Solar Stocks Tumble as GOP Tax Bill Takes 'Sledgehammer' to Green Subsidies

Renewable energy stocks tumbled after the House of Representatives passed a tax bill that effectively nullifies many Biden-era green energy initiatives, a move seen as deeply damaging to the solar sector.

Shares of SunRun (RUN) tumbled more than 38%, while Enphase Energy (ENPH) dropped 19% to lead S&P 500 decliners. NextEra Energy (NEE) stock slid 9%, and First Solar (FSLR) was off about 4%. 

The House on Thursday morning passed a tax and spending bill that would end tax credits for wind and solar projects in 2029, years earlier than a previous version of the bill. The bill also requires projects to begin construction within 60 days of the bill’s passage to qualify for those credits, a next-to-impossible timeline for any infrastructure project. 

Jefferies analysts in a note Thursday called the bill a “sledgehammer” to the Inflation Reduction Act, 2022 legislation that established tax incentives to spur clean energy investment. The bill makes claiming most IRA tax credits “truly untenable,” Jefferies said, and is a “worse than feared” outcome for the solar industry.

SunRun was particularly hard hit by a last-minute addition that excludes companies that rent residential solar equipment to customers from earning certain tax credits. 

The bill now moves to the Senate. Jefferies expects the Senate to focus on Foreign Entity of Concern (FEOC) language, which restricts tax benefits for companies with supposed ties to hostile governments, and the phaseout timeline of clean electricity credits. 

Jefferies expects the stocks of domestic solar companies like First Solar to outperform competitors due to the House bill’s more aggressive FEOC language. However, the entire industry may be “adrift” for weeks before the Senate releases its own markup of the bill, its analysts wrote.