Interest Rate Risk and Renewable Energy Investment in Australia: Evidence from OLS Regression

Abstract

This paper studies the relationship between interest rate risk and renewable energy investment in Australia. Renewable energy projects usually need high upfront capital and long payback periods, so they can be sensitive to financing costs and changes in investor confidence. Using Clean Energy Council investment data and Reserve Bank of Australia cash rate data, the paper compares quarterly trends and runs exploratory OLS models in R. The study focuses on correlation rather than strict causal inference, because the available sample is short and renewable energy commitments may also be affected by project approval, PPA coverage, grid connection, and year-end project clustering. The results show that the RBA cash-rate level itself has weak explanatory power in this sample, while cash-rate changes and a simple rate-volatility proxy are more closely associated with investment commitments. This finding shifts the discussion from a single interest-rate-level story to a channel view of adjustment speed, financing uncertainty, project timing, and revenue stability. It also suggests that sustainable finance risk management should pay attention to both funding costs and the uncertainty around rate movements.