New energy projects at risk of interest rates, inflation remain high: Fitch
Operating, construction costs increased due to high inflationary environment in last 2 years, says rating agency
New energy projects in North America are at risk as they may not be enough to encourage investments if interest rates and inflation remain elevated, Fitch Ratings said Friday.
"Increased federal support against a higher interest rate environment remains pivotal for shaping the direction of North American energy infrastructure in 2024," the rating agency said in its mid-year outlook report for the energy sector.
Elevated interest rates and stubbornly high inflation would limit the development of new energy projects and could place more pressure on the performance of existing projects, it said.
"Operating and construction costs for energy projects have increased due to the high inflationary environment over the past two years," said the report. "This has created global and regional supply chain bottlenecks and higher competition for key components and equipment."
The rising demand for artificial intelligence and the development of data centers also lead to higher energy demand, according to Fitch. may cause a slower transition to clean energy in some regions and increase dependence on existing fossil fuels.
