Solar stocks drop after Senate proposal to phase out tax credits by 2028
June 17 (Reuters) - U.S. solar stocks dropped in premarket trading on Tuesday after a Senate panel proposed a full phase-out of solar and wind energy tax credits by 2028, as part of changes suggested to President Donald Trump's sweeping tax-cut and spending bill.
Solar inverter maker Enphase Energy (ENPH.O), opens new tab was among the biggest decliners on the S&P 500 (.SPX), opens new tab in early trading, sliding 17.2% to $38. Solar panel sellers Sunrun (RUN.O), opens new tab and SolarEdge Technologies (SEDG.O), opens new tab plunged more than 20% each. First Solar (FSLR.O), opens new tab was down 10.5%.
The draft bill, circulated by a U.S. Senate committee, includes several changes to Trump's budget known as the "One Big, Beautiful Bill Act" that the House narrowly passed last month.
The language released by the committee chair envisages phasing out subsidies enshrined by the Biden-era 2022 Inflation Reduction Act for solar and wind in 2026 by reducing the incentive to 60% of its value and ending it by 2028.
Under current law, the tax credits would not start phasing out until 2032.
Citi strategists said they "remain a sell on residential solar."
"This is a slight improvement compared to the prior sharp termination of credits for projects not placed in service by 12/31/2028 but is far more restrictive than the original bill's phase-out starting in 2029 and elimination of credits in 2032," they said.
Solar companies are already under pressure from weak U.S. residential demand that's partly driven by high interest rates and metering reforms in top market California. The reforms have reduced the credits customers get for feeding excess electricity back into the grid.
Shares of Sunrun have shed 27% in the past one year, while Enphase Energy is down 63% in the same period.
The Invesco Solar ETF has dropped 22.8% over the past year.
However, the Senate panel's proposed changes to Trump's budget extend tax credits for hydro, nuclear and geothermal power to 2036.
Shares of some nuclear energy-related companies rose, with Nano Nuclear Energy (NNE.O), opens new tab and nuclear startup Oklo (OKLO.N), opens new tab up 2.2% and 2.1%, respectively.
The different versions of the bill in the two narrowly Republican-controlled chambers of Congress could complicate party leaders' goal of passing the bill, which is the centerpiece of Trump's domestic agenda, before a self-imposed July 4 deadline.
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