Why is renewable energy in a slump?

At the UN climate ­summit in Dubai in December, the United States joined governments from around the world in pledging to ­triple the world’s renewable energy capacity—such as solar and wind power—by 2030. But recent trends suggest the promise to transition from fossil fuels and achieve net zero carbon emissions by 2050 should be taken with a dose of ­skepticism. The clean energy sector suffered a $30 billion decline in stock value at the end of 2023 after a year of dwindling profits and ­canceled projects. Financial analysts once bullish about green energy are revising their predictions downward.

What’s the problem in the renewable energy sector? Rising production costs, interest rate hikes from the Federal Reserve, government regulations, and an aging power grid have affected the profitability of already expensive projects like solar and wind farms. Companies have met headwinds securing federal and state permits (and public approval) for new projects, and they’ve also had to eat costs from supply chain problems and price hikes resulting from the pandemic. Globally, European energy companies have sought government assistance and written off billions of dollars in losses because of manufacturing defects, overproduction, or abandoned projects. And China’s biggest solar and wind turbine ­manufacturers reported poor third-quarter profits in October.

Are investors losing faith in renewables? Venture capitalists have invested over $100 billion in renewable energy production, ­storage, transportation, agriculture, and related industries in recent years. But canceled wind and reactor projects and bankruptcies have investors fearing a repeat of the bust in the mid-2010s, when they lost more than half of the $25 billion invested in clean energy projects that went bankrupt.

Has government intervention helped? The Biden administration has tried to accelerate change through subsidies and federal mandates, but the laws of supply and ­demand still apply: Despite deep price cuts and manufacturer and government incentives, electric car sales are lagging behind the administration’s goal of having half of all new cars sold by 2030 be battery powered. Almost 4,000 auto dealers asked the administration in November to temper that goal to allow demand to catch up with supply.

How is oil and gas production ­faring in the meantime? U.S. oil production reached an all-time high of 13.2 million barrels per day in September. Analysts predict companies will produce 500,000 more barrels daily in 2024. The oil ­industry is also eyeing improvements for hydraulic fracking—the technique that has allowed drillers to reach previously inaccessible oil formations—that should allow the extraction of more oil through cleaner, safer methods.