Renewable stocks were in focus overnight after the House Republicans released a draft framework to extend President Trump’s tax cuts, which would also overhaul President Joe Biden’s climate law, eliminating or phasing out tax credits for renewables, forecast to save the government more than $560 billion on energy tax credits over 10 years. Important to recognise that this is just a first crack at reducing the amount given back to renewables companies to help fund Trump’s wider tax cuts, but it does show where the focus will be, and who the likely winners and losers are.
- The draft framework put out overnight by the Ways and Means Committee takes aim at billions of dollars of incentives in the Inflation Reduction Act, including tax credits for electric vehicles and solar and wind projects — subsidies Trump has labelled a “green new scam.”
However, it’s not all bad news, with the proposal suggesting that tax credits for making solar panels or batteries in the US be phased out just a year earlier than in Biden’s original framework, which is significantly better than was feared/expected. As an analyst from Jeffries wrote this morning, the draft bill takes more of a “scalpel than a sledgehammer” to Biden’s law.
This put the fire under solar shares overnight, headlined by First Solar (FSLR US), which rallied +22.7% – a position we hold in the International Equities Portfolio. While only a draft, the move implies the Whitehouse sees solar manufacturing and energy storage as more important components than Trump’s campaign rhetoric had implied, and this is good news for First Solar and others, with Sunrun +14%, Shoals Technologies +12%, Array Technologies +22% while the Global X Solar ETF rose 3.4% to its highest point since March.
MM remains long & bullish FSLR US, our preferred pick in the sector
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