March 19, 2024

Warren, Whitehouse to Federal Reserve Chair Powell: High Interest Rates Are Blocking Clean Energy Progress, Increasing Energy Costs

Extreme Interest Rate Hikes Have Contributed to Postponed EV Production, Clean Energy Project Headwinds, Soaring Offshore Wind Costs 

Text of Letter (PDF)

Washington, D.C. – U.S. Senators Elizabeth Warren (D-Mass.) and Sheldon Whitehouse (D-R.I.) sent a letter to Federal Reserve (Fed) Chair Jerome Powell, expressing concerns about the damaging impact of the Fed’s extreme 2022 and 2023 interest rate hikes, which have halted deployment of clean energy technologies and have undermined the Inflation Reduction Act’s climate and consumer benefits. The senators are calling on the Fed to cut interest rates to allow for continued progress on clean energy projects and the climate and economic benefits they provide. 

“Your decision to rapidly raise interest rates beginning in 2022, and the potential that they may remain too high for too long, has halted advances in deploying renewable energy technologies and delayed significant climate and economic benefits from these projects. Even as demand for clean solar, wind, and electric power grows – driven by the Inflation Reduction Act’s (IRA) federal tax incentives – the Fed’s interest rates have stalled progress and hampered the country’s ability to combat the climate crisis,” wrote the senators. 

Since March 2022, the Fed has raised interest rates 11 times, pushing rates to their highest levels in over 20 years and retaining them at that level since 2023. The senators noted that the Fed’s skyrocketing interest rates have obstructed clean energy investments across the economy, including in electric vehicle production, clean energy projects, and offshore wind. 

  • Auto manufacturers have postponed their plans to increase the production of electric vehicles (EVs) in response to skyrocketing interest rates. Ford decided to delay production of an EV battery plant in Kentucky, citing “uncertainty about demand for EVs,” and Tesla has slowed their EV production capacity due to “higher borrowing costs.” Consumer demand has also slowed in response to high interest rates. 
  • Large-scale clean energy projects have encountered headwinds from the Fed’s decisions to raise interest rates. Puerto Rico needed an additional $700 million on top of an initial $4.6 billion in federal funding to move forward 11 solar projects, companies have pulled out of massive offshore wind projects, and solar and battery storage developers are concerned about meeting their financial goals given high interest rates. 
  • Spiraling financing costs due to interest rates are threatening the Biden administration’s goal to increase the 41 megawatts of current offshore wind capacity to 30,000 megawatts by 2030. Developers have struggled to maintain consistent progress in their projects. Renewable energy projects are sensitive to rates since debt comprises “as much as 85% to 90% of capital expenditures.” High rates have disrupted and, in some cases, completely tanked major renewable infrastructure projects across the country. 

“Your interest rate increases have jeopardized the IRA’s opportunities to create new green jobs and cut electricity costs, despite the Fed’s mission to ‘promote maximum employment, stable prices, and moderate long-term interest rates in the U.S. economy.’ As you consider the Fed’s interest rate policies in the upcoming March Federal Open Market Committee meeting and beyond, we urge you to cut interest rates throughout 2024 to allow for continued progress on clean energy projects and the climate and economic benefits these projects provide,” concluded the senators. 

Senator Warren has been ringing the alarm bells about the serious dangers of Chair Powell’s continued interest rate hikes: 

  • In January 2024, Senators Warren, John Hickenlooper (D-Colo.), Jacky Rosen (D-Nev.), and Whitehouse sent a letter to Chair Powell, calling on the Fed to reverse its troubling interest rate hikes that have driven mortgage rates to 20-year highs and have put affordable housing out of reach for too many Americans. 
  • In July 2023, Senator Warren sent a letter to Chair Powell, raising concerns about the disproportionate impact of the Fed’s monetary policy amid rising unemployment for Black workers. 
  • In May 2023, Senator Warren led lawmakers in a letter to Chair Powell, calling on the Fed to pause interest rate hikes and respect its dual mandate of maximum employment and price stability, particularly in the wake of recent turmoil in the banking system following the collapses of Silicon Valley Bank, Signature Bank, and First Republic Bank. The lawmakers expressed serious concerns that the Fed’s monetary policy strategy of more rate hikes could trigger a recession, throw millions out of work, and crush small businesses. 
  • In March 2023, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren questioned Chair Powell on the Fed’s monetary policy plan and its projection that the unemployment rate will rise sharply to 4.6% by the end of the year if the Fed continues to raise interest rates. Senator Warren highlighted that the Fed’s projections suggest that nearly 2 million people will lose their jobs, and that history shows that the Fed has a poor track record of containing moderate increases in unemployment.
  • In November 2022, Senator Warren and Representative Madeleine Dean (D-Pa.) led their colleagues in sending a letter to Chair Powell, expressing concern and seeking answers about the Fed’s most recent economic projections, its intentions to continue to raise interest rates at a rapid pace, and its disturbing warning to American families that they should expect “pain” in the coming months. 
  • In July 2022, Senator Warren published an op-ed in the Wall Street Journal warning that the Fed’s decision to aggressively raise interest rates risks triggering a devastating recession.
  • In June 2022, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren called out Chair Powell for the Fed’s announced interest rate increases that wouldn’t address the key drivers of inflation. Chair Powell confirmed that the Fed’s interest rate increases will not bring down gas and food prices, two of the biggest drivers of inflation.