Solar Stocks Fall as Senate Bill Ends Key Tax Credits Early
Takeaways by Bloomberg AI
- Shares of US solar companies fell sharply after Senate Republicans released a bill that would end clean energy tax credits earlier than expected.
- The new version of the bill would end incentives for wind and solar in 2028, while tax breaks for other sources of power would be allowed to remain until being phased out in 2036.
- The elimination of the credits would decimate the reeling solar industry, with uncertainty over clean energy credits already causing disruption, including triggering the bankruptcy of Solar Mosaic Inc.
Shares of US solar companies fell sharply after Senate Republicans released a bill that would end clean energy tax credits earlier than expected, dashing hopes that major cuts passed by the House wouldn’t stick.
Sunrun Inc., the largest US rooftop panel installer, plunged as much as 44%, the most ever in intraday trading. SolarEdge Technologies Inc. fell as much as 43%. Enphase Energy Inc slid as much as 28%.
The new version of the bill released by the Senate Finance Committee would end incentives for wind and solar in 2028. Tax breaks for other sources of power, such as nuclear, hydropower and geothermal, would be allowed to remain until being phased out in 2036, according to a summary of the legislation.
“It appears Senate Finance has taken this bill from a flat D to a solid D+ for the clean energy industry,” said Ethan Zindler, an analyst with BloombergNEF and a Treasury Department official during the administration of former US President Joe Biden. “And that may be with a bit of grade inflation factored in.”
The legislation, which is part of US President Donald Trump’s multi-trillion dollar signature economic package, would pare back credits from the Inflation Reduction Act. A popular $7,500 credit for the purchase of electric vehicles would be eliminated 180 days after the bill becomes law, as opposed to at the end of the year for most vehicles in the House version.
Lawmakers may still make changes to the bill, which the Senate is aiming to pass and send back to the House for final approval by July 4. Senator John Cornyn, a senior Republican from Texas, indicated Monday evening that the Senate’s tax provisions weren’t a done deal.
“This is just the opening shot,” Cornyn said. “Most of the members who aren’t on Finance haven’t seen this.”
But the odds appear to be fading that lawmakers intend to make changes to preserve credits for residential solar companies, according to Guggenheim Securities analyst Joe Osha. Credits for residential solar would expire much sooner than those for utility-scale projects.
“Hoping for a fix continues to be naïve, in our view,” he said.
The Senate version of the bill would eliminate an incentive that provides as much as $3 per kilogram of hydrogen production, despite a lobbying blitz from companies that included producer Plug Power Inc., the American Petroleum Institute, and the Fuel Cell & Hydrogen Energy Association.
The Senate bill also would end credits for companies like Sunrun that lease rooftop solar systems as well as homeowners who buy them outright. Analysts say the elimination of the credits would decimate the reeling solar industry, with uncertainty over clean energy credits already causing disruption, including triggering the bankruptcy of Solar Mosaic Inc., one of one of the largest home solar lenders.
The Senate bill would rescue a tax credit for nuclear power. Under the House version, projects would have needed to have been under construction by the end of 2028 to receive the credit, a deadline analysts said was unworkable.
Unlike the House version, the Senate legislation does not include limits on the ability of project sponsors to sell tax credits to third parties, which makes credits easier to use.
The Senate’s proposal drew consternation from environmental and clean energy groups, including the American Clean Power Association, which said the bill “would increase household electricity bills and threaten hundreds of thousands of jobs across the country.”
“Absent reasonable time lines for businesses to adjust to increasing taxes, good paying jobs, technology innovation, and AI data centers will be driven overseas,” Jason Grumet, the group’s chief executive officer, said in a statement.
— With assistance from Erik Wasson, Mark Chediak, and Jeran Wittenstein
(Updates shares in the second paragraph)
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