Interest rate shift to boost renewable energy companies, offshore wind developers 

Writing in the latest Clarksons Renewables Newsletter, Clarksons Securities managing director Jonas Shum said a “potential shift is taking place in the narrative” about offshore wind, particularly concerning interest rates.

“The offshore wind industry and renewables in general, grappling with challenges posed by factors such as interest rates, inflation and supply chain issues, are witnessing this potential shift,” he said.

“Bond traders are indicating a more than 50% probability of a Fed rate cut by March next year, fully pricing in cuts by May. This shift has been accompanied by a substantial decline in long-term treasury yields, with US 10-year treasuries falling to 4.21%, from the peak around 5.00%.”

Mr Shum said developers, who were adversely affected by rate hikes over the past two years, have emerged as the primary beneficiaries of this changing interest rate narrative. He said recent stock performance reflects this reversal, with renewables companies posting strong gains in their share price.

“The interest-sensitive developer segment is leading the charge in stock performance, signalling a positive response to the declining interest rates,” said Mr Shum.

“Recent stock developments in the renewables sector, driven by a changing interest rate narrative accompanied by a notable decline in interest rates, underscore the importance of closely monitoring interest rate trajectories,” Mr Shum said.

“The historical context provides insights into potential economic shifts, emphasising the need for vigilance in anticipating their impact on various sectors, including renewables.

“Understanding and reacting to evolving interest rate trends remains imperative for informed decision-making and risk management in the market. Combined with supply chain costs easing, further falling interest rates are likely to be positive for the renewables industry.”