- Solar stocks are plunging as the House Republican tax bill terminates key clean energy credits.
- The legislation is “disastrous” for the rooftop solar industry, according to Guggenheim.
- First Solar is relative winner as the manufacturing tax credit is relatively unscathed.
- The legislation still has to pass the Senate and changes could still be made.
Solar stocks plunged premarket on Thursday after House Republicans passed a tax bill that terminates key clean energy credits.
Residential solar installer Sunrun plummeted more than 35%. The legislation ends tax credits for installers like Sunrun that lease equipment to customers.
The GOP bill is a “worse than feared” scenario for clean energy, as it takes a “sledgehammer” to the Inflation Reduction Act, Jefferies analysts led by Julien Dumoulin-Smith told clients in a note.
Some 70% of the rooftop solar industry now uses lease arrangements, making the bill disastrous for companies like Sunrun, Guggenheim analyst Joseph Osha told clients.
Enphase and SolarEdge plummeted about 18%, as sales of their inverters would take a hit from lower demand for rooftop solar.
The bill also ends the investment and electricity production credits for clean energy facilities that begin construction 60 days after the legislation is enacted or enter service after Dec. 31, 2028. Those credits have played a key role in the rapid expansion of utility-scale solar projects in the U.S.
Solar stocks exposed to the utility sector tumbled, with Array and Nextracker down 14% and 5%, respectively. Array and Nextracker make devices that allow solar panels track the position of the sun.
First Solar, however, fell just 1% as the bill left the manufacturing tax credit relatively unscathed. First Solar is the biggest producer of solar panels in the U.S. with a large domestic manufacturing footprint.
“Manufacturing subsidies do not appear to have been touched – good news for FSLR,” Osha said. While the bill is bad for solar, Jefferies expects the Senate to make changes to the legislation.
