Solar company impact due to pending legislation

May 23, 2025

by a searcher from The University of Texas at Austin - Red McCombs School of Business in Seattle, WA, USA

I'm looking for solar companies to acquire and this pending legislation will bring an end to the 30% tax credit that was set to last for another 10 years. I know it isn't law yet, but this was approved by the house and obviously has Trump standing behind it. How should I think about the impact on the valuations of solar panel installation companies? I have to think that if the price goes up 30%, demand will go down substantially. Thoughts? https://www.cnbc.com/2025/05/22/solar-stocks-plunge-as-republican-tax-bill-worse-than-feared-for-clean-energy.html

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Reply by a searcher
from INSEAD in Seattle, WA, USA

It is true that the solar industry is heading into a partial solar eclipse—as political uncertainty casts a shadow over its growth, but this isn’t a new phenomenon. Over the past two decades, we've seen solar industry navigating numerous political ups and downs such as 2016 ITC sunset threat, CA NEM 3.0, and 2022 AD CVD tariff threat: from shifting subsidies to trade tariffs. The proposed legislation could potentially slash demand by 50% or more, given the residential market’s price sensitivity, though history shows the industry often rebounds from such setbacks. Despite the challenge, several factors provide a silver lining. Technological advancements continue to bolster solar’s appeal, with PV panels and inverters becoming more efficient and affordable, alongside reductions in soft costs like permitting and labor. Fallen costs of battery energy storage and combining PV with BESS give more reliable, flexible, and resilience solution than a standalone PV. Consumer demand remains robust, where solar often achieves cost parity with fossil fuels—though a 30% price hike from the credit’s loss would be a major headwind. If somehow the bill passes, I expect state-level incentives to emerge, particularly in Democrat states to offset some of the federal level clawback. Additionally, rising energy prices due to increasing energy demand could make the higher upfront cost of solar installations more palatable over time, especially if electricity rates continue to climb. Keep in mind this bill still needs Senate approval, and there’s likely to be significant pushback from key Republican states like Texas, Indiana, and the Carolinas, where billions are being invested in solar factories, supporting thousands of jobs. Trump’s effort to dismantle the IRA tax credit may face resistance from these red states prioritizing economic interests. For now, I’d hold off on acquiring residential solar installation companies unless there is a fire sale opportunity. Instead, keep a close eye on the market and target installation firms that have diversified into battery energy storage systems and have a strong foothold in the commercial and industrial (C&I) sector, rather than depending solely on residential sales, as they’ll be better equipped to navigate this uncertainty. (You didn't specify what type of solar company you were after, but based on the post on this website, I'm assuming it is solar installation/service companies in the residential sector.)

Reply by a searcher
from California Polytechnic State University in San Francisco, CA, USA

I think demand will go decrease if legislation passes as is. I've seen what the change in NEM has done to CA pure solar installations. It's not good. Valuations will likely come down. Maybe wait this out and see what happens.

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