U.S. Senate green energy reforms in budget bill "implausible": Jefferies

June 18, 2025 10:49 PM AEST | By EODHD

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U.S. Senate green energy reforms in budget bill — Image source: Kalkine Media

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Investing.com - A lack of actionable changes to Medicaid and state and local tax provisions in the U.S. Senate’s version of a sweeping tax-and-spending bill overshadowed improved edits on clean energy tax credits, according to analysts at Jefferies. Shares in clean-energy companies tumbled on Tuesday after a Senate panel released its version to the White House-backed fiscal package that included the phasing out of solar, wind and energy tax credits by 2028. Solar inverter-maker Enphase Energy (NASDAQ:ENPH) slumped by more than 23%, while solar panel groups Sunrun (NASDAQ:RUN) and SolarEdge (NASDAQ:SEDG) shed roughly 40% and 33%, respectively. Peer First Solar (NASDAQ:FSLR) also dropped by over 17%.

A draft bill circulated on Monday, which is part of a massive budget proposal currently making its way through Congress, would phase out subsidies for solar and wind placed in a Biden-era law from 2026, reducing them to 60% of its value. The tax credits would then be eliminated entirely in 2028. Under the current law, the subsidies would not begin to be phased out until 2032. However, the Senate committee’s version of President Donald Trump’s so-called "One Big Beautiful Bill Act" would extend incentives for hydropower, geothermal and nuclear energy until 2036. The Senate’s language would also grant clean energy projects more time to use available tax credits than the House’s version.

The Senate proposal says that facilities need to begin construction in a certain year to claim the credit, rather than the House’s version which called for the start of construction within 60 days of the bill’s passage. Although they noted the changes as an "improvement" for the clean energy industry, the Jefferies analysts flagged that the alterations will likely not be included in the final bill presented to Trump. In particular, the Senate’s call for possible cuts to the Medicaid health care program for low-income Americans and increased limits to deductions for state and local income taxes stand to be rejected by the House of Representatives, which must sign off on a final draft of the bill before it can be signed into law. The issues remain highly contentious for Republicans in Congress, who have set a deadline of delivering the bill to Trump by July 4. "It’s difficult to see how the bill advances to the House smoothly without realistic Medicaid and [state and local tax] provisions also in place," the Jefferies analysts wrote, adding that "adverse reforms" to clean energy sections of the legislations will likely be needed to overcome these hurdles.

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