Clean Energy Powers Back: Alt-Energy ETFs Surge in 2025 Comeback
By James Picerno | The Milwaukee Company
Clean energy stocks are outperforming Big Oil by a wide margin this year
The business of building renewable energy sources remains robust
The rise of AI data centers is a key demand driver, pushing renewables toward surpassing coal as the world’s top power source
Stocks in the alternative-energy endured a rough ride following the pandemic, but 2025 looks set to market a sharp rebound for this formerly battered industry.
After four straight calendar-year losses, the tide appears to have turned for so-called clean-energy firms. A benchmark created by TMC Research that tracks the five biggest alt-energy ETFs is up nearly 37% year to date (through Dec. 2). That’s a hefty return premium over this year’s rise for the US stock market, which is up 16.1% via the S&P 500 Index. Clean energy’s rally is even further ahead of conventional fossil fuel energy stocks, which has gained 7.8% year to date, based on the Energy Sector SPDR ETF (XLE), a proxy for Big Oil names such as ExxonMobil and Chevron.
The recovery in renewable energy stocks may strike some observers as surprising, given the policy changes in Washington this year that are widely seen as headwinds for the renewables industry. The One Big Beautiful Bill Act, which was signed into law in July, rolled back several key tax incentives that favored clean energy projects following the passage of the Inflation Reduction Act in 2022.
Yet a combination of factors has sparked a rally this year. At the core of the bullish climate for these stocks: demand for energy is increasing, and renewables are increasingly part of the solution.
A Green Energy Tailwind
From an investment perspective, the selling in previous years may have went too far and disconnected from the business prospects. As a result, the sector started 2025 with deeply discounted valuations. At one point in the year, stocks in this corner traded at a record discount of 67% relative to global stocks, according to analysis by Reuters.
While investor sentiment for green energy has been fickle, the business has been consistently bullish. Growth in renewable energy capacity continues to rise at a robust pace. Renewable energy is projected to soon surpass coal as the world’s leading source of electricity, if it hasn’t already, marking a historic shift in global power generation, according to the International Energy Agency (IEA).
Adding to energy demand is the surge in the rapid use of artificial intelligence (AI) data centers. The growth of AI is straining energy systems, with data centers and advanced chips among the fastest-rising electricity users. In the US, data centers could reach 8.6% of total power demand by 2035—double today’s share, according recent IEA forecasts.
Reading the writing on the wall, several big-tech firms, such as Microsoft, Amazon and Google, have announced billions of dollars for developing renewable-energy projects. A similar trend is playing out globally as more firms target renewable energy projects. Bloomberg NEF, a data firm, estimates that global investment for new renewable energy sources reached a record $386 billion in the first half of this year.
While the One Big Beautiful Bill Act has created headwinds for clean energy, energy-project developers have been adapting. Meanwhile, robust growth for energy has kept investment monies flowing into new projects.
Crux, a finance tech firm, reports that total project lending in the US clean energy industry rose $86 billion in the first half of 2025, up from $80 billion in the comparable period for 2024.
“The market continues to diversify, and, over the long term, a diverse array of technologies is expected to support sustained market volumes,” Crux notes. “The economics of clean energy investment are more compelling than ever, due to rising power demand and elevated electricity costs across the US.”
