe’ initiative’, 2 April 2026.
3 Source: Offshore Wind.biz, ‘UK to Launch Next CfD Allocation Round in July’, 16 March 2026.
4 Source: EU Commission, Eurostat, ‘EU imports of energy products decreased again in 2025’, 25 March 2026.
5 Source: International Energy Agency, ‘Slowing demand growth and surging supply put global oil markets on course for major surplus this decade’, 12 June 2024.
6 Source: World Nuclear Association, ‘Nuclear Power in Japan’, 21 April 2026.
7 Source: World Nuclear Association, ‘Nuclear Power in China’, 24 April 2026.
8 Source: World Nuclear Association, ‘United States of America – World Nuclear Outlook Report’, 19 January 2026.
Asset allocation: The allocation of a portfolio between different asset classes, sectors, geographical regions, or types of security to meet specific objectives of risk, performance, or time horizon.
Balance sheet: A financial statement that summarises a company’s assets, liabilities, and shareholders’ equity at a particular point in time. Each segment gives investors an idea as to what the company owns and owes, as well as the amount invested by shareholders. It is called a balance sheet because of the accounting equation: assets = liabilities + shareholders’ equity.
Bear market: A bear market is one in which the prices of securities are falling in a prolonged or significant manner. A generally accepted definition is a fall of 20% or more in an index over at least a two-month period. Bearish sentiment suggests the expectation of negative market conditions.
Bull market: A bull market is one in which the prices of securities are rising, especially over a long period of time.
Capital: When referring to a portfolio, the capital reflects the net-asset value of a fund. More broadly, it can be used to refer to the financial value of an amount invested in a company or an investment portfolio.
Decarbonisation: The process of reducing the amount of carbon, mainly carbon dioxide (CO2), sent into the atmosphere, to combat global warming and climate change.
Deficit: A deficit occurs when expenses exceed revenues (or taxation), imports exceed exports, or liabilities exceed assets over a specific time period.
Inflation: The rate at which the prices of goods and services are rising in an economy. The consumer price index (CPI) and retail price index (RPI) are two common measures; the opposite of deflation.
Infrastructure investment: Investment into the physical assets of a nation or company, such as roads, railways, bridges, water, sewerage, port facilities, or telecommunications. Given that it usually requires large amounts of money, it is typically undertaken by governments or specialised investment strategies.
Levelized Costs of Energy (LCOE) represent the average, minimum cost per unit of energy required to build and operate a power generation asset over its lifetime, covering construction, fuel, maintenance, and financing. It is used to compare the competitiveness of different energy sources, such as solar, wind, or gas.
Premium: When the market price of a security is thought to be more than its underlying value, it is said to be ‘trading at a premium,’ the opposite of discount.
REPowerEU is a European Union (EU) initiative launched in 2022 to reduce reliance on Russian fossil fuels by accelerating energy savings, diversifying energy supplies, and scaling up renewable energy and clean technologies across Europe.
Volatility: The rate and extent at which the price of a portfolio, security, or index, moves up and down. If the price swings up and down with large movements, it has high volatility. If the price moves more slowly and to a lesser extent, it has lower volatility. The higher the volatility, the higher the risk of the investment.
These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. References made to individual securities do not constitute a recommendation to buy, sell or hold any security, investment strategy or market sector, and should not be assumed to be profitable. Janus Henderson Investors, its affiliated advisor, or its employees, may have a position in the securities mentioned.
Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.
The information in this article does not qualify as an investment recommendation.
There is no guarantee that past trends will continue, or forecasts will be realised.
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