Solar power CEOs believed the billions of dollars that they invested in Republican congressional districts would ultimately shield their industry from President Donald Trump’s threats to end federal support for renewable energy.
But they may have been disastrously wrong. The tax bill that House Republicans passed this week is a “worse than feared scenario” for solar, analysts at the investment bank Jefferies told clients in a note.
The legislation would terminate key tax credits that have supported the industry’s growth, triggering a broad sell-off of solar stocks on Thursday. The bill does still have to pass the Senate, where Jefferies expects the “unworkable” provisions to be undone.
But in its current form, the tax bill effectively takes a “sledgehammer” to President Joe Biden’s Inflation Reduction Act, the Jefferies analysts said. The legislation would “upend an economic boom in this country that has delivered an historic American manufacturing renaissance,” said Abigail Ross Hopper, CEO of the lobby group Solar Energy Industries Association.
Hopper excoriated the tax bill as “willfully ignorant” of the role that solar power and battery storage is playing in meeting electricity demand from U.S. consumers and businesses.
“If this bill becomes law, America will effectively surrender the AI race to China and communities nationwide will face blackouts,” she warned.
Sunrun CEO Mary Powell told CNBC in an interview Thursday that the legislation could result in the loss of 250,000 jobs and would increase the cost of electricity for consumers. The rooftop solar installer had its worst performance ever Thursday, with shares dropping 37%.
Trump, for his part, called on the Senate to pass what he calls the “one, big, beautiful bill” as soon as possible. “There is no time to waste,” the president said on his social media platform Truth Social Thursday.
Clean energy boom could bust
Companies have invested more than $161 billion in large solar and battery storage projects since the IRA passed in 2022, according to the Massachusetts Institute of Technology and the Rhodium Group.
Solar and battery storage is the fastest growing energy source in the U.S., making up 81% of expected power additions to the grid in 2025, according to the Energy Information Administration.
But the tax bill would basically kill the two tax credits that have done the most to enable the surge of solar power. It terminates the investment and electricity production credits for clean energy facilities that begin construction 60 days after the legislation is enacted or enter service after 2028. This also applies to wind power, which is growing at slower place in the U.S.
“That’ll put a massive slowdown on the amount of clean energy that gets added to the grid,” said Ben Smith, associate director of Rhodium Group’s energy and climate practice. The deployment of clean energy to the grid could decline by 57% to 72% over the next decade, according to Rhodium.
Clean energy projects also cannot claim the tax credits as early as next year if they receive “material assistance” from prohibited foreign entities. This mostly targets projects that source basic materials from China, such as glass for solar panels or cobalt and lithium for batteries, King said.
“It really does serve in our estimation as a de facto repeal of the credit as early as next year,” he said. The manufacturing tax credit that has supported companies such as First Solar remains in place until 2031, though its also subject to the foreign entity restrictions.
The tax bill is “disastrous” for the rooftop solar industry, Guggenheim analyst Joseph Osha told clients. It terminates tax credits for companies like Sunrun that lease solar equipment to customers. About 70% of the residential solar industry is using lease arrangements, Osha said.
GOP senators could tweak bill
But some Republican senators have pushed back on the legislation, raising at least some hope for the industry that the bill’s harshest provisions will be softened. Sen. Shelley Moore Capito, R-W.V., told Politico that the tax bill acts like a blanket repeal of the tax credits.
“I would expect that to change,” Capito told Politico on May 13. “There has been job creation around these tax credits.”
Indeed, GOP congressional districts would get hit the hardest if the credits are terminated. Some 81% of IRA investment has gone to Republican districts, according to data from advocacy group E2.
A slowdown in solar deployment would come at the same time that electricity demand is increasing due to the construction of artificial intelligence data centers, reindustrialization and the broader electrification of the economy.
Renewables can be deployed the most quickly to meet demand right now because solar, battery storage and wind represent 92% of the power projects waiting for connection to the grid, according to Interconnection.fyi, an organization that tracks connection requests.
Natural gas demand is also soaring in the U.S., but the wait time for new turbines is five to six years if an order is put in now, said Reid Ramdathsingh, an analyst at consulting firm Rystad Energy. While growth may slow, solar and batteries will continue to be deployed because there really isn’t an alternative, Ramdathsingh said.
“The demand is there for energy,” he said. “Gas is not able to meet this demand in the short term. The biggest alternative to that gas generation that we would need in the next couple of years is renewables.”
