Finance
Green Energy Is Stuck at a Financial Red Light
After years of uncertainty, final yr’s Inflation Discount Act lastly gave America’s renewable-energy business a protracted, inexperienced sign. Now the financial system is obstructing the highway.
The wind and photo voltaic industries have at all times suffered from the short-term nature of subsidies, with federal tax credit usually prolonged in nail-biting one-year increments. Final yr’s local weather invoice modified that, giving the business subsidies that final not less than a decade. However simply as coverage winds blow of their favor, two essential development drivers—rates of interest and gear prices—are transferring within the improper path.
Wind and photo voltaic initiatives are particularly delicate to charges as a result of debt can comprise as a lot as 85% to 90% of capital expenditures. Renewable builders have recognized solely low charges for many of their historical past. Practically all U.S. utility-scale photo voltaic services and 85% of onshore wind farms had been put in since 2009, throughout which interval the goal federal-funds fee was near 0% in eight out of 13 years. Not any extra: After the newest hike, charges are the very best since 2007.
Renewable vitality initiatives are typically financed with floating-rate loans that rise and fall with the benchmark rate of interest. Fortunately, most of these initiatives are well-shielded from fee threat as a result of lenders require them to hedge not less than 75% of their loans by way of swaps, in response to Elizabeth Waters, managing director of challenge finance at MUFG. Most ended up hedging 90-95% to lock in low charges, she famous. However these swaps received’t assist new initiatives. Some new photo voltaic and wind initiatives going through larger borrowing prices than after they had been deliberate may not make it off the drafting board.
Borrowing isn’t the one factor that prices extra. Following years of worth declines because of expertise and economies of scale, gear is getting dearer too. Commerce insurance policies aimed toward Chinese language producers have triggered delays and shortages for the photo voltaic business, which depends closely on the nation for its parts. German utility RWE, an energetic developer within the U.S., stated in its annual report launched final week that imports of photo voltaic modules from Asia at the moment are topic to “stringent checks” and stated it might fall behind on its growth plans if the U.S. continues to “impede the procurement of photo voltaic panels.”
After falling to a file low in 2020, the common worth of a photo voltaic photovoltaic system rose in 2021 after which once more in 2022, in response to information from the Photo voltaic Power Industries Affiliation and Wooden Mackenzie. In the meantime, the common value to construct an onshore wind farm within the U.S. rose in 2020 and 2021 earlier than leveling off final yr, in response to information from BloombergNEF. Provide-chain points and interconnection delays already began slowing the clear energy business final yr: In 2022 it put in 25.1 Gigawatts of complete capability, a 16% decline from a yr earlier, in response to the American Clear Energy Affiliation, which tracks photo voltaic, wind and vitality storage. Whereas that’s nonetheless sufficient to satisfy roughly half of Texas’ electrical energy demand, it was nonetheless beneath expectations–although a part of the drop was pushed by an preplanned phase-down for tax credit generally utilized by the wind business earlier than the Inflation Discount Act was handed.
Finally, photo voltaic and wind’s capability to soak up value and interest-rate hikes will depend on how prepared utilities and firms are to pay larger costs. Many onshore wind and photo voltaic initiatives have been in a position to renegotiate pricing on their energy buy agreements as a result of demand is strong, in response to business executives. However cracks are exhibiting for offshore wind, which is extra uncovered to rising prices and charges as a result of it takes longer to develop. BloombergNEF estimates that the weighted common value of capital for U.S. offshore wind initiatives rose to five.25% in 2022 from 4.41% in 2020.
Developer
Avangrid
Renewables, for instance, is attempting to terminate its energy buy settlement with utilities in Massachusetts for a 1.2 Gigawatt offshore wind challenge after an unsuccessful try at renegotiating its fixed-price contract. If constructed, Commonwealth Wind would generate sufficient vitality to energy 700,000 properties. The corporate cited “historic worth will increase for international commodities, sharp and sudden will increase in rates of interest, extended provide chain constraints, and protracted inflation” for the reason that challenge secured a contract in late 2021. Avangrid plans to bid the identical challenge into the state’s subsequent aggressive offshore wind procurement, a spokesman stated over electronic mail. Danish energy firm Orsted stated in its annual report launched February that it incurred an impairment of two.5 billion Danish kroner, the equal of $369 million, on its 50% curiosity within the Dawn Wind challenge off the coast of New York, noting that the challenge value has elevated considerably since its bid in 2019.
Because the identify implies, the Inflation Discount Act is meant to alleviate a few of these value pressures. Nevertheless it received’t really feel like a bonanza with out readability on how the principles apply. Increasing the eligibility of tax credit to extra applied sciences, for instance, has unfold the restricted pool of tax fairness buyers—that’s, these with each the tax burden and the know-how to make use of renewable tax credit—extra thinly throughout extra initiatives. Mockingly, that has shrunk the pool of tax fairness out there to photo voltaic and wind within the close to time period. The invoice tries to handle this by making such tax credit transferable, however business executives stated that pool of capital will stay constrained till there’s extra steering.
