Private Equity Shifts Focus to Fossil Fuels, Outpaces Renewables

What's New: 

Private equity investment in fossil fuel companies surged 131% year-over-year to $15.31 billion in 2024, with momentum accelerating in the latter half of the year when oil and gas investments ($10.17 billion) substantially outpaced renewables ($5.14 billion), according to a recent S&P Global Market Intelligence report.

Why It Matters: 

This reversal signals a significant shift in global investment strategies as private equity firms capitalize on major oil and gas companies divesting assets while also responding to growing energy demands from emerging sectors like AI that require reliable baseload power.

Big Picture Drivers:

• Divestment opportunities are expanding as major oil and gas companies streamline portfolios, creating openings for private markets in both fossil fuels and renewables.

• Policy uncertainty, particularly in the US with the Inflation Reduction Act on hold, is reshaping investment priorities and creating market instability.

• Demand from the nascent generative AI industry requires consistent energy sources that weather-dependent renewables cannot reliably provide.

• Regulatory differences between regions are directing capital flows, with Europe maintaining more stable clean energy policies compared to the US.

By The Numbers:

• Private equity investment in fossil fuels: $15.31 billion in 2024 (131% increase)

• Renewable energy investments: $25.91 billion in 2024 (64% increase)

• Climate tech private equity deals: $560 million across 26 deals in early 2025

• Largest 2025 fossil fuel deal: KKR's $615.6 million stake in Enilive SpA

• Largest 2025 renewables deal: TPG's $2.34 billion buyout of Altus Power Inc.

Key Trends to Watch:

• Early 2025 data shows renewables rebounding with $3.07 billion across 10 deals versus $930 million for fossil fuels across 11 deals in January-February.

• Climate tech investment continues its multi-year decline since peaking at $16.38 billion in 2021.

• European markets may offer more stable investment opportunities for climate technologies due to consistent regulatory frameworks.

• Agricultural innovation focused on moving away from fertilizers and pesticides represents an emerging opportunity within climate tech.

The Wrap: 

Private equity's strategic pivot toward fossil fuels reflects both practical responses to immediate energy demands and opportunistic acquisitions during industry restructuring, suggesting that despite long-term decarbonization goals, near-term investment priorities are being shaped by market realities and policy shifts.