Clean Energy Stocks Sink As Senate’s Tax Bill Retains Cuts Made on Renewables

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Clean energy stocks fell sharply Monday after Senate Republicans released a tax package that maintains deep cuts to renewable energy incentives. In particular, the market reaction among solar stocks was swift, as Sunrun dropped 27%, SolarEdge lost 21%, and First Solar fell 11%. Investors had hoped the Senate version of the “One Big Beautiful Bill” would revise some of the cuts passed by the House last month. Instead, the Senate kept most of them intact. The proposed legislation would phase out federal tax credits for solar and wind projects starting next year. Credits for electric vehicles and residential solar installations would also end within six months. Battery producers and green hydrogen developers would lose access to subsidies by year-end. These incentives were key drivers of clean energy expansion since the 2022 Inflation Reduction Act.

Investor Optimism in Clean Energy Stocks Fades as Phaseouts Take Shape

The Senate bill offers a slightly slower phaseout schedule than the House version. But it still delivers a blow to the industry. Renewable developers would get the full credit only if they begin construction this year. By 2026, the credit drops to 60%. In 2027, it falls to 20%. By 2028, there is no support.

Analysts warn that the lack of support will slow U.S. progress on clean energy targets. Industry groups said higher financing costs and lower returns will halt projects and increase electricity prices. Companies that rely on leasing models or third-party financing such as residential solar installers are especially vulnerable under the new rules.

Investors responded by selling off shares across the clean tech space. Battery storage firm Enphase Energy lost 17%. Fluence Energy dropped nearly 2%. Even Tesla, which maintains a substantial battery and solar business, slipped slightly. Hydrogen developers also took a hit, with major green hydrogen projects now at risk of cancellation due to the 2026 expiration of production tax credits.

Clean Energy Stock Winners and Losers in the Senate Bill

While wind and solar took the biggest hit, the Senate plan preserved credits for baseload clean power such as nuclear, hydropower, and geothermal through 2033. It also maintained the ability to transfer tax credits, an important financing tool that the House version wanted to eliminate.

Still, several restrictions remained. Projects using equipment sourced from China or other designated foreign adversaries would be disqualified from many incentives. This could impact U.S. manufacturers who rely on global supply chains. Although the Senate offered some easing of these rules, the industry says they remain too rigid for rapid expansion.

Notably, while Democrats fought to preserve residential credits, the Senate version still eliminates them. This includes tax breaks for rooftop solar, heat pumps, induction stoves, and other home energy upgrades. In 2023 alone, over 3.4 million households had used these programs.

Market Reaction Reflects Political Realignment

The Senate plan caught many investors and clean energy advocates off guard. Nearly 80% of the Inflation Reduction Act’s clean energy investments had gone to Republican districts. Many of those lawmakers, under pressure from local industry, had urged the Senate to protect jobs and investment. Thirteen House Republicans had signed letters asking the Senate to soften the blow.

Despite those appeals, the final draft delivered only modest changes. It was enough to preserve nuclear and hydro credits, but not enough to reverse the market’s broader sentiment. Climate and investment groups alike warned that the changes would delay progress and drive clean tech development overseas.

Investors now face renewed uncertainty. The clean energy sector, once viewed as a high-growth area supported by bipartisan industrial policy, is now politically vulnerable again. With earnings season ahead and capital-intensive projects under threat, clean energy stocks may continue to feel pressure until there is greater policy clarity.

Should investors reduce exposure to clean energy stocks after the Senate upheld tax credit phaseouts for renewables? Tell us what you think.

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