The Iran war and escalating tensions across the Middle East have triggered turmoil in global energy markets. Oil and gas prices have risen sharply after disruptions in the Strait of Hormuz, through which 20% of the world's oil supply flows, and attacks on Gulf refineries and processing plants.
For many governments and businesses, these events echo the shock that followed Russia’s invasion of Ukraine in 2022. Securing a stable and affordable energy supply is again at the top of their agenda; the priority is to diversify away from vulnerable fossil fuel routes and to reassess long‑term energy strategies.
Beyond this immediate crisis, a deeper structural shift has taken place since 2022 that matters for investors. Renewables have become much more affordable. On a levelised cost basis, new wind and solar projects are now typically cheaper than gas, coal and nuclear plants (Fig. 1).
Selected historical average LCOE values* (USD/MWh)
* Reflects the average of the high and low LCOE for each respective technology in each respective year.
** Given the limited public and/or observable data available for new-build nuclear projects, the LCOE presented herein reflects Lazard’s LCOE v14.0 results (2020) adjusted for inflation and based on then-estimated costs of the Vogtle Plant.
Source: Lazard
What is more, the time it takes to bring these clean sources of energy to market has shortened considerably. It can now take 12 months or less to build a utility-scale solar farm, compared with the many years required for nuclear and fossil fuel alternatives (Fig. 2).
Source: Pictet Asset Management, 2025. NextEra 2025 Fourth Quarter and Full-Year 2025 Earnings Presentation. * Load factor is the ratio of the average load (power consumption) to the peak (maximum) load during a specific period. It measures how efficiently electricity is utilized, with a high load factor indicating consistent, efficient use, and a low load factor indicating high, intermittent demand - estimates here are based on US market
Of course, renewables’ drawbacks remain. They are an intermittent source of power, generating energy only when the sun is shining and the wind is blowing. This means their average output over time is well below their installed capacity, resulting in lower load factors than conventional plants that can run steadily most of the day.
But technological innovation is changing all this.
Advances in batteries and other storage technologies are allowing renewables to narrow this efficiency gap, integrate more smoothly into power systems and improve their ability to match supply with demand.
This marks a turning point in clean energy's “energy trilemma”, or that of balancing three competing challenges: affordability (accessible pricing), security (having reliable supply) and sustainability (avoiding climate change impacts).
Neither fossil fuels nor renewables have been able to address this problem.
Fossil fuels have traditionally been relatively cheap, easy to ship and store, but their use contributes to climate change.
Renewables, by comparison, were clean but costly, dependent on subsidies , and unreliable because of their variable output.
Today, that picture has flipped. Fossil fuel prices have become more volatile and less predictable. The Iran war has served as a reminder of the fundamental security risk energy importers face when they are reliant on just a handful of oil and gas producers located in geopolitically volatile areas of the world.
Conversely, renewables’ security profile has improved, thanks to advances in storage and grid flexibility. This leaves renewables uniquely positioned to address all aspects of the energy trilemma, and to eventually supplant fossil fuels as the default energy option. What’s more, switching to solar and wind power, often generated within borders, allows governments to replace imported fossil fuels with home-grown power over time.
Europe’s power system, for example, has remained resilient through the latest energy shock, thanks to the efforts made since 2022 to cut dependence on imported gas and expand wind and solar. For the first time, wind and solar generate more electricity than fossil fuels in the region. Adding hydro lifts renewables to almost 50% of the power mix.
No grid, no transition
These developments have significant implications for investors in clean energy.
Funding the backbone of the power system that keeps an electrified economy running – rather than just investing in solar panels and wind turbines - is becoming an increasingly attractive way to tap into the clean energy transition.
This involves investing in companies that operate power grids and network infrastructure, produce electric components, heating and cooling systems and sustainable building materials – areas where long-term structural growth is most visible.
Grids, for example, which deliver energy from producers to consumers, offer investors opportunities to invest in tangible and hard assets managed using well-established business models.
These are complex networks consisting of power generation stations, transmission lines and distribution hardware such as transformers, switchgear and circuit breakers.
One large network due for an urgent overhaul is Europe's. It is one of the world's largest systems spanning 36 countries but one which, after years of underinvestment is not fit for a modern economy.
Around 40% of the network is over 40 years old, closer to the end of the typical lifespan of power lines. An ageing grid and interconnectors mean higher power losses and more constraints on connecting new renewables, increasing the risk of outages – a typical bottleneck for the clean energy transition.
The European Commission estimates investments of over EUR 580 billion are required to meet electricity demand, which is expected to increase by 60% between 2023 and 2030.https://energy.ec.europa.eu/topics/infrastructure/european-grids_en
Even before the Iran war, tech giants like Amazon, Google and Microsoft – Europe’s largest electricity consumers – were calling on the EU to accelerate electrification and improve the continent’s power infrastructure as grid congestion and slow connection threaten decarbonisation and industrial competitiveness.https://esgnews.com/amazon-google-and-industry-leaders-form-giga-to-accelerate-europes-grid-overhaul/
It is worth noting that Europe's problems aren't unique. US infrastructure is of a similar age profile, which means its grid is also ill-equipped for a world of EVs, digitalisation and a push for reindustrialisation.
Listed utility companies offer an attractive route for investors to capitalise on the grid overhaul that is unfolding. This is because utilities, responding to the urgency, are re-allocating capital toward networks, in what could herald a multi-year investment cycle designed to support their long-term earnings growth. Spain’s Iberdrola, for example, plans to allocate two-thirds of its capital spending to network upgrades, calling the investment a “once-in-a-century opportunity”.
Electric equipment makers, which provide the nuts and bolts of energy infrastructure, should also benefit for this shift in priorities.
These companies are already experiencing structurally higher demand for transformers, switchgear, cables and other components needed to reinforce and expand power grids. The American-Irish manufacturer Eaton, for example, has seen its order backlogs multiply by five times since 2020, which attests to its robust, multi-year revenue pipeline.
The balance of the energy trilemma is shifting. Clean power now offers stability at lower cost, making it the clear choice for governments, businesses and investors.
Boosting energy efficiency in buildings
Responding to rising energy costs, businesses are also investing in measures to increase energy efficiency. This makes sense as heating and cooling can account for up to 80% of household energy use in certain regions, and a large share of commercial building operating costs.
Companies supplying energy efficient heating, ventilation and air conditioning (HVAC) solutions represent another set of investment options for clean energy investors.
A silver lining in a world of higher and volatile energy prices, payback periods for energy efficiency investments are shortening. This is illustrated by a recent retrofit of 55 Water Street in New York – one of the largest commercial buildings in the city. Trane Technologies, which led the project, installed an advanced thermal system that is three times more efficient than traditional heating methods. This lowered overall energy intensity by nearly a fifth, cutting emissions and saving the building management USD 1.5 million in annual utility costs.https://www.trane.com/commercial/north-america/us/en/about-us/newsroom/case-studies/commercial-real-estate/55-water-street.html
Elsewhere, companies providing light and sustainable materials stand to benefit from a wave of reindustrialisation and infrastructure buildout. In the US alone, companies have announced trillions of dollars of megaprojects aimed at reshoring manufacturing, expanding data centre and AI computing capacity, and reinforcing physical infrastructure.
As the Gulf war exposes the security risks of relying on fossil fuels, and renewables become cheaper and quicker to roll out, the balance of the energy trilemma is shifting. Clean power now offers stability at lower cost, making it the clear choice for governments, businesses and investors. Today’s crisis, therefore, could spur a new wave of investment in clean energy.
