Stocks in companies dedicated to energy efficiency and renewables have surged forward this summer on mounting evidence that governments — and markets — are taking alternative energy more seriously.

The WilderHill Clean Energy Index (ECO on the American Stock Exchange) rose in value by almost 20% during June and July (see graph) as high oil prices, together with various corporate and political initiatives, bolstered investors' confidence in the sector.

Credit: SOURCE: WILDERSHARES

The expected passage of an energy bill by the US Congress has fuelled positive sentiment, says Robert Wilder, a former political scientist at the University of California at Santa Barbara, whose company runs the index. Although the final bill won't include targets for renewable energy production, as some had hoped, its various measures have still boosted share values in the sector. “There are enough subsidies in there for everyone,” Wilder says.

He adds that the healthier performers in the index — such as Connecticut-based Distributed Energy Systems, which sells systems for supplying power from multiple sources into decentralized markets — are doing well on the basis of actual revenues and profits, rather than on speculation about future sales.

Michael Liebreich, head of London-based New Energy Finance and a member of the WilderHill index's advisory board, says an energy bill passed in China and the announcement of an environmental strategy by General Electric in May (see Nature 435, 410; 2005) have also improved market sentiment. The investment climate in clean energy, he says, “is moving from a gambling mentality to a more realistic phase, where risks are better understood by sophisticated investors”.