"A look at the numbers illustrates the scale of the transformation, and these are not passing fads but indicators of a structural investment cycle," says Christian Rom, manager of the DNB Renewable Energy fund.
Over the past five years, the energy transition has been a perfect example of the expansion and recession cycle in the financial markets. Between 2019 and the beginning of 2021, zero interest rates, government stimulus measures and decarbonization policy programs propelled the valuations of companies linked to solar, wind and hydrogen energy to record levels.
The inflationary surge, the rise in interest rates and massive supply chain disruptions then led to a correction that lasted several years. Margin forecasts were revised downward, valuation multiples were considerably compressed and many companies had to rethink their business models as well as their investment plans.
Today, the situation is beginning to change, but differently from the first wave of enthusiasm. The emphasis is less on an individual wind turbine or the next solar park than on the systemic electrification of the entire economy. The global electrification rate currently represents about 20% of total energy consumption. Over the next ten to twenty years, that share could reach 60 to 70%.
The economic logic underpinning this shift is clear: electrons are more efficient than molecules. While combustion engines lose nearly two-thirds of their energy as heat, electric motors convert about 90% into kinetic energy. In the long term, these efficiency gains have a greater impact than temporary fluctuations in interest rates.
In Europe, annual investments in electrical grids are expected to be multiplied by four or five over the next three to five years.
Electricity demand is therefore rising again. After about fifteen years of stagnation, consumption in the United States is now increasing by 2 to 3% per year. The drivers of this growth are data centers, artificial intelligence, reindustrialization trends and electromobility.
Investment spending in data centers amounts to around one trillion US dollars. Meta has raised its forecasts to $75 billion, and Alphabet Inc. is following suit. These investments represent more than one percentage point of global gross domestic product, and each of these facilities requires a secure and predictable electricity supply. This changes the constraints of the energy transition: today, the main problem is not at the level of production capacity, but in the electrical infrastructure.
In Europe, annual investments in electrical grids are expected to be multiplied by four or five over the next three to five years in order to support electrification, decentralization and the increasing volatility of the energy system. Permitting procedures, construction lead times and supply chains make this expansion complex, while opening up a significant field of structural investment.
It is above all equipment manufacturers along the value chain who benefit. Cable manufacturers such as Prysmian Group and Nexans are recording a sharp increase in their order books as well as longer delivery times. Transformer and motor manufacturers, like WEG S.A., must increase their production capacities. As for Schneider Electric, it benefits from switchgear, automation solutions and the electrification of buildings and data centers.
Semiconductor manufacturers such as On Semiconductor or Monolithic Power provide essential components for power conversion and improving energy efficiency. Even smart electricity meters are taking on strategic importance: with the increase in electricity from solar installations, battery storage systems and electric vehicles, the need for real-time data on grid stability and load distribution is growing.
The energy transition thus appears less as a matter of ideological debates than as a gigantic industrial undertaking.
At the same time, the battery market is experiencing rapid growth. In 2025, global volume increased by about 40% compared with the previous year. Storage systems are becoming the link between volatile production and steady demand. Market leaders, CATL and BYD, are investing heavily in research and the expansion of their production capacities, while companies like Albemarle are benefiting from strong lithium demand.
As the world leader in offshore wind, Ørsted has to contend with political uncertainties in the United States since Donald Trump's return. Projects already 60 to 80% complete have been halted and their financing has become more difficult. Nevertheless, the free cash flow yield was about 17% at the time of the capital increase, even assuming that not all US investments would be recovered. Offshore wind remains strategically relevant from a European perspective, notably for reasons of energy security after the Russian attack on Ukraine.
Finally, it is interesting to note that the focus is not solely on traditional renewables. Darling Ingredients, the largest producer of biodiesel in the United States, collects slaughterhouse waste worldwide, converts fats into biodiesel and derives by-products such as collagen for the cosmetics industry.
A look at the numbers illustrates the scale of the transformation. One trillion dollars for data centers, 40% growth in the battery market, a quadrupling or even quintupling of investments in grids in Europe, double-digit free cash flow yields at some project developers, as well as expected portfolio earnings growth of more than 20%: these are not passing fashion phenomena, but indicators of a structural investment cycle.
The energy transition thus appears less as a matter of ideological debates than as a gigantic industrial undertaking. Those who invest today are not primarily betting on visions, but on transformers, cables, storage systems, industrial software and robust cash flows. The real investment theme is only just beginning: it is increasingly playing out in grids and infrastructure, and no longer only at the foot of wind turbines.
This article has been automatically translated using AI. If you notice any errors, please don't hesitate to contact us.
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