Rising Interest Rates Hit Renewable Energy Harder Than Fossil Fuels, Threatening U.S. Energy Transition Efforts.

Rising interest rates have impacted renewable energy harder than fossil-fuel sources of energy, according to an analysis by Wood Mackenzie. The study suggests that 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 experiencing the most impact. The LCOE for a combined-cycle natural gas plant, by contrast, increases only 11%, due to fossil fuel generators already paying higher rates before interest rates began to increase. This could jeopardize the energy transition and impact the U.S. push for more domestic manufacturing, as it remains uncertain whether the Federal Reserve will begin to cut decades-high interest rates this year. Wood Mackenz estimates that a 2 percentage point rise in interest rate could raise hydrogen by about 10%.