The solar industry has been trading jabs all year, but Washington may have delivered the knockout punch.
Consequently, solar stocks have taken their investors on a steep slide, with the trend pointing mostly south.
💵💰Don’t miss the move: Subscribe to TheStreet’s free daily newsletter💰💵
For the better part of the year, Washington’s response to any clean energy talk has been lukewarm (at best). Unsurprisingly, the ride has been rough, with bankruptcies and brutal sell-offs.
Funny how the “Big Beautiful” bill could throw a wrench in what otherwise was a promising trend.
No credits, no scale
It’s no secret that the solar industry, in general, relies on fragile economics.
Related: Enphase Energy (ENPH) Downgraded From Hold to Sell
Tax credits aren’t just niceties; they’re essentially the linchpins underpinning the entire solar value chain.
Take them out of the equation, and everyone from rooftop solar financiers to utility suppliers loses demand, cost advantages, and bidding power.
For residential solar businesses like Enphase (ENPH) and Sunrun (RUN) , the 30% federal Investment Tax Credit, or ITC, makes its systems affordable enough to spark demand.
Additionally, it boosts fuel install volumes, software fees for Enphase, and higher leasing cash flows for Sunrun.
Strip that away, and its returns shrink dramatically, as do the growth stories.
Similarly, on the utility side, First Solar (FSLR) leans on Production Tax Credits, or PTCs, and transferable ITCs to score big utility-scale deals.
PTCs boost returns over a ten-year period, while transferable credits help developers unlock upfront cash flow.
That combo fattens the margins on its thin-film tech and makes contracts much more attractive.
That said, it’s worth understanding how these solar bellwethers actually make money because it’s not always straightforward.
Enphase sells microinverters that sit under rooftop panels, turning sunlight into usable home power. Add batteries and monitoring software, and it’s a hardware-plus-subscription play.
Sunrun takes a different approach, think of it as a solar utility. It leases panels and batteries to homeowners, collecting monthly payments while handling all the upkeep. Nevertheless, it’s a lot more sensitive to interest rates and policy shifts.
First Solar, on the flipside, plays at the utility level. It builds massive solar farms with its low-cost, U.S.-made thin-film panels while profiting from one-time sales and ongoing maintenance deals.
More On Solar:
- Macy’s is selling a ‘well-designed’ $399 solar panel for $208 that shoppers say is easy to set up
- Amazon is selling ‘exceptional’ $70 outdoor solar lights for just $35, and shoppers say they’re ‘the best’
What ties it all together? Tax credits. ITCs and PTCs help drive demand, improve margins, and unlock greater financing.
Senate plan phases out solar tax credits, slams stocks
Solar stocks have nosedived, post-market Monday, June 27, and regular trading Tuesday, June 18, after Senate Republicans proposed changes to President Trump’s tax and spending bill.
The amendments threaten to phase out solar and wind tax credits fully by 2028.
Related: Sunrun (RUN) Stock Climbs, Goldman Upgrades
The shift will likely send capital fleeing from solar to sectors with longer government backing. Even First Solar stock, arguably more protected due to its U.S. footprint, has taken a massive beating.
Solar Energy Industries Association President and CEO Abigail Ross Hopper remarked. “This bill makes it harder to do business in America for U.S. manufacturers and small businesses and will undoubtedly lead us to an energy-strained economy with higher electric bills over the next five years.”
Needless to say, the timing couldn’t have been any worse for solar stocks.
Sunnova’s recent Chapter 11 filing landed right when the residential solar space wobbled. With a $9–11 billion debt load and just $13.5 million in cash, the Houston-based installer laid off 700 employees and scrambled to sell assets for some relief.
Sunnova wasn’t alone, though, with Solar Mosaic also filing for bankruptcy, exposing cracks in the solar model. Then came California’s controversial AB 942 bill, gutting solar resale economics.
The bill forces homes with solar to switch to the NEM 3.0 net metering plan, slashing credit payouts by 80% whenever ownership changes. Hence, it’s a one-two punch for an industry already on its knees.
At the time of writing, the Invesco Solar ETF (TAN) is down 10% in regular trading on Tuesday, breaking below the $32 level and extending its six-month slide. Enphase has nosedived 26% so far today, bringing its losses to over 52% in six months.
First Solar shed 18%, down more than 24% over the 6-month period. SunRun fared the worst, crashing 42% to $5.63 and flirting with penny stock territory. Moreover, it’s now down over 54% in just a month.
Related: First Solar (FSLR) Stock Slumps, Goldman Downgrades
