Looking Ahead to 2026

2025 was a roller-coaster year for US renewables. The economic landscape for the sector, which had already been shifting over the last couple of years, has changed significantly. The phase out of financial support from state and federal governments, combined with higher interest rates and the increased cost of capital, has eaten into project returns and has pushed costs back onto developers. In fact, whereas pre-2020 renewables projects saw Internal Rates of Return (IRRs) of 10-15 percent, new project IRRs have fallen to roughly 5-8 percent.

At the same time, the renewable energy market has reached a level of maturity that will enable it to adapt to these changes. Tighter margins mean that project owners are learning to manage and operate their existing assets more effectively for greater and safer gains over time than from building new assets.

Capacity traded also declined by 29 percent in 2024, and investors are moving away from investing in development pipelines, acquiring de-risked, operating assets instead. As such, we view the market as reaching an inflexion point in 2026 with both investors and developers targeting new growth through optimized performance. 

Reflecting this, here are 5 market trends that we anticipate seeing this year:

1. The ‘scale paradox’ – the rapid deployment of renewables has been so remarkable that operational sophistication has struggled to keep pace. Renewable energy assets went from playing a niche role in energy generation to now accounting for more than 40 percent of generation in Europe and 23 percent in the US. The unintended consequence of this is operational debt: operators are finding that the tools and systems that worked for 1GW footprints do not smoothly scale to 10GW multi-technology fleets. Once you reach multi-gigawatt capacity, it is no longer possible to maintain efficiency with more spreadsheets and site managers. 2026 will bring the rise of a new, tech-enabled operational playbook.

2. Hybridization to become the new normal –The importance of hybrid energy asset projects has quickly grown as the demand for 24/7 power from high energy users explodes. The longer runway of tax credit support for battery energy storage (compared to wind and solar) also leaves the door open for longer-term, subsidized development. Solar + storage hybrids are most popular and, in some markets, over 80% of new solar is proposed as hybrid. Operationally, integrating assets and diverse data points exponentially increases complexity. Having the hardware and software to manage hybrid sites will separate the most productive projects from the least productive, raising the bar in 2026.

3. Strategic operators to focus on optimization – as returns compress, costs rise, and renewables penetration increases, operators are leaning towards “both and” growth strategies, investing as much in enhancing existing assets as in portfolio expansion. In the current economic context, just 1-2 percent more yield from operating assets is enough to outperform new build returns. Smart North American operators have observed the rising levels of price cannibalization and curtailment in Europe’s renewables market and will move proactively on optimization this year to maximize the value of their installed capacity and protect its productivity for the duration of its life span.

4. AI journey of discovery – According to Deloitte’s 2026 Renewables Energy Industry Outlook, 76 percent of executives plan to increase AI spending this year. It’s clear that machine learning and artificial intelligence will play a critical role in increasing production from assets – whether by conducting maintenance tasks to reduce downtime or by tracking the root causes of underperformance for operators to prioritize. However, AI will not be able to produce meaningful insights without a clean and harmonious base of data supporting it. Of the many executives ramping up AI investment, only those who have a trusted data foundation will reap the rewards of its implementation. 

5. Portfolio growth – despite the shift towards smarter asset management, the most effective portfolio scalers will continue to build out their pipelines. Several Independent Power Producers announced their intentions to double or triple their capacities last year, and many of these are well placed to do so through strong stakeholder relationships and access to committed capital. Even so, for these strategies to successfully come into fruition, operators will need to take heed of the four trends above and mitigate against the growing complexity risks that their portfolios will inevitably face.

Despite the fresh challenges put before US renewables in 2025, the sector has come out of the other side with impressive resilience and optimism. Although the International Energy Agency’s Renewable Energy report last year lowered growth expectations in the US by almost 50 percent, the industry’s response seems to be focused on delivering growth through alternative means, such as asset optimization. This has always been a priority for renewable energy operators; now it is a priority for all stakeholders.

Albert Hofeldt is Chief Product Officer at Power Factors, which works to optimize every kWh of renewable energy with unified technology from the sensor to the cloud.

Power Factors | www.powerfactors.com