The 2024 election outcome came with warnings for alternative energy and solar energy companies, favoring cheaper energy sources already in use and readily available in America. The Republican tax bill has removed many tax benefits for solar and other clean energy. While it is not a ban on solar by any means, the end result here suggests that if people want to spend up for solar energy they can pay for it with government subsidies. This will restrict and phase out certain aspects of the Inflation Reduction Act and will change and ultimately eliminate certain tax credits in the solar industry.
What strategic investors need to consider is that solar is not being outlawed — by removing tax credits the owners who want to install new systems just have to pay their own way without getting government subsidies. This may push out even more weak players in the space, but solar still has a large market internationally. The Solar Energy Industries Association has already warned ahead of the tax bill of devastating energy shortages for the U.S. could reduce 300,000 current and future jobs and could lose energy production rather than add to it as needed.
Certain inverters and components for solar energy, wind energy, batteries and even the critical minerals may lose their tax credits. The current IRA law had certain components with rising tax credits from 20230 to 2032 and expiring thereafter. The tax credit for critical mineral production was set to be permanent. What appear to be changing in tax credits ahead, which may not exactly be what passes into law (and may have even been tweaked today), is that the new tax bill is removing tax credits as follows:
- wind energy components sold after 2027
- all other components sold after 2031
- restrict tax credits for certain prohibited foreign entities.
- remove clean energy storage provisions like clean electricity investment credit
Regardless of what passes into law, Wall Street has decided even before today to panic in solar-related companies. This was the trading action seen on Thursday alone, with a 52-week range to show the broader damage.
Sunrun Inc. (NASDAQ: RUN) down $4.00 (-38%) to $6.66 on 37 million shares, already three-times normal volume of a whole day. Its 52-week range is $5.45 to $22.26.
Enphase Energy, Inc. (NASDAQ: ENPH) down $9.52 (-20%) to $37.77 on 12 million shares, about 250% of normal volume for a whole day. Its 52-week range is $5.45 to $22.26.
SolarEdge Technologies, Inc. (NASDAQ: SEDG) was down $5.09 (-25%) to $14.76, with its 8 million shares already double a normal day’s volume. Its 52-week range is $10.24 to $52.40.
Array Technologies, Inc. (NASDAQ: ARRY) was down $0.88 (-12.3%) at $6.24 on 5.5 million shares. Its 52-week range is $3.76 – $14.69.
Canadian Solar Inc. (NASDAQ: CSIQ) was down $0.57 (-5.4%) at $9.93, although its 589,000 shares traded was light versus a normal trading day. Its 52-week range is $6.57 – $21.05. Goldman Sachs reiterated its Sell rating on May 19, but it did lift its target price to $9 from $8 in that call.
The key solar-focused ETF is the Invesco Solar ETF (NYSEArca: TAN) and it was last seen down 8.3% at $31.15, with 1.4 million shares in the first hour of trading being a 150% volume spike for the day. Its 52-week range is $25.53 to $49.93.
Even First Solar, Inc. (NASDAQ: FSLR), which was being treated favorably just last week by the markets as a domestic producer of solar panels, was down over 4% to $156.80 and the 3.4 million shares was nearing an average day’s trading volume. First Soalr’s 52-week range is $116.56 to %306.77. Just on May 19, Goldman Sachs reiterated its Buy rating and raised its target to $255 from $204.
And for wind energy players, the First Trust Global Wind Energy ETF (NYSEArca: FAN) was down 1.7% at $16.65 but on very thin trading volume. Each of its top 10 components are not U.S. companies.
Maybe some investors are still comfortable trying to figure out who will really win here, but doing so without using stock options might be taking on too much risk. That decision is entirely up to you.
