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Solar stocks rebound Friday after suffering crushing losses in the previous session that followed the House of Representatives’ passage of President Trump’s tax and spending package that analysts say would effectively end the U.S. residential solar industry as it currently exists.
Sunrun (SUN) and SolarEdge Technologies +11.9% and +10.7%, respectively, after plunging 37% and 24% on Thursday; Enphase Energy (ENPH) +4.6% after tumbling nearly 20% a day earlier when it was the biggest loser on the S&P 500.
Other clean energy names showing at least partial recoveries Friday include First Solar (FSLR) +2.6%, Fluence Energy (FLNC) +2.2%, Array Technologies (ARRY) +2.1%, Maxeon Solar Technologies (MAXN) +2%.
The final House bill represents “a worst case scenario for solar,” particularly for Sunrun (NASDAQ:RUN), followed by Enphase (ENPH) and SolarEdge (NASDAQ:SEDG), according to Wells Fargo analysts led by Michael Blum.
For Sunrun (NASDAQ:RUN), leased residential solar equipment no longer qualifies for the 48E investment tax credit, which expires at the end of 2028, and instead will be required to use the 25D credit, which expires at the end of 2025; if it stands, Blum wrote, the change would significantly lower Sunrun’s (RUN) cash generation potential, and higher leasing costs passed to the end customer would reduce the economic viability of TPO solar in many states and limit installations.
Array (ARRY) and Nextracker (NXT) also are hurt, but Blum believes utility scale solar demand is
“secular, and there’s significant headroom to raise PPA prices even without tax credits,” while First Solar (FSLR) is less affected as the House bill maintained 45X credits, although “the appeal of domestic panels diminishes if developers are unable to qualify for domestic content/ITC credits.”
The bill now moves to the Senate, where some Republican senators suggest the House’s draconian cuts to former President Biden’s climate landmark Inflation Reduction Act would be changed.
The House bill sunsets renewable energy credits, as expected, but also ends credits for rooftop solar this year – seen as a potentially fatal blow for the industry – while credits for larger solar and wind energy projects would end by 2028, instead of a slower phaseout through 2031, unless projects have invested at least 5% of total cost within 60 days of the law’s enactment.
An earlier version of the bill rolled back the rooftop solar credit for people who own their systems but left it in place for leased systems, but both groups lost the credit under the bill that passed the House; Guggenheim analyst Joseph Osha estimates ~70% of the residential solar industry is supported by leasing or other financing arrangements.
The House bill also said clean energy tax credits – except for advanced nuclear projects – are no longer transferable, which could create financing challenges for equipment manufacturers.