Dear Reader,
Renewable energy stocks had a rough day last week as the market weighed the impact of higher interest rates in 2022.
The sell-off was broad, and some of the biggest names in renewables dropped double digits.
Enphase Energy, Bloom Energy, Maxeon Solar Technologies, and Daqo New Energy, at one point, were all down over 12% last week.
This can all be tied back to those pesky rate increases initiated by the Federal Reserve.
During a panel at the International Monetary Fund Debate on the Global Economy, Federal Reserve Chair Jerome Powell said a 50 basis-point rate increase is on the table for its May meeting.
We all knew that rates would rise, but it seems the speed and rate of change is what's jarring to investors.
For renewable energy companies, this is unwelcome news because most borrow money to fund projects and intend to pay back debt through revenue generated years or decades in the future.
So, what now?
While it's not good for renewable energy manufacturers or project developers to see rates go up, this isn't entirely surprising.
The industry has been expecting rate increases, and investors have been selling renewable energy stocks in anticipation of higher rates impacting growth.
What's worth noting is that higher rates will lead to higher required rates for electricity sold to consumers or utilities. But, we're seeing inflation like this across the board.
While no one in renewable energy likes to see interest rates go up, this isn't something that presents a long-term concern.
Long-term costs continue to decrease for wind, solar, and hydrogen energy sources.
These tailwinds are more important than a short-term change in interest rates that investors were expecting, anyway.
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