Barclays Bankers Warn Distressed Valuations Can Hit Clean Energy
(Bloomberg) -- In an age dominated by war, inflation and AI, investors may be underestimating the risks now associated with renewable energy assets.
That’s according to a group of bankers at Barclays Plc, who just published a paper laying out their views on the future of the clean energy transition.
“The classic stranded-asset story focused on fossil fuels, but what we are now seeing is stranded-like outcomes also emerging for renewables,” Daniel Hanna, group head of sustainable and transition finance and a contributing author to the paper, said in an interview.
He says risks are now arising for renewables where “systems integration fails.” And if clean energy can’t connect to the grid, it starts to risk obsolescence.
Despite record investments in renewable energy, Barclays notes that global fossil-fuel consumption has never been higher. And with an escalating military conflict in the Middle East, the price of oil and gas is once again soaring. The development highlights that having secure and affordable access to energy continues to be a bigger priority globally than reducing emissions.
Valuations will therefore depend on how efficiently an energy source can feed into distribution systems, according to the Barclays paper, whose main author was Niall Mac Dowell, the bank’s head of climate technology and a professor of energy systems at Imperial University.
The observation shouldn’t be seen as a critique of renewables, but as a reflection of what happens when energy generation of any type moves fast and “the grid doesn’t keep up,” said Hanna.
Renewables are regularly hampered by long queues to connect to the grid, and by a system in which grid operators often have to pay wind farms to shut down when excess power is generated. Barclays says such a dynamic opens the door to “a new class of distressed energy transition opportunities in under-connected renewables.”
It’s a development that’s been percolating for a while now.
While solar and wind will “undoubtedly” be the stars of the energy transition in the long run, new renewables capacity is useless without the infrastructure to transport that clean electricity from where it’s produced to the end user, BloombergNEF noted as far back as 2023. In December last year, BNEF said grids remain a bottleneck with queues for new demand “lengthening rapidly” across the US and Europe.
In its 2025 renewables report, the International Energy Agency noted that issues with distribution, transmission and interconnection capacity have curtailed the pace at which new renewable power plants can be connected to the grid, threatening project delays, higher costs and reduced auction participation.
For investors, these risks can be translated into opportunities to generate market-beating returns, according to the Barclays report.
“Where you are able to identify these bottlenecks and provide mechanisms to ease them, that will then create alpha,” said Hanna, who noted the report doesn’t reflect the bank’s house view but that of the authors.
Investors would do well to rethink the energy transition more generally, according to Barclays. It’s no longer just a “technology theme” centered exclusively on wind, solar and batteries, but increasingly about looking for opportunities in the grid and associated infrastructure.
“The next phase of the transition is really about systems design, the overall way it comes together, and the value is going to get created by tackling the bottlenecks that slow that down,” Hanna said.
From the Barclays Paper:
“The three dominant macro themes - climate, AI, and defence - are converging into a single industrial-capital cycle. All three rely on grids, firm capacity, metals, materials processing, and resilient supply chains.”
Capital investment in the world’s power grids grew 17% in 2025, marking a second straight year of double-digit growth, according to BNEF. The theme has drawn major investors, including the world’s largest sovereign wealth fund. Norges Bank Investment Management said last week it sees transmission infrastructure “as both a strategic investment opportunity and an essential enabler of the energy transition.”
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