Market Forces Drive Clean Energy Growth: Investment Outlook For 2025

While recent headlines have largely focused on political disruptions to climate change policy, including the U.S.'s withdrawal from the Paris Agreement and changing energy production regulations, some clean energy investors are betting on an unintuitive outcome: growing momentum in the clean energy transition.

Many veteran investment firms believe that market forces, rather than policy changes, will pave the path for continued growth in sustainable investing.

One example is Angeleno Group, a Los Angeles-based venture capital and growth equity firm focused on next-generation clean energy and climate solutions. As one of the earliest U.S. entrants in the clean tech growth capital space, the firm projects that strong industry drivers in decarbonization and the energy transition will make this a promising year for clean energy and sustain momentum through 2025.

Drawing on over two decades of clean energy investing experience, Angeleno Group's analysis points to market shifts the firm believes are too substantial to reverse — from the plunging costs of renewable energy to economic growth and job creation in domestic clean energy production.

"This is not the first time our industry has bridged opposing administrations with opposing policies," said Daniel Weiss, the firm's co-founder and managing partner. "While there can be a tendency for investors to focus on the impact of administrative changes, in reality, we believe market dynamics tell a more nuanced story."

The evidence supporting this outlook is apparent in the current market. Corporate appetite for clean energy continues to surge, with 2024 marking the seventh consecutive year of record-breaking power purchase agreements. Nearly 70% of Fortune 500 companies now have public climate commitments, up from less than 10% a decade ago.

Meanwhile, the economic case for renewables has never been more attractive. The rapid expansion of data centers and growing electric vehicle adoption are driving unprecedented power demand, prompting U.S. utilities to prepare to scale up electricity production capacity. Concurrently, the levelized costs of solar and wind have fallen 70-85% in the last decade, making these technologies the most cost-effective form of new power generation across most of the globe.

"We seek to invest in foundationally strong, profitable businesses that aren't reliant on subsidies or public funding," Weiss said. "The most important thing to focus on is business fundamentals. The clean energy sector has matured significantly, and current market conditions present particularly compelling opportunities."

Indeed, recent valuation corrections in climate tech, driven by broader private market shifts, have created attractive entry points for investors, even as the sector's underlying growth trajectory remains strong.

Regulatory developments may even accelerate certain aspects of the energy transition. Propositions to expedite federal permits and environmental reviews could benefit large-scale renewable projects. Additionally, the reinvigorated emphasis on domestic manufacturing aligns with the clean energy supply chain build-out that is already underway.

However, this impact will not be uniform across all clean energy subsectors. While geothermal, nuclear, and biofuels may see increased support in the coming years, other sectors, such as electric vehicles, solar, and battery storage, could face headwinds. Yet even here, wild cards exist — Tesla CEO Elon Musk's influence and the increasing bipartisan support for EVs could help maintain momentum in these sectors.

From a global perspective, Angeleno Group noted, climate realities continue to drive action. The past nine years have been the warmest on record, with climate-related disasters in the U.S. alone causing a record $28 billion in damages in 2023. In response, subnational governments are stepping up; 24 states and territories in the bipartisan U.S. Climate Alliance, representing over half of the American population and economy, have committed to net-zero goals. More than 3,000 cities around the world have pledged similar commitments.

The energy transition may fundamentally be a story of technological innovation and market evolution. Policy can accelerate or modulate the pace, but the direction of travel is clear. There appears to be continued drivers that will attract capital seeking risk adjusted returns and long term growth in the sector.