Solar energy stocks had a great week, and Array Technologies (ARRY -4.52%) was no different. The company's shares jumped 21.7% between Friday's close and Thursday's close, according to data provided by S&P Global Market Intelligence, as investors speculated that demand for solar energy projects will increase in 2024.

Like most of the recovery in renewable energy this week, interest rates were the driver of the bounce.

The solar energy bounce

Rising interest rates have been a headwind for the entire industry in 2023, and we're starting to see the effects on the financial results. Not only was Array Technologies' revenue down last quarter, but management also expects revenue to fall to between $290 million to $340 million in the fourth quarter of 2023.

ARRY Revenue (Quarterly) Chart

ARRY Revenue (Quarterly) data by YCharts.

Higher interest rates make it more expensive to finance solar projects, and as a result, there's less volume of Array's products, like racking and other services. So, it's not a surprise that volume and revenue are starting to decline.

This week, interest rates started falling, and in the last month, the 10-year government bond's interest rate has fallen 60 basis points, with most of that decline coming this week. That should make it more economical to build utility-scale solar projects in the future.

A long road to recovery

You can see in the chart that net income is positive, but the company's $2.9 billion valuation doesn't match the current profitability or growth. So, lower rates could give a boost as more developers look to build projects in 2024 and 2025 if rates stay low. But it's a long road ahead, and shares will likely be volatile in the meantime.