Those on the left are eager for the Fed to cut interest rates, arguing that higher rates are hindering “the nation's ability to combat the climate crisis.” [emphasis, links added]
As media speculation grows about the prospect of a rate cut by the Federal Reserve in September, Clean energy companies and their backers on Wall Street hope the expected rate cuts will ease the heavy borrowing costs that have plagued “big renewable energy” over the past two years.
Charlie Gailliot, global climate co-head at private equity firm KKR, said: “The energy transition is capital intensive. In a lower interest rate environment, you will see tailwinds for the renewable energy industry.
Semafor's Tim McDonell wrote:
But rates hit a particular sore spot for the industry: its ability to profit in a volatile, cutthroat power market. Cheaper borrowing means higher profits and provides the industry with a cushion, albeit a modest one, against the political risks of the energy transition amid President Donald Trump's campaign.
Renewable energy began to go mainstream in the 2010s, when interest rates were at or near zero, a supportive environment where cheap borrowing made it easier for project developers to meet investors' profit expectations.
Jen Harris, director of economic and social initiatives at the William and Flora Hewlett Foundation, wrote that the Fed's efforts to raise interest rates to combat inflation “are slowing our efforts to combat climate change”:
Unnecessarily high interest rates also harm our fight against climate change. Clean energy projects typically involve higher upfront financing costs, and the higher the interest rates, the more expensive the financing costs.
A 2020 report estimated that increasing rates from 3% to 7% could increase the cost of U.S. renewable energy projects by about a third. Of course, higher interest rates hurt poor consumers who rely on variable credit card rates and auto loans.
In March, Senators Elizabeth Warren (D-MA) and Sheldon Whitehouse (D-RI) wrote to Federal Reserve Chairman Powell arguing that rising interest rates are hindering the U.S. transition to green energy:
Your decision to rapidly raise interest rates starting in 2022, and the possibility that interest rates may remain too high for too long, Hindering the deployment of renewable energy technologies and delaying the significant climate and economic benefits these projects would bring.
While demand for clean solar, wind and electricity continues to grow, driven by federal tax incentives under the Inflation Reduction Act (IRA), Federal Reserve interest rates have hindered progress and stymied the economy. The country’s ability to respond to the climate crisis.
…
Your rate hikes have jeopardized the IRA's chances While the Fed’s mission is to create new green jobs and lower power costs “Promote full employment, stable prices, and moderate long-term interest rates in the U.S. economy.”
Senate Democrats concluded: “When you think about the Fed's interest rate policy at the upcoming March FOMC meeting and beyond, We urge you to cut rates throughout 2024 so progress on the clean energy package can continue and the climate and economic benefits of these projects.
Read more at Breitbart News
