Sign In or Create an Account.

By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy

Energy

Residential Solar’s No Good, Very Bad Day

Shares in Sunrun, SolarEdge, and Enphase are collapsing on the Senate’s new mega-bill draft.

Sad solar panels on a roof.
Heatmap Illustration/Abbr. Projects

The residential solar rescue never happened. Shares in several residential solar companies plummeted Tuesday as the market reacted to the Senate Finance Committee’s reconciliation language, which maintains the House bill’s restriction on investment tax credits for residential solar installers and its scrapping of the tax credit for homeowners who buy their own systems.

The Solar Energy Industries Association, a solar trade group, criticized the Senate text, saying that it had only “modest improvements on several provisions” and would “pull the plug on homegrown solar energy and decimate the American manufacturing renaissance.”

Sunrun shares fell 40% Tuesday, bringing the company’s market cap down by almost $900 million to $1.3 billion, a comparable loss in value to what it sustained the day after the passage of the House reconciliation bill. The stock price had jumped up late last week due to optimism that the Senate Finance bill might include friendlier language for its business model.

Instead the Finance Committee proposal would terminate the residential clean energy tax credit for any systems, including residential solar, six months after the bill is signed. The text also zeroes out investment and production tax credits for residential solar when “the taxpayer rents or leases such property to a third party,” a common arrangement in the industry pioneered by Sunrun.

Sunrun’s third party ownership model well predates the Inflation Reduction Act and is about as old as the company itself, which was founded in 2007. The company had been claiming investment tax credits for solar before the IRA made them tech neutral. The company began securitizing solar deals in 2015 and in a 2016 securities filling, the company said that it had six deals where investors would be able to garner the lease payments and investment tax credits.

“Ain’t no sunshine for resi,” Jefferies analyst Julien Dumoulin-Smith wrote in a note to clients on Tuesday. “Overall, we view Senate's version as a negative” for Sunrun, as well as SolarEdge and Enphase, the residential solar equipment companies, whose shares are down by about 33% and 24% respectively.

“If this language is not adjusted before the bill passes the Senate floor,” Morgan Stanley analyst Andrew Perocco wrote in a note to clients, “we believe Sunrun, SolarEdge, and Enphase will trade towards our bear cases.”

Morgan Stanley had earlier estimated that cutting off home solar from tax credits would lead to a “85% contraction in residential solar volumes” due, in many cases, to solar products no longer resulting in savings on electricity bills.

That’s because the ability to lease solar equipment (or have homeowners sign power purchase agreements) and then claim tax credits sits at the core of the contemporary residential solar model.

“Our core solar service offerings are provided through our lease and power purchase agreements,” the company said in its 2024 annual report. “While customers have the option to purchase a solar energy system outright from us, most of our customers choose to buy solar as a service from us through our Customer Agreements without the significant upfront investment of purchasing a solar energy system.”

This means that to claim tax credits for the projects, they have to be investment tax credits, not home energy credits. These credits play a role in Sunrun’s extensive business raising money from investors to finance solar projects, which can then be partially monetized via tax credits.

Fund investors “can receive attractive after-tax returns from our investment funds due to their ability to utilize Commercial ITCs,” the company said in its report. The financing then “enables us to offer attractive pricing to our customers for the energy generated by the solar energy system on their homes.”

Without the ability to claim investment tax credits, Sunrun could be left having to charge higher prices to homeowners and face a higher cost of capital to raise money from investors.

“Last night’s draft text confirms the Senate intends to abruptly repeal tax credits available to homeowners who want to go solar – effectively increasing costs and limiting choice for countless Americans,” Chris Hopper, chief executive of Aurora Solar, said in an emailed statement.

Blue

You’re out of free articles.

Subscribe today to experience Heatmap’s expert analysis 
of climate change, clean energy, and sustainability.
To continue reading
Create a free account or sign in to unlock more free articles.
or
Please enter an email address
By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy
Climate

AM Briefing: Trump Scythes Grain Belt Funding

On FERC’s ‘disastrous misstep,’ the World Court’s climate ruling, and 127 SMRs

Trump Cuts Off Funding for Grain Belt Power Line
Heatmap Illustration/Getty Images

Current conditions: West African countries including Guinea-Bissau, Guinea-Conakry, Senegal and The Gambia are facing flash flooding from heavy rainfall • The southwestern corner of New Mexico is suffering “exceptional” drought, the highest possible level in the U.S. Drought Monitor. • Already roasting in excessive heat, Des Moines, Iowa, is bracing for thunderstorms.

THE TOP FIVE

1. Energy Department yanks $5 billion guarantee for Grain Belt Expressr

The Department of Energy canceled a nearly $5 billion loan guarantee for the Grain Belt Express, a transmission project designed to move wind power from Kansas to the industrial upper Midwest. After more than a decade of development, the power line won bipartisan support and secured $4.9 billion in federal financing late last year to fund the first phase of the project, running from Ford County in Kansas to Callaway County in Missouri.

Keep reading...Show less
Yellow
Energy

Bigger Is Better in the Age of Trump, Says NextEra CEO

NextEra CEO John Ketchum projected serenity during the company’s earnings call Wednesday.

A sunglasses emoji amid the NextEra logo.
Heatmap Illustration/Getty Images

The business of renewable energy development in the United States is the business of NextEra. The company’s renewable division is one of the country’s largest and most sophisticated, with almost 30 gigawatts in its project backlog — including 3.2 gigawatts added in the past three months.

NextEra’s financial results and outlook for the future can be a guide to how the sector is thinking — or wants people to think it’s thinking — about the state of the development landscape. Now especially, that landscape looks confusing and contradictory, with power demand increasing sharply alongside hostility to wind and solar development.

Keep reading...Show less
Yellow
Politics

The Electricity Affordability Crisis Is Coming

It sure looks that way, at least. Democrats should start coming up with a plan.

Donald Trump and electricity.
Heatmap Illustration/Getty Images, Chevrolet

For the first six months of President Trump’s term, the big question was about what would happen to the Inflation Reduction Act. We now have something like an answer.

President Trump’s memorably named One Big Beautiful Bill Act repealed many of the IRA’s most important clean energy tax credits, including incentives for wind, solar, and electric vehicles. And while it’s still unclear whether the Trump administration will let developers actually use the tax credits that remain on the books — especially the now-denuded credits for wind and solar — fewer “unknown unknowns” remain about what might come next.

Keep reading...Show less
Blue