Renewable energy stocks are having a hard time, even in the middle of Europe’s energy crisis. It seems that the sector needs central banks to take their foot off the gas in hiking interest rates, but it may have to wait a little longer.
European renewable stocks have fallen 20% since August.Utilities could be particularly at risk, as higher rates will hurt the sector’s 2023 revenues the most. Renewable energy stocks are having a hard time, even in the middle of Europe’s energy crisis.
“Overall, it is this conflict and divergence between the short-term pain of interest-rate worries versus the long-term gain from the policy side, and currently, the short-term pain is winning this battle,” Utilities could be particularly at risk, as higher rates will hurt the sector’s 2023 revenues the most, according to Citigroup strategists led by Beata Manthey. This week is heavy in earnings, with updates from the likes of Verbund, Vestas, Orsted and Scatec in coming days.
While the longer-term policy outlook is supportive as governments look to meet targets to cut emissions, there’s speculation that energy windfall taxes could hit renewable equities in the near term. Germany’s plans would affect firms making electricity from lignite, nuclear, oil, renewables and waste, yet plants fed by gas or charcoal would be spared, fueling fund manager frustration.
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