High interest rates hit renewable energy harder than natural gas: Wood Mackenzie

Emma Penrod | Source: Utility DIVE | Posted 05/08/2024

A 2-percentage-point increase in interest rates pushes up the levelized cost of electricity for renewables by as much as 20%, according to an analysis by Wood Mackenzie. Rising interest rates have hit renewable energy harder than fossil-fuel based sources of energy, and could also impact the viability of nascent energy technologies like low-carbon hydrogen, according to an analysis published in April by Wood Mackenzie.

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Rising interest rates are affecting renewable energy more than fossil fuel-based sources and could impact emerging technologies like low-carbon hydrogen, according to an analysis by Wood Mackenzie. A two percentage point increase in interest rates could raise the levelized cost of electricity from renewables by up to 20%, with utility-scale solar being notably impacted.

This increase in borrowing costs is narrowing profit margins for renewable energy developers, potentially slowing down development. Additionally, the push for more domestic manufacturing in the U.S. could be hindered by higher interest rates, making it more costly to build new factories compared to China. The uncertainty of when the U.S. Federal Reserve will lower interest rates adds to the challenges faced by the renewable energy sector in the current high-interest environment.

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High interest rates hit renewable energy harder than natural gas: Wood Mackenzie

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