Renewables Overtake Coal: A Turning Point for Valuations

For the first time in history, renewable energy has overtaken coal as the world’s largest source of electricity generation. According to new data from global energy think tank Ember, solar and wind not only met all of the world’s additional power demand in the first half of 2025, they also contributed to a slight decline in coal and gas use.

It’s a milestone moment for the global energy transition. Yet, behind the headline lies a complex picture. The pace of change, and its impact on value differs sharply across regions, technologies, and policies. As the clean energy landscape evolves, so too does the way investors, operators, and valuers assess risk and opportunity.

At Hickman Shearer, where we specialise in understanding the true value of capital assets, this shift represents more than a symbolic victory for renewables. It’s a defining inflection point for how renewable infrastructure, energy assets, and related supply chains are being valued globally.

Global Investment Trends and Market Activity

According to BloombergNEF, investment in new renewable energy projects reached a record $386 billion in the first half of 2025. While that headline figure demonstrates continued investor confidence, the underlying mix tells a more selective story. Utility-scale wind and solar financing fell by around 13% year-on-year, while smaller-scale and hybrid projects picked up the slack.

At the same time, large infrastructure transactions continue to shape valuation benchmarks. Ares Management’s recent US $2.9 billion acquisition of a 49% stake in EDPR’s renewable assets in the US shows continued appetite for quality, de-risked platforms with contracted cash flows.

Yet in some markets, particularly in the US, policy uncertainty has introduced volatility into forward valuations. The International Energy Agency has halved its forecast for US renewable capacity additions this decade, citing policy reversals and higher financing costs. By contrast, China continues to surge ahead, adding more solar and wind capacity than the rest of the world combined and reinforcing its dominance in clean tech manufacturing and exports.

From a valuations perspective, these regional differences matter. Capital continues to flow into the sector, but the cost of capital, regulatory stability, and contract structures are increasingly driving the divergence in asset values.

The Key Valuation Levers

When valuing renewable energy assets; from operational solar farms to wind portfolios and hybrid storage systems, several themes are defining market sentiment this quarter:

1. Revenue Certainty and Contract Structures

Valuations hinge on visibility of cash flow. Long-term Power Purchase Agreements (PPAs) or feed-in tariffs continue to underpin higher valuations, while merchant-exposed projects are being priced with a wider risk margin. As more markets shift toward variable pricing models, valuers are adjusting discount rates accordingly.

2. Cost of Capital and Interest Rate Pressure

Higher borrowing costs are having a measurable impact on valuations. Renewables are capital-intensive, and elevated interest rates have raised hurdle rates, compressed transaction multiples, and slowed refinancing activity. The effect is particularly pronounced in wind, where project costs remain high and installation timelines long.

3. Technology and Storage Integration

Battery storage and hybrid generation are becoming key differentiators in valuation modelling. Projects that can provide flexible, dispatchable power are commanding a premium, particularly in regions with intermittent supply challenges. However, uncertainty around long-term performance, degradation rates, and evolving regulatory frameworks for storage continues to temper valuations.

4. Policy and Incentive Risk

Across the U.S. and Europe, the valuation of renewable assets now reflects a layer of political risk. The potential rollback of subsidies, tax incentives, or import tariffs directly influences the stability of future returns. In contrast, developing regions such as Asia and Africa, where renewables are increasingly driven by economics rather than policy, are showing accelerating growth and investor confidence.

5. Exit Multiples and Liquidity

Comparable transactions remain a cornerstone for valuation benchmarking. Deals such as the Ares–EDPR partnership provide valuable reference points for market multiples and sentiment. However, with fewer large-scale M&A transactions this quarter, valuers are relying more heavily on DCF analysis and scenario modelling to assess future exit potential.

A Market at an Inflection Point

The Q3 data underscores that we’ve entered a new phase of the energy transition, one where clean power is keeping pace with demand growth, as Ember describes it. Solar continues to lead the charge, accounting for over 80% of global generation growth this year, while battery storage and grid flexibility solutions are increasingly central to future value creation.

However, this transition is uneven. While emerging markets are scaling renewables at remarkable speed, often thanks to rapid cost declines and improving grid economics, developed markets are facing higher financing costs, slower permitting, and in some cases, weaker wind and hydropower yields.

For valuers, investors, and operators alike, that means navigating a market defined not by universal growth, but by selectivity. Capital is still flowing, but it is more discerning, seeking projects with robust off-take contracts, integrated storage, and reliable long-term returns.

Outlook: Recalibrating Value

As renewable generation surpasses coal, the narrative around value is shifting from potential to performance. Assets are no longer simply being valued for their contribution to decarbonisation; they’re being measured on their ability to deliver stable, resilient, and bankable returns in an increasingly competitive environment.

From our perspective at Hickman Shearer, this represents a maturing market, one where the valuation of energy assets demands greater technical understanding, local insight, and forward-looking analysis.

The headlines may be about renewables overtaking coal, but the real story for Q3 2025 lies in how value is being recalibrated across the global energy system, from the financing of infrastructure to the fair value of the assets powering the transition.

About Hickman Shearer

At Hickman Shearer, we specialise in RICS and ASA-certified capital asset valuation, management, and sales services providing robust, independent valuations that support investment, financing, and strategic decision-making at every stage of the asset lifecycle. Our expertise extends across the renewables and green infrastructure sector, from solar and wind to battery storage and energy transition technologies, helping businesses understand the true worth of their assets in a rapidly evolving energy landscape.

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