Solar Power Stocks Plunge as GOP House Bill to Gut Subsidies

(Bloomberg) -- Investors of clean-power stocks are running for the exits after a massive tax and spending bill that would gut former President Joe Biden’s landmark climate law narrowly passed the House of Representatives.

The bill now moves to the Senate, where some lawmakers are skeptical of provisions that would end subsidies for green energy years earlier than planned. But even as some Wall Street analysts suggested a final bill isn’t likely to be as damaging to the industry, renewable energy stocks are tumbling.

Shares of Sunrun Inc., America’s biggest rooftop-solar company, fell as much as 42% on Thursday — the most ever in intraday trading. Equipment provider SolarEdge Technologies Inc. slid as much as 27%. NextEra Energy Inc., the biggest US developer of wind and solar projects, slid as much as 10.7%, the most since October 2023. 

While the House GOP bill would take a sledgehammer to Biden’s Inflation Reduction Act, it’s “not yet a finishing blow,” analysts at Jefferies wrote in a note Thursday. “We don’t expect this to last into Senate draft.”

If passed without revision, the House bill would be the biggest blow to clean power yet from Donald Trump’s administration. The president has been keen to undo Biden’s climate legacy and has already throttled the country’s fledgling offshore wind sector.

The House bill represents a “nightmare scenario for US clean energy advocates and defenders of the Biden-era IRA,” BloombergNEF analysts Ethan Zindler and Derrick Flakoll wrote in a note Thursday. The provisions that bar US projects from using components, subcomponents or even materials from China would make it nearly impossible for US solar and battery manufacturers to qualify for the tax incentives, they wrote. 

The House GOP bill would end technology-neutral clean electricity tax credits for sources including wind and solar starting in 2029 and require those projects to begin construction within 60 days of the legislation becoming law. The initial version proposed by House Republicans had a longer phase-out time, allowing many of the credits to exist until 2032.

Without the tax credits, returns for renewable power plants could drop below threshold necessary to stimulate investment and likely spur a strategic capital shift away from the US, Bloomberg Intelligence wrote in a note.

“Without tax credits it’s harder to invest,” Bobby Chada, an investment analyst at Capital Group, said in an interview on the sidelines of the Aurora Energy Research conference in London on Thursday.

While some moderate Republicans in the Senate have vowed to defend the energy credits, the tight margin in the House — where Speaker Mike Johnson can only afford to lose three votes — may limit their ability to act as a firewall, said James Lucier, managing director at research group Capital Alpha Partners.

“Conventional wisdom is that the Senate always rolls the House on must-pass bills at the end of the day,” Lucier said in an email. “But this time, the margins in the House are so tight that the Senate may have to accept the House bill.”

(Updates with share prices in the third paragraph, comment in sixth.)

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