Solar stocks drop on U.S. Senate proposal to phase out tax credits by 2028

This June 15, 2021 photo shows a view of the Sugar Hill Solar Site in Clifton Park, N.Y. (AP Photo/Hans Pennink)

U.S. solar stocks tumbled on Tuesday after a Senate panel proposed phasing out solar and wind tax credits by 2028, as part of changes to President Donald Trump’s sweeping tax-and-spending bill.

Solar inverter maker Enphase Energy and solar panel manufacturer First Solar slid 27.2 per cent and 19.3 per cent, respectively, among the biggest decliners on the benchmark S&P 500.

Other solar panel sellers, Sunrun and SolarEdge Technologies, plunged 43 per cent and 39.4 per cent, respectively.

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The draft bill, circulated by a U.S. Senate committee, amends Trump’s “One Big, Beautiful Bill Act” that the House narrowly passed last month.

“On first glance, the Investment Tax Credit/Production Tax Credit provisions for solar and wind look worse than the industries had hoped, though not quite in the same way as the House bill,” said Raymond James analyst Pavel Molchanov.

The committee’s draft bill proposes cutting solar and wind incentives to 60 per cent of their value in 2026 and ending them by 2028.

Under current law, the credits wouldn’t begin phasing out until 2032.

Analysts, however, remain skeptical of whether policymakers will pass the bill in its current form before Trump’s self-imposed July 4 deadline.

“It will take time – probably several months – for House and Senate Republicans to bridge those differences. During that time, there will be a window for solar and wind industry lobbyists to make their views heard,” Molchanov said.

Citi strategists said they “remain a sell on residential solar,” calling the proposal “a slight improvement” over the House version but “far more restrictive than the original bill.”

Solar firms are already grappling with weak U.S. residential demand, pressured by high interest rates and metering reforms in California that have slashed credits for excess power sent to the grid.

Shares of Sunrun have shed 27 per cent in the past one year, while Enphase Energy is down 63 per cent in the same period.

The Invesco Solar ETF has dropped 22.8 per cent over the past year.

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The U.S. Senate proposal will, however, extend tax credits for hydro, nuclear, and geothermal energy through 2036.

Shares of some nuclear energy-related companies rose, with Nano Nuclear Energy gaining 1.2 per cent.

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Reporting by Shashwat Chauhan and Pooja Menon in Bengaluru; Editing by Devika Syamnath.