Why High Interest Rates Hurt Clean Energy Stocks More Than Oil Stocks

  • 📰 MarketWatch
  • ⏱ Reading Time:
  • 44 sec. here
  • 2 min. at publisher
  • 📊 Quality Score:
  • News: 21%
  • Publisher: 97%

United States News News

United States United States Latest News,United States United States Headlines

Companies that build wind and solar projects depend heavily on the debt market while oil companies can fund projects out of operating cash.

High interest rates are sinking renewable energy companies, sending some of the biggest players down by double-digit percentages in the past two weeks. Meanwhile, traditional energy companies—which can fund their capital projects out of operating cash instead of having to raise money—are in strong financial shape.

Companies that build wind and solar projects depend heavily on the debt market. They take out large loans to build projects and then pay them off over time with the money that consumers pay for the electricity those turbines and panels produce. When debt is expensive, those projects take longer to pay off, and are likely to offer smaller profits to investors.

High rates are even outweighing the effects of the Inflation Reduction Act that Biden signed last year. Most renewable stocks are below where they were when the law was signed, despite the fact that it will direct hundreds of billions of dollars to clean energy. The same is true of coal stocks, which have also benefited from relatively high commodity prices. Arch Resources made more than three times as much in profits as it spent on capital expenditures in the first half of the year.

 

Thank you for your comment. Your comment will be published after being reviewed.
Please try again later.
We have summarized this news so that you can read it quickly. If you are interested in the news, you can read the full text here. Read more:

 /  🏆 3. in US

United States United States Latest News, United States United States Headlines

Similar News:You can also read news stories similar to this one that we have collected from other news sources.

The stock market is building up to a major 'buy' signalHigh interest rates aren’t going to keep stocks low much longer
Source: MarketWatch - 🏆 3. / 97 Read more »

Stocks Had a Great September. Coal Stocks, Anyway.Shares of coal miners Alpha Metallurgical, Warrior Met Coal, Arch Resources, Consol Energy, and Peabody Energy logged double-digit-percentage gains in...
Source: MarketWatch - 🏆 3. / 97 Read more »

JPMorgan's Marko Kolanovic braces for 20% market plunge, delivers recession warningInstitutional Investor hall-of-famer Marko Kolanovic warns high interest rates are creating a breaking point for stocks.
Source: NBCLA - 🏆 319. / 59 Read more »