Shares of clean energy-focused exchange-traded funds (ETFs) suffered sharp losses on Wednesday, after the U.S. Senate unveiled a budget bill that would significantly scale back federal tax credits for solar, wind, electric vehicles, and other energy-efficiency initiatives.
The proposed legislation retains most of the cuts outlined in the earlier House version, with key clean energy incentives now expected to be phased out over the next six months, according to media reports.
The $1.4 billion iShares Global Clean Energy ETF (ICLN) closed down 4.3%, while the First Trust NASDAQ Clean Edge Green Energy ETF (QCLN), valued at $413 million, dropped 2.6%. The Invesco Solar ETF (TAN), with $634 million in assets, took the steepest fall, plunging 8.1%. The more globally diversified First Trust Global Wind Energy ETF (FAN), worth $149 million, slid 2.4%.
The sell-off was driven by sharp declines in solar equities. Sunrun, a major U.S. rooftop solar provider, saw its shares plummet 42%. Enphase Energy dropped 23%, while First Solar fell 18%.
“The Senate proposal is better than expected for nuclear and battery storage, in line for utility-scale wind and solar, but worse than expected for rooftop solar,” said Morningstar analyst Brett Castelli. “Market participants had hoped the Senate would soften the impact of the House’s earlier proposal to end rooftop solar incentives by the end of 2025. That hasn’t materialised, triggering a steep sell-off in rooftop solar stocks like Enphase, SolarEdge, and Sunrun.”
Castelli also highlighted a provision in the bill that limits domestic manufacturers from claiming multiple tax credits across components, restricting eligibility to a single credit on the final product. “This creates uncertainty for companies like First Solar,” he added.
The broader market was relatively unaffected, with the Morningstar US Market Index closing down just 0.5%.
