It’s been a wild ride holding First Solar shares in recent times, however, recent news flow has been supportive, pushing shares sharply higher over the week. New guidance has emerged from the Treasury Department and IRS concerning tax credits for clean energy projects. The updated rules, released on Friday, adjust how companies can qualify for credits established under the Biden-era tax-and-climate law.
Previously, developers could establish the start of construction through two primary methods: initiating physical work or by meeting a “safe harbor” provision, which involved paying at least 5% of the total project costs.
- The new guidance largely eliminates the 5% safe harbor option for wind and solar facilities to meet the beginning of construction deadlines. This means most companies will now have to rely on the physical work test to qualify for the valuable clean electricity investment and production credits.
The guidance is important for developers, as wind and solar projects must begin construction within a year or be operational by the end of 2027 to be eligible for the expiring tax credits.
That means, to bank eligibility for tax credits, developers need to commit serious capital upfront, which favours well-capitalised players like First Solar, which already has scale, manufacturing capacity, and deep developer relationships. Smaller and less-funded operators will find it tougher to keep projects alive under the new rules. This urgency should support forward demand for First Solar’s panels as developers try to lock in projects before the 2027 deadline. This rule change could cement FSLR’s advantage over weaker developers, with demand likely to stay strong as deadlines loom, though like anything tax or subsidy-related, future changes to policy could also be a shock negative.
- In short, for First Solar, the updated guidance acts as a competitive moat enhancer — making it tougher for smaller players to compete — while also creating urgency-driven demand for its modules.
MM remains long & bullish FSLR US
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