Solar stocks are taking a material hit this morning after the US Senate approved cuts to renewable energy incentives the Trump administration proposed in its controversial spending bill last month.
On Tuesday, the upper chamber decided in favour of keeping incentives for hydropower, nuclear, and geothermal energy in place – but included a provision in the said bill that will fully eliminate ones for solar and wind power by 2028.
Enphase, Sunrun, Solaredge, and First Solar – all are down between 18% and 43% at the time of writing.
What removal of tax credits mean for US solar stocks?
Note that tax incentives for solar/wind power under the previous government’s Inflation Reduction Act (IRA) were originally set to remain in place through 2032.
An early sunset is meaningful for solar stocks as it wipes out critical financial underpinnings of pending and planned projects, reduces business pipelines, and forces layoffs or cancellations, especially in the residential segment.
Residential solar providers like Enphase or Sunrun face a concentrated loss of demand following the Senate’s nod on cuts to renewable energy incentives on Tuesday.
Without nationwide tax credits, rooftop system cost could rise by some 30%, shrinking uptake and ultimately profits.
Smaller installers are particularly vulnerable as contracting margins could even push them into bankruptcy in the back half of 2025.
How IRA helped solar stocks outperform in recent years?
Biden’s IRA offered bonus add-ons for domestic sourcing and wage/apprenticeships to solar firms on top of a standard 30% credit.
These incentives are widely credited with quadrupling US solar manufacturing capacity, adding as much as 31GW last year, and attracting more than $20 billion in investments in year one alone.
The Inflation Reduction Act has helped rooftop solar savings reach millions of US households.
In 2023, 3.4 million families saved up to $8.4 billion, while the act reportedly supported about 100K clean energy jobs in under a year as well.
Additionally, the tax credits fuelled community solar, expanded reach to low-income households, and generated economic benefits across multiple states.
Should you buy the dip in US solar stocks on Tuesday?
In short, the Senate’s version of Trump’s spending bill rewinds years of solar momentum. It lowers solar tax credits to 60% in 2026, shrinks them further in the year after, and removes them entirely in 2028.
Investors should note that the upper chamber’s decision to leave incentives for hydro, nuclear, and geothermal unchanged until 2036 could unbalance energy investments over time.
US solar firms, meanwhile, lose financial lifelines, investors pull back, projects stall, and the supply chain faces uncertainty. The outcome? Continued potential weakness in solar stocks and a major setback for the clean energy growth curve.
Investors are, therefore, advised to exercise caution in buying the dip in the likes of Enphase, SolarEdge, Sunrun, or First Solar on Tuesday.
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