A photo voltaic website in Lumpkin, Ga.
Picture:
Audra Melton for The Wall Road Journal
There are two different more moderen developments value watching: One is the plummeting value of pure gasoline which, if extended, might impression demand for photo voltaic and wind on the margins. The U.S. benchmark Henry Hub has fallen 49% yr to this point. Secondly, banks’ latest turmoil might shrink their capability to lend. Ted Brandt, chief govt of clean-energy targeted funding financial institution Marathon Capital, notes that the business has at all times had low cost debt, low cost fairness and “huge liquidity chasing it.” How the business will reply to costly capital continues to be an open query, he stated.
It isn’t sufficient for coverage winds to blow in the suitable path for a renewable vitality growth–financial headwinds must abate too.
Write to Jinjoo Lee at jinjoo.lee@wsj.com
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Truist Financial Corporation (NYSE:TFC) is included among the 11 Best Bank Dividend Stocks to Buy.
Photo by Annie Spratt on Unsplash
Truist Financial Corporation (NYSE:TFC) is a prominent American commercial bank with a strong footprint in the Southeast and Mid-Atlantic regions. Ranking among the top ten banks in the country, it enjoys a solid market position in high-growth states like Florida and Georgia. Recently, the bank has prioritized digital innovation and technology development to improve service delivery and remain competitive against fintech firms.
Regulatory compliance remains a key focus for Truist Financial Corporation (NYSE:TFC), as it operates under enhanced prudential standards and capital requirements as a Category III banking organization. Adhering to these standards is essential for sustaining its operations and long-term strategies. At the same time, Truist’s disciplined approach to capital management allows it to maintain financial stability while pursuing strategic growth opportunities, including potential mergers and acquisitions.
Truist Financial Corporation (NYSE:TFC) is also popular among investors because of its dividend policy. The company has been making regular payments to shareholders since 1997. Currently, it offers a quarterly dividend of $0.52 per share and has a dividend yield of 4.53%, as of September 24.
While we acknowledge the potential of TFC as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
EAD NEXT: 12 Best Stocks to Buy Now for Passive Income and 12 Best Retail Dividend Stocks to Buy Now
Disclosure: None.
Finance
Financing opportunity: Q&A with Harold Pettigrew on the future of the CDFI Sector – Kresge Foundation
As the community finance field enters a new era—shaped by economic uncertainty, shifting capital flows, and growing calls for accountability—how can CDFIs prepare for what’s ahead? The Kresge Foundation spoke with Harold Pettigrew, the president and CEO of the Opportunity Finance Network (OFN) to help answer that question. This article is part of a series highlighting the impact of CDFIs and how the sector is adapting to the current environment.
MD: CDFIs play a unique role in our financial ecosystem, often serving communities that mainstream banks overlook. Why are CDFIs so critical for advancing economic growth and creating opportunities in underserved communities?
HP: In every corner of America, CDFIs show that impact and financial performance aren’t at odds—they reinforce each other. We address market gaps and go where traditional capital doesn’t: listening first, solving for need, and providing capital to people and financing projects that strengthen families and communities. Whether it’s a small business on Main Street or a housing development in a rural town, CDFIs make investments that build wealth and create opportunities that reach people and communities that need it most.
MD: CDFIs seem to have broad support in Congress, even when some administrations have looked to reduce funding or support. Is bipartisan support materially different today? What role has OFN played in telling the CDFI story and maintaining that support?
HP: Bipartisan support for CDFIs remains strong because our work cuts across political divides — we’re about creating jobs, building businesses and revitalizing communities. What’s different today is the urgency and scale of the need, and the growing recognition that CDFIs are essential partners in solving some of our nation’s toughest challenges. OFN and CDFIs tell real stories of impact—stories of people across the country whose lives and livelihoods have changed thanks to the capital provided by CDFIs. Through advocacy, research, and direct engagement with policymakers, we’ve elevated a clear, consistent message: For over 30 years, CDFIs have delivered results addressing market gaps in providing access to capital to communities across the country.
MD: Beyond federal funding concerns, what are the current challenges and needs CDFIs are facing in their day-to-day efforts to support communities?
HP: CDFIs are navigating a complex economic environment— rising interest rates, tighter capital markets, and growing community needs are stretching our resources like never before. Many CDFIs are being asked to do more with less, while also investing in their own operations to scale effectively and sustainably. OFN is working to develop diverse pools of flexible capital, make deeper investments in talent and technology, and new policy frameworks that support and recognize the unique value CDFIs bring. The demand is clear — what’s needed now is bold investments to meet the moment and craft new solutions for the future.
MD: Philanthropies and community development departments of banks and insurance companies have always been crucial partners for CDFIs — how can they best support and invest in CDFIs right now?
HP: Our partners in philanthropy and financial services have been critical to the success of CDFIs, and now they have a critical opportunity to strengthen the CDFI industry for the future. That means moving beyond transactional grantmaking to long-term, trust-based partnerships. It means offering flexible, risk-tolerant capital that lets CDFIs innovate and expand, and it means investing in the infrastructure — people, systems, data — that helps us operate at scale.
