Solar energy stocks dropped sharply on Tuesday following the release of the US Senate’s version of President Donald Trump’s tax bill, which proposes a full phase-out of solar and wind energy tax incentives by 2028. Meanwhile, tax credits for nuclear, hydropower and geothermal energy remain intact for a longer period.
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The market reaction was swift. Shares of Enphase Energy fell over 17 per cent in premarket trading, First Solar declined around 12 per cent, Sunrun dropped more than 27 per cent and SolarEdge Technologies slid by 22 per cent.
The proposed cuts are a major blow to the renewable energy sector, especially as these incentives had been central to former President Joe Biden’s Inflation Reduction Act (IRA). However, the Senate bill is seen as a slight improvement over the House-passed version, which posed a more severe threat to the IRA’s tax provisions.
“The House-passed version generally represented a worst-case scenario for the majority of the IRA’s tax incentives; while the Senate proposal still represents a material negative for renewable energy investment/names, it is a significant improvement from the House,” noted Raymond James Washington policy analyst Ed Mills. “wind and solar eligibility continue to see pressure in the Senate-passed version.”
Republicans, who currently hold a 53-47 majority in the Senate, are aiming to pass the legislation before the July 4 holiday. The bill also includes a provision to raise the federal debt ceiling from USD 4 trillion to USD 5 trillion.
“We continue to view the July 4 target as ambitious given pending Byrd Rule decisions and potential amendments. With Republicans holding a narrow 53-47 majority, defections could force concessions, particularly on SALT and Medicaid provisions,” Mills added. “Unless the Senate can pre-negotiate provisions, the Senate will then reconcile differences with the House version through the conference process, likely extending into late July.”
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