The solar industry has been dealt a major blow by a Senate proposal to phase out tax credits for solar energy by 2028. The proposed legislation has caused uncertainty in the renewable energy sector, leading to a sharp decline in the stock prices of several solar companies. The affected companies include Enphase Energy Inc and First Solar Inc, which both saw substantial drops in their stock values.
Enphase shares nosedived 26% today, bringing its six-month losses to over 52%. First Solar shares dropped 18%, down more than 24% over the same period. The solar industry relies heavily on tax credits to make their systems affordable and spark demand.
The 30% federal Investment Tax Credit (ITC) boosts install volumes, software fees for Enphase, and leasing cash flows for Sunrun.
Senate proposal impacts solar incentives
Stripping away ITCs would drastically shrink returns and growth potential.
Abigail Ross Hopper, President and CEO of the Solar Energy Industries Association, commented, “This bill makes it harder to do business in America for U.S. manufacturers and small businesses and will undoubtedly lead us to an energy-strained economy with higher electric bills over the next five years.”
The timing couldn’t have been worse for solar stocks. A Chapter 11 filing landed just as the residential solar space wobbled. With a $9–11 billion debt load and just $13.5 million in cash, Houston-based installer Sunnova laid off 700 employees and scrambled to sell assets.
Solar Mosaic also filed for bankruptcy, highlighting cracks in the solar model. The proposed changes in tax credits and subsequent stock market reactions underscore the solar industry’s dependency on federal policy for its economic viability and overall growth. The move has disappointed many who viewed these incentives as crucial for transitioning to renewable energy and combating climate change.
The Senate proposal adds uncertainty to an industry that relies heavily on federal support to compete against more established fossil fuel infrastructures.