MD: What keeps you optimistic about the future of the CDFI sector?
HP: What keeps me optimistic is the impact and commitment I see every day, from the entrepreneurs we finance, to the communities we serve, to the CDFI leaders innovating with courage and conviction. The sector is growing, diversifying and deepening its impact. We’re not just responding to the moment — we’re helping define the future of expanded access to finance and financial services. And with every new loan, every new partnership, every life changed, we’re proving that when we expand access to opportunity — we don’t just finance projects, we shape the future of communities across the country.
Harold Pettigrew is the President and CEO of Opportunity Finance Network (OFN)
Derek Kudsee is a veteran of the enterprise software industry, with senior leadership roles at industry giants such as SAP, Salesforce, and Microsoft under his belt. So, when he took the helm as the new Managing Director for Unit4 Financials by Coda, ERP Today sat down with Kudsee to discuss his vision for Coda, the promise of agentic AI to make work feel lighter for finance teams, and his mission to transform the classic system of record into a dynamic system of intelligence for the Office of the CFO.
What was it about the opportunity at Unit4, and specifically the challenge of modernizing Coda, that convinced you to take this role?
A rare combination of having a deeply trusted platform and a clear opportunity to reimagine the finance function drew me to Unit4, and specifically the Coda business. Some of the largest enterprise customers have been running on this platform for decades. I’ve been brought in to help these finance teams run more efficiently and provide greater insight through agent-driven automation. We live in a world where technology has converged in our consumer and professional lives. Therefore, modernization is not only about addressing complex systems, but also about enhancing the user experience. This combination of running a deeply trusted platform, reimagining its capabilities in an AI-driven world, and modernizing the user experience was attractive.
Unit4 Financials by Coda’s goal is to deliver an “AI-fueled office for the CFO” using agentic AI. How will a finance team using Coda experience this in their day-to-day work?
When one thinks of an AI-fueled Office of the CFO, it’s about having agents deep inside those finance processes that will suggest, explain, and act within guardrails that finance teams can set. The work should feel like the machine is performing tasks that were previously done manually or laboriously.
A simple example is in an accounts payable department. An agent can automate everything from invoice capture using AI-driven OCR, verify that the invoices are within policy, queue them for approval, send them to the respective individuals, and flag exceptions along the way. Users can see how the work feels lighter because the machine handles everything from capture to the final stage, including payment release.
How do the AI functionalities offered by Coda differ from what competitors are offering right now?
Many vendors today have a finance module. However, we aim to be the best standalone financial management system, not a generic suite. We’re not trying to be finance because we want to sell an HR or CRM system. That means we need to embed intelligence deeply within the finance processes so that the software acts, takes action, and performs activities for the finance function. For that, the agentic AI needs to operate with autonomy, understand financial context, and learn from user behavior.
Moreover, fundamentally, Coda has always been built on a unified financial model. We’ve never had Accounts Payable separate from Accounts Receivable that needed to be consolidated. Our AI works on clean, structured data from day one, and that’s the foundation for accuracy. We don’t need to chase hype to incorporate AI. We’re going to redefine the finance function with AI at its core.
How do you plan to balance the introduction of these cutting-edge innovations without disrupting the core stability that Coda is known for?
The safest way to modernize finance is to add certainty around the core, rather than disrupting it. Our core is why customers have been running Coda for 20-30 years. Thus, stability is not a nice-to-have; it’s non-negotiable. Our customers run mission-critical processes, and that trust is sacred to us. Therefore, every innovation we deliver, whether it’s UX modernization or AI, will be built on one simple principle: if it compromises stability, we don’t build it. We don’t ship it.
With that rock-solid foundation in place, we can layer intelligence and usability on top. While some software providers are still determining the stability of their platform, we can offer customers the best of both worlds. They’ll have the reliability they’ve counted on for decades, and now we bring them the innovation they need to stay ahead.
What This Means for ERP Insiders
Your biggest enemy is decision latency. According to Kudsee, the primary challenge for modern finance is the gap between a business event occurring and the ability to respond intelligently. This decision latency, caused by fragmented data, batch processes, and manual workarounds that are standard in traditional ERP environments, prevents finance from being a proactive and strategic partner. Coda’s goal is to shrink that gap from weeks or days to near-real-time.
Shift the ERP mindset from system of record to system of intelligence. For decades, the primary function of ERP finance modules has been to record transactions accurately. This is no longer sufficient, as Kudsee notes. A modern financial platform must function as a system of intelligence that not only records data but also analyzes, predicts, and automates actions within core financial processes, effectively acting as the intelligent brain of the CFO’s office.
Prioritize financial depth over suite breadth. Kudsee suggests that the single ERP for everything strategy can result in a finance module that is a jack-of-all-trades but master of none. The alternative approach is to prioritize depth and best-in-class functionality for the critical finance function. Instead of settling for the generic finance module within a larger suite, consider how a dedicated platform like Unit4 Financials for Coda, focused on deep financial control, insight, and automation, can deliver more agility and tackle core challenges, such as decision latency, more effectively.
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