The Fed needs to cut rates to help the struggling clean energy sector, Elizabeth Warren says
The Fed needs to cut rates to help the struggling clean energy sector, Elizabeth Warren said in a letter to Fed Chair Jerome Powell.
Along with Sen. Sheldon Whitehouse, Warren said that high interest rates have "completely tanked" major renewable infrastructure projects which are heavily debt-financed.
The letter also said high rates have pushed out increases in EV production and forced companies to axe their offshore wind projects.
High interest rates are hurting the clean energy sector, and the Fed needs to do something about it, Elizabeth Warren said.
In a letter written to Fed Chair Jerome Powell on Tuesday (before the Fed's March meeting), Sen. Warren said that the central bank's extreme rate hikes have stymied progress in the energy transition.
"Your decision to rapidly raise interest rates beginning in 2022, and the potential that they may remain too high for too long, has halted advances in deploying renewable energy technologies and delayed significant climate and economic benefits from these projects," Warren, along with Sen. Sheldon Whitehouse, wrote to Powell.
Clean energy projects are an incredibly debt-reliant sector of the economy, and the Fed's elevated rates have pinched those companies by jacking up the cost of borrowing money. Last year, clean energy stocks were some of the worst-performing companies in the S&P 500, and they're still limping along. Amid a record-setting stock market, the iShares Clean Energy ETF is down almost 12% this year alone.
In their letter, Warren and Whitehouse noted that the high interest rates have buffeted progress in areas including electric vehicle production, clean energy projects, and offshore wind.
They highlighted that EV makers have pushed out plans to increase manufacturing, underscored by announcements like Tesla's lower production forecasts because of "higher borrowing costs."
Several clean energy projects have taken a hit, too, with companies backing out of offshore wind projects. Battery storage developers are concerned about meeting their goals in the high-rate environment, they said.
Finally, they added that the elevated rates are beginning to impede the Biden administration's goals to increase the 41 megawatts of current offshore wind capacity to 30,000 megawatts by 2030. Because those projects are financed by debt — as much as 85% to 90% of capital expenditures — high rates have in some cases "completely tanked" major renewable infrastructure projects across the country.
"Your interest rate increases have jeopardized the IRA's opportunities to create new green jobs and cut electricity costs, despite the Fed's mission to 'promote maximum employment, stable prices, and moderate long-term interest rates in the U.S. economy,'" the senators wrote to Powell.
They added: "We urge you to cut interest rates throughout 2024 to allow for continued progress on clean energy projects and the climate and economic benefits these projects provide."
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