Key Takeaways
- UK government has said it is “doubling down” on domestic renewable energy as the Iran war highlights the economy’s sensitivity to energy supply shocks.
- Stocks with exposure to the UK’s renewables push include SSE, Centrica, and National Grid.
- Investors could benefit from the change of sentiment, fund managers say.
The UK’s aspiration to get off what the energy secretary Ed Miliband calls “the fossil fuel rollercoaster” took another step forward this month as the government announced plans to unlock up to 10GW of renewable power and weaken the link between gas and wholesale electricity prices.
This is part of Labour’s plans to “double down” on clean energy in its quest for greater energy security amid the Iran war, which has laid bare Britain’s sensitivity to energy supply shocks.
When the chancellor, Rachel Reeves, unveiled plans this month to raise windfall taxes on low-carbon generation to help shield consumers from soaring energy bills, shares in London-listed utilities like SSE SSE and Centrica CNA fell.
Raising the “generator levy” on nuclear and renewable energy projects that date before 2017 will hit the profits of utilities with these assets in the short-term, says Morningstar energy analyst Tancrede Fulop. But this recent weakness came after a strong period of share price gains for UK listed stocks in the sector amid soaring electricity prices following the outbreak of war on Feb. 28. Both Centrica and SSE have made their best start to a year in share price terms.
Energy Stocks in Focus: UK and European Utilities
Investors are now reassessing which energy stocks—across the UK and Europe—could benefit most from the renewable energy transition.
Energy Stocks to Watch in 2026
- SSE SSE – Major UK renewables developer (wind, hydro, solar)
- Centrica CNA – British Gas owner with exposure to gas and nuclear
- National Grid NG. – Key player in grid infrastructure and energy storage
- Iberdrola IBE – Owner of ScottishPower, strong UK renewables exposure
- RWE RWE – Offshore wind and gas generation
- Ørsted ORSTED – Global offshore wind leader
Centrica and SSE currently trade close to their Morningstar fair value estimates, while National Grid’s 4-star rating suggests potential upside.
SSE is a leading developer and operator of renewables in the UK, through both onshore and offshore wind farms, hydro power and solar.
Centrica is among the largest suppliers of gas and electricity to British homes through its ownership of British Gas. The energy supplier has benefited from higher gas prices due to its production fields in the North Sea. The company is also exposed to the buildout of nuclear energy through its 20% stake in the UK’s existing nuclear energy operations.
Centrica has a 15% equity stake in Sizewell C, a nuclear reactor on the Suffolk coast currently under development, that is unlikely to be operational until the mid-to-late 2030s.
Morningstar’s Fulop also highlights European stocks Iberdrola IBE (owner of ScottishPower), RWE RWE (offshore wind and gas-fired power plants), and Orsted ORSTED (offshore wind) as stocks with direct UK energy exposure. RWE and Orsted have posted strong returns in 2026 so far, and none of these stocks offer attractive entry points at current prices, Morningstar analysts say.
The Long-Term Investment Case for UK Renewable Energy Stocks
And the long-term direction of travel is favorable for UK renewable stocks, according to Fulop, if the government’s plans spur new renewable investment.
This presents opportunities for patient investors in the sector, experts say.
“From a long-term perspective, the current geopolitical crisis gives further momentum to the push towards energy security and the renewable transition,” says Saftar Sarwar, chief investment officer at Binary Capital.
“For investors, there could be a profound benefit in the change of sentiment, reinforcing the potential upside for the renewable sector as governments accelerate the deployment of domestic, low-carbon infrastructure to insulate their economies from global energy volatility.”
Grid and Storage Investment Is Critical
One way for investors to tap into this theme is to look at alternatives to “pure-play” utilities.
While the buildout of new renewable energy-producing assets is important to the government’s plan, investment in grid and energy storage infrastructure could be equally critical to improve efficiency.
National Grid NG., which owns and operates electricity networks in the UK, is likely to benefit from upgrades to energy grid infrastructure and storage improvements.
“[National Grid] is in a strong position to make effective long-term capital spending decisions, and we see the value of its assets as attractive,” says David Harrison, fund manager and head of sustainability at Rathbones Asset Management.
National Grid’s 4-star rating means Morningstar analysts view its shares as undervalued.
MIGO Opportunities Trust comanager Charlotte Cuthbertson says battery storage is an “overlooked” component of the transition.
“Battery storage allows the plethora of energy from solar and wind farms in the UK to be used when energy demand is at its highest, rather than just when the sun shines or the wind blows,” she says.
UK Utilities: Not a One-Way Trade
A combination of climate change urgency and favorable government policy seems to be an obvious benefit for UK stocks with renewable energy. Whether stocks with exposure to the sector ultimately benefit, however, is far from straightforward, Fulop says.
“If you look back to 2022, after the Ukraine war and the energy crisis that followed, pure-play renewable developers actually underperformed because of cost inflation and the rise in interest rates,” he says.
As capital-intensive assets, renewables are sensitive to interest rates and inflation. Due to the significant up-front costs associated with building the assets, renewable infrastructure projects can rely heavily on debt financing.
Because of this, Fulop adds, that while deployment of these assets is likely to accelerate as the UK builds out cleaner domestic energy sources, the net effect on stock performance depends heavily on inflation and the interest rate environment. UK interest rates have been cut since 2024 but financial markets are suggesting that the cost of borrowing could increase as policymakers look to combat rising inflation.
“Investors should be aware it’s not a simple one-way trade,” he says.
A Cautionary Tale from UK Renewable Investment Trusts
Though the need for greater domestic energy production remains clear, many listed renewable funds have struggled in recent years.
Shares in pure-play renewable infrastructure investment trusts such as £2 billion Greencoat UK Wind UKW, the UK’s largest, have languished at wide discounts to the valuation of their underlying assets as higher interest rates and inflation have weighed on sentiment towards the sector. Over one year this trust’s share price is off around 12% and nearly 25% over five years.
“It’s worth remembering that these assets proved their resilience during the energy shock following the Russia–Ukraine war, generating strong cash flows as power prices surged,” says Chelsea Financial Services head of investments James Yardley.
“More recently, however, a combination of political uncertainty, shifting regulatory frameworks and operational headwinds including cost inflation, negative power prices and weaker wind resource has weighed heavily on performance.”
The sector has offered investors relative protection from the wider Iran war selloff so far. During the month of March, the AIC Renewable Energy Infrastructure sector declined by 1.3%, compared to a fall of 6.7% for the FTSE All Share index.
