The Potential Downfall of the U.S. Clean Energy Surge if Trump’s ‘Grand, Gorgeous Legislation’ is Enacted.

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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, according to the Jefferies analysts. The legislation would "upend an economic boom in this country that has delivered a historic American manufacturing renaissance," said Abigail Ross Hopper, CEO of the lobby group Solar Energy Industries Association.

Hopper criticized the tax bill as "willfully ignorant" of the role that solar power and battery storage play 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 noted in an interview that the legislation could result in the loss of 250,000 jobs and would increase electricity costs for consumers. The rooftop solar installer experienced its worst performance ever on Thursday, with shares dropping 37%. Trump, for his part, called on the Senate to pass what he terms the "one, big, beautiful bill" as soon as possible. "There is no time to waste," he stated.

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., comprising 81% of expected power additions to the grid in 2025, per the Energy Information Administration.

However, the tax bill would effectively eliminate two critical tax credits that have fueled the solar power surge. 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 change also extends to wind power, which is growing at a slower rate in the U.S.

"That will significantly slow down the amount of clean energy that gets added to the grid," remarked 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.

Additionally, clean energy projects could lose access to tax credits as early as next year if they receive "material assistance" from prohibited foreign entities. This primarily targets projects sourcing basic materials from China, such as glass for solar panels or cobalt and lithium for batteries. "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 benefiting companies like First Solar remains in place until 2031, though it is also subject to the foreign entity restrictions.

The tax bill is viewed as "disastrous" for the rooftop solar industry, according to Guggenheim analyst Joseph Osha. It terminates tax credits for companies like Sunrun that lease solar equipment to customers, with about 70% of the residential solar industry utilizing lease arrangements, he noted.

Some Republican senators have expressed opposition to the legislation, raising hope that the bill's harshest provisions will be softened. Sen. Shelley Moore Capito, R-W.V., stated that the tax bill acts like a blanket repeal of the tax credits. "I would expect that to change," she commented. "There has been job creation around these tax credits."

Indeed, GOP congressional districts would be impacted the most if the credits are terminated. Approximately 81% of IRA investment has gone to Republican districts, based on data from advocacy group E2. A slowdown in solar deployment would come at a time when 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 quickest to meet demand, with solar, battery storage, and wind accounting for 92% of the power projects awaiting grid connection, according to Interconnection.fyi. Although natural gas demand is rising in the U.S., the wait time for new turbines is five to six years from the time of order, as noted by Reid Ramdathsingh, an analyst at consulting firm Rystad Energy. While growth may decelerate, solar and batteries will continue to be deployed because alternatives are limited. "The demand is there for energy," he emphasized. "Gas cannot meet this demand in the short term. The biggest alternative to gas generation that we would need in the coming years is renewables."

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