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. For larger projects, they will have to meet a physical construction standard but will still have four years to complete their developments.
“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 as much as 42%, and home solar equipment provider SolarEdge Technologies Inc. rose as much as 28%. NextEra Energy Inc., the biggest large-scale solar and wind developer, climbed as much as 5%. NexTracker Inc., a solar equipment provider, jumped nearly 13%.
The moves, which follow an executive order by President Donald Trump ordering the Treasury Department to place new limits on the tax credits, adds to an escalating campaign against wind and solar power. The crackdown, which has a series of new permitting reviews for the projects at the Interior Department and the cancellation of a massive planned wind farm in Idaho, comes at a critical time in the US as it confronts a potential shortage of power supplies to meet rising 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% for large scale projects, instead requiring developers prove “physical work of a significant nature” has been taking place on an ongoing basis. However, small 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 rulemaking 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 will add another hurdle to an industry already reeling from the Trump administration’s attacks aimed at blocking solar and wind development on both federal and private lands.
“This is yet another act of energy subtraction from the Trump administration that will further delay the buildout 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.
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