The actions of clean energy leaders QuantumScape (NYSE: QS), SolarEdge (NASDAQ: SEDG)and Sunnova Energy (NYSE: NOVA) fell on Tuesday, falling 4.4%, 10.5% and 3% through Tuesday trading.

QuantumScape is an early-stage electric vehicle (EV) battery manufacturer, SolarEdge is a rooftop solar inverter company, and Sunnova is a solar energy services company that offers customers long-term power generation agreements (PPAs). .

There are some commonalities between the three companies: each is heavily influenced by the adoption of clean energy technologies, and each is losing money right now and is therefore very sensitive to long-term interest rates.

Unfortunately, both of these factors have worsened with the election of Donald Trump, with long-term interest rates making a particularly important move today.

Long-term rates may be the biggest risk

Today, long-term interest rates as dictated by 10-year Treasury bond rose more than 12 basis points to yield 4.433% at 3:14 p.m. ET. Of note, long-term rates have risen over the past month and are also gradually higher since the election. While interest rates fell earlier this year, the prospect of potentially lower taxes and higher tariffs from a Trump administration raised the possibility of higher inflation and thus longer-term rates.

Higher interest rates have absolutely decimated both the solar and EV industries this year. Both rooftop solar and cars are high-priced items that are typically financed, so higher rates are really bad for both industries. So it’s not surprising to see all three stocks lower at higher long-term rates today.

Additionally, all three stocks have struggled since the election of Trump and Republicans to Congress last week. The thinking is that Republicans may try to repeal the Inflation Reduction Act’s incentives for both rooftop solar and electric vehicles.

However, the second threat may be a little exaggerated. Many of the IRA’s incentives have gone disproportionately to red districts, with 18 Republican lawmakers recently writing to Speaker Mike Johnson to warn against a complete repeal of the incentives. Moreover, having Elon Musk as a big Trump booster and donor may soften the impact on EV incentives.

Still, a higher-rate environment could be a headwind for each of these companies, even if the IRA incentives remain intact.

Image source: Getty Images.

While QuantumScape recently hit a milestone by shipping its first anode-less solid-state battery for customer testing, the company is still largely pre-revenue and burning through cash every quarter. While recent cost cuts have stretched the company’s cash flow through 2028, according to management, any kind of capital increase would become thinneror an increase in debt would be more costly in a higher rate environment. After spending $110 million in the last quarter alone, QuantumScape is well on its way to finding commercial adoption of its next-generation solid-state battery cells.

The situation is also pretty dire for SolarEdge, which has seen its revenues explode and profits turn to losses over the past year. Higher interest rates and a changing regulatory landscape have decimated the rooftop solar market, particularly in Europe. Revenue fell 64.1% last quarter, with gross margin deeply negative. While SolarEdge has slightly more cash than convertible debt, if the current pace of losses continues, it may need to raise more cash, which again would be costly for shareholders in a higher-rate environment .

The same kind of phenomenon applies to Sunnova, which is more of a service company than a hardware company. However, Sunnova’s financials are somewhat like a finance company, as it installs solar systems and then collects revenue from long-term PPAs. A higher rate environment and potentially lower fossil fuel prices may limit demand for its solar services, but higher long-term interest rates will also decrease the value of the PPA’s long-term fixed cash flows.

And of course, since none of these three companies is profitable, a higher long-term interest rate will also decrease the value of current value of each company’s theoretical cash flows will be in the future, even if each manages to become profitable at some point.

There may be opportunities in clean energy technology, but these three seem to be hiding

The recent sell-off of all things clean energy could lead to some bargain-priced opportunities. QuantumScape’s milestone product is certainly one to watch as it has the potential to revolutionize electric batteries.

However, it’s probably prudent to look for clean energy bargains in healthier companies that are at least turning a profit today, or close to doing so. The possibility of a quick change in the interest rate environment or a less hostile regulatory environment is probably not a bet you want to make in clean energy stocks right now. Unfortunately, each of these three seems to need those elements to change – the sooner the better.

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Billy Duberstein and/or its clients have no position in any of the shares mentioned. The Motley Fool recommends SolarEdge Technologies. The Motley Fool has a disclosure policy.