A Drop in Interest Rates Could Boost Renewables

If the Federal Reserve cuts interest rates in the coming weeks, a friendlier borrowing environment could make all the difference for some mothballed renewable-energy projects.

The returns generated by such projects once they are up and running are often predictable and modest, but because they require a large upfront expenditure, frequently funded in part by debt, they are sensitive to interest-rate fluctuations.

With recent economic data suggesting the Fed has plenty of room to cut, some investors say now is the time to get moving on renewable plans.

Thomas Byrne, chief executive at solar investor CleanCapital, said a drop in interest rates would affect a “not inconsequential amount” of solar developments under consideration. “We have had projects on hold that simply don’t make economic sense for us anymore because the borrowing cost was too high. So those projects will immediately unlock,” he said.

Byrne estimates some of these projects could begin construction by the end of the year and start generating energy next summer.

Solar and wind energy in particular stand to gain from lower borrowing costs, said Srinivasan Santhakumar, principal research analyst with the research firm Wood Mackenzie. “Higher interest rates have disproportionately affected the economics of wind and solar projects,” he said.

An interest-rate increase of 2 percentage points could result in a 20% jump in the cost of producing energy for utility-scale solar power over the life cycle of a project, according to a Wood Mackenzie analysis released in April. In comparison, the same increase might boost the cost of producing energy from gas by 10% to 12%.

Some developers may wait to see a steeper drop before making moves. “It’s definitely a phenomenon, particularly for the more sophisticated, more longer-standing developers who’ve had a history of surfing the ups and downs of the interest-rate spectrum and are also aware of the consequences for their own balance sheet of a long-term interest rate rise,” said Katherine Mogg, managing director at the New York Green Bank, a state-sponsored investment fund that focuses on filling gaps in energy transition financing. Mogg said she expects to see a modest uptick in requests for proposals in the coming months.

The Federal Reserve has signalled a rate cut at its next meeting in September, and most futures investors expect a quarter-percentage-point reduction, according to CME FedWatch. More than three quarters of investors expect the Fed to lower its benchmark rate, now in a range between 5.25% and 5.5%, by at least a full percentage point by year-end.

While a cut in interest rates is a positive for renewables financing, a durable boost for green projects may require a Goldilocks economic scenario in which a cut to borrowing costs don’t coincide with rising fears of a global recession, which could in turn drive investors away from the U.S., said Ron Erlichman, partner at the law firm Linklaters.

“There are a lot of different factors, like the old cliché of ‘headwinds,’ that affect transactions,” he said, adding that large-scale projects such as offshore wind, hydrogen and carbon capture frequently rely on foreign investment.

Fears of unchecked inflation and rampant increases in the cost of materials have cooled down somewhat in the past year, he said, but the looming U.S. election brings a fresh element of uncertainty . While many see a low probability of a full rollback of the Inflation Reduction Act, the legislation that provides game-changing tax breaks for renewables, an executive branch hostile to green energy could slow project permitting or otherwise “nibble at the fringes” of the landmark legislation, as Byrne put it.

“Having done this awhile and seen the cycles in the market, I still remain incredibly optimistic about renewables and energy transition in the United States,” Erlichman said.

It’s go time for the highest-stakes mission at NASA in more than 50 years.

On April 1, the agency is set to launch four astronauts around the moon, the deepest human spaceflight since the final Apollo lunar landing in 1972.

The launch window for Artemis II , as the mission is called, opens at 6:24 p.m. ET.

National Aeronautics and Space Administration teams have been preparing the vehicles to depart from Florida’s Kennedy Space Center on the planned roughly 10-day trip. Crew members have trained for years for this moment.

Reid Wiseman, the NASA astronaut serving as mission commander, said he doesn’t fear taking the voyage. A widower, he does worry at times about what he is putting his daughters through.

“I could have a very comfortable life for them,” Wiseman said in an interview last September.

“But I’m also a human, and I see the spirit in their eyes that is burning in my soul too. And so we’ve just got to never stop going.”

Wiseman’s crewmates on Artemis II are NASA’s Victor Glover and Christina Koch, as well as Canadian Space Agency astronaut Jeremy Hansen.

