Solar Shares Rise as Trump Hit to Credits Softer Than Feared
(Bloomberg) -- Clean energy stocks soared after the Trump administration released new guidance on eligibility requirements for tax credits that weren’t as punitive as the industry had feared.
Residential solar systems still will be able to qualify under prior guidance and the new rules won’t be applied retroactively. Larger projects will be limited to a standard that requires a certain amount of physical construction to qualify for the credits.
“This is much better than expected,” said Phil Shen, a clean energy analyst with Roth Capital Partners, who added the changes were minimal overall.
Sunrun Inc., the nation’s biggest residential solar installer, jumped 33% Friday and home solar equipment provider SolarEdge Technologies Inc. rose 17%. NextEra Energy Inc., the biggest large-scale solar and wind developer, climbed 4%. NexTracker Inc., a solar equipment provider, was up 12%.
The issuing of the rules follows an executive order by President Donald Trump directing the Treasury Department to place new limits on the tax credits, part of an escalating campaign waged by the administration against wind and solar power. The crackdown includes policies that could halt the construction of renewable projects on public and private lands. It arrives as the country is scrambling to add more power supplies to meet soaring electricity demand from data centers running artificial intelligence.
Under Trump’s massive tax-and-spending bill signed into law July 4, solar and wind developments are eligible for tax credits if they begin construction within 12 months.
Until now, projects were considered eligible for the credits if developers had spent at least 5% of the planned projects cost. The new rule eliminates the 5% standard for large solar and wind projects, instead requiring developers prove “physical work of a significant nature” has been taking place on an ongoing basis. However, solar facilities not greater than 1.5 megawatts can still use the 5% of planned project expense standard to qualify.
“There was some expectation that the rule-making would make it very onerous to safe harbor tax credits, but this seems pretty straight forward,” said Robert Barnett, a clean energy analyst for Bloomberg Intelligence. “This is particularly favorable news to the residential and small commercial solar companies.”
More than 2,500 announced wind and solar projects — with a combined generating capacity equivalent to roughly 383 nuclear reactors — that have yet to begin construction could be affected by the decision, according to data from BloombergNEF.
“It’s not the worst thing in the world,” said Rhone Resch, chief executive officer of Advanced Energy Advisors, a risk management consulting firm for renewable energy development. “What it is going to do is reward sophisticated companies that have projects that are further along in their development. The companies that are going to suffer are the smaller medium sized developers that aren’t going to be able to meet this time frame.”
Large renewable energy developers have expressed confidence they can withstand the policy change. Executives with NextEra Energy said recently they have started construction on enough projects before the passage of Trump’s bill that they can meet their development plan through 2029. AES Corp. said most of its backlog of projects won’t be subject to the new guidance.
Still, the stricter requirements for big projects will add another hurdle to an industry already reeling from the Trump administration’s attacks.
“This is yet another act of energy subtraction from the Trump administration that will further delay the build-out of affordable, reliable power,” said Abigail Ross Hopper, chief executive officer of the Solar Energy Industries Association.
US annual clean energy installations are projected to plunge 41% after 2027, due to the rapid phase out of wind and solar tax credits, according to an analysis from BloombergNEF published before the latest Treasury tax guidance.
(Updates with closing share prices in the fourth paragraph.)
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