Senate Proposal to End Solar Tax Credits Hits Stocks Hard

2025-06-18 economy

Washington D.C., Tuesday, 17 June 2025.
A Senate draft suggests ending solar and wind tax credits by 2028, causing sharp declines in solar company stocks and raising concerns over U.S. renewable energy growth and climate policy.

The Senate’s Legislative Proposal

On June 16, 2025, the Senate Finance Committee released a draft proposal suggesting the phased elimination of tax credits for solar and wind projects by 2028. This move is part of the revisions made to President Donald Trump’s sweeping tax-and-spending initiative, known as the ‘One Big Beautiful Bill Act’, which the House of Representatives had approved earlier [1][2]. The draft legislation outlines a reduction in the Investment Tax Credit (ITC) and Production Tax Credit (PTC) starting in 2026, when the benefits will decrease to 60% of their current value, before being entirely phased out two years later [5][8].

Market Reaction and Investor Concerns

U.S. solar stocks experienced a substantial downturn following the announcement. Enphase Energy, Sunrun, and SolarEdge Technologies saw their shares drop by 27.2%, 43%, and 39.4% respectively [2][3][6]. The market reaction reflects a broader concern among investors about the future of renewable energy incentives, as such tax credits have historically played a significant role in solar energy development [8]. The potential reduction of these incentives could slow down solar expansion projects, causing apprehensions about the industry’s growth trajectory and the broader implications on U.S. climate policy [8].

Broader Economic and Policy Impacts

The Senate proposal didn’t just impact solar companies. The bill aims to reinforce other energy sectors by extending tax credits for hydro, nuclear, and geothermal energies through 2036, a move that aligns with a shift towards diversifying the U.S. energy portfolio [5]. However, this shift comes at a time when the solar industry is already grappling with other challenges such as high interest rates and state-specific metering reforms [3][7]. Such legislative changes, if enacted, could ultimately reshape the competitive landscape across energy sectors in the U.S.

Legislative Timeline and Uncertainties

The Senate aims to pass its version of the bill prior to the July 4 deadline, although analysts remain skeptical about its passage in its current form due to potential pushback from industry stakeholders and regulatory complexities [3]. The timeframe for legislative negotiations provides an opportunity for lobbying efforts from the renewable energy sector, which is expected to advocate vigorously against the proposed changes [3][5]. Whether the proposed tax credit phase-outs will proceed as planned or undergo further modifications remains uncertain, underscoring the volatile nature of legislative processes concerning energy policy.

Sources

solar energy tax credits