Photo: NASA’s Artemis II SLS rocket and Orion spacecraft being rolled out at night. Miguel J. Rodriguez Carrillo/Getty Images

What are the goals for Artemis II?

The biggest one: Safely fly the crew on vehicles that have never carried astronauts before.

The towering Space Launch System rocket has the job of lofting a vehicle called Orion into space and on its way to the moon.

Orion is designed to carry the crew around the moon and back. Myriad systems on the ship—life support, communications, navigation—will be tested with the astronauts on board.

SLS and Orion don’t have much flight experience. The vehicles last flew in 2022, when the agency completed its uncrewed Artemis I mission .

How is the mission expected to unfold?

Artemis II will begin when SLS takes off from a launchpad in Florida with Orion stacked on top of it.

The so-called upper stage of SLS will later separate from the main part of the rocket with Orion attached, and use its engine to set up the latter vehicle for a push to the moon.

After Orion separates from the upper stage, it will conduct what is called a translunar injection—the engine firing that commits Orion to soaring out to the moon. It will fly to the moon over the course of a few days and travel around its far side.

Orion will face a tough return home after speeding through space. As it hits Earth’s atmosphere, Orion will be flying at 25,000 miles an hour and face temperatures of 5,000 degrees as it slows down. The capsule is designed to land under parachutes in the Pacific Ocean, not far from San Diego.

Water photo: NASA’s Orion capsule after its splash-down in the Pacific Ocean in 2022 for the Artemis I mission. Mario Tama/Press Pool

Is it possible Artemis II will be delayed?

Yes.

For safety reasons, the agency won’t launch if certain tough weather conditions roll through the Cape Canaveral, Fla., area. Delays caused by technical problems are possible, too. NASA has other dates identified for the mission if it doesn’t begin April 1.

Who are the astronauts flying on Artemis II?

The crew will be led by Wiseman, a retired Navy pilot who completed military deployments before joining NASA’s astronaut corps. He traveled to the International Space Station in 2014.

Two other astronauts will represent NASA during the mission: Glover, an experienced Navy pilot, and Koch, who began her career as an electrical engineer for the agency and once spent a year at a research station in the South Pole. Both have traveled to the space station before.

Hansen is a military pilot who joined Canada’s astronaut corps in 2009. He will be making his first trip to space.

Koch’s participation in Artemis II will mark the first time a woman has flown beyond orbits near Earth. Glover and Hansen will be the first African-American and non-American astronauts, respectively, to do the same.

What will the astronauts do during the flight?

The astronauts will evaluate how Orion flies, practice emergency procedures and capture images of the far side of the moon for scientific and exploration purposes (they may become the first humans to see parts of the far side of the lunar surface). Health-tracking projects of the astronauts are designed to inform future missions.

Those efforts will play out in Orion’s crew module, which has about two minivans worth of living area.

On board, the astronauts will spend about 30 minutes a day exercising, using a device that allows them to do dead lifts, rowing and more. Sleep will come in eight-hour stretches in hammocks.

There is a custom-made warmer for meals, with beef brisket and veggie quiche on the menu.

Each astronaut is permitted two flavored beverages a day, including coffee. The crew will hold one hourlong shared meal each day.

The Universal Waste Management System—that’s the toilet—uses air flow to pull fluid and solid waste away into containers.

What happens after Artemis II?

Assuming it goes well, NASA will march on to Artemis III, scheduled for next year. During that operation, NASA plans to launch Orion with crew members on board and have the ship practice docking with lunar-lander vehicles that Elon Musk’s SpaceX and Jeff Bezos’ Blue Origin have been developing. The rendezvous operations will occur relatively close to Earth.

NASA hopes that its contractors and the agency itself are ready to attempt one or more lunar landing missions in 2028. Many current and former spaceflight officials are skeptical that timeline is feasible.

A Drop in Interest Rates Could Boost Renewables

Long-shelved capital-intensive green-energy projects could be dusted off for construction to begin—if everything goes right

The lunar flyby would be the deepest humans have traveled in space in decades.