On Friday, solar stocks declined after Senator Joe Manchin refused to support the legislation aimed at increasing spending for addressing the issue of climate change. This year, the solar industry has had to deal with plenty of headwinds, which include supply chain disruptions, policy uncertainty, and an increase in the cost of raw materials.
Invesco Solar ETF down
Aimed at tracking the industry, the Invesco Solar ETF saw a decline of 7% in the day but managed to recover some of the losses. However, it still ended the session on Friday lower by 2%. As far as the weekly decline is concerned, it stands at about 10%.
At one point, there was a more than 10% decline in Maxeon Solar, First Solar, Sunnova, and Sunrun. The group recently took a hit because of the areas out of the growth orientation because investors were assessing the impact of rising interest rates.
Market analysts said that the decision of the US Senator would affect the ability of President Joe Biden in achieving his goal of a 50% reduction in greenhouse gas emissions by 2030. While the news might be disappointing, the switch towards renewable resources is still encouraged because of its economic rationale.
Last November, the Build Better Act from President Joe Biden had passed and it set aside more than $500 billion for spending on climate change issues. This included clean energy tax credits of about $320 billion. However, opposition from Senator Manchin meant that the bill was unable to clear the Senate.
The bill also included the extended version of the Investment Tax Credit, which is considered vital for the development of the industry. This year, there is a 26% tax incentive given for residential solar systems, but this is expected to drop to 24% next year and then expire in 2024. A permanent 10% will be charged in that year for commercial systems’ tax credit.
However, it was noted by some that Congress could still pass a slimmed-down version of the bill. The last time the credit had been extended was under the Trump administration back in 2020, as it had gotten bipartisan support.
Market experts said that this was not a good sign for clean and solar energy, but there could be an extension possible if some Republicans decide to jump in. This could happen in states where wind and solar have become prominent industries.
Sunnova is a residential rooftop installer and its chief executive, John Berger stated that solar presented the United States with a great economic opportunity. He also went on to say that the best thing about the industry was its anti-inflationary nature.
He said that they were making a lot of effort to come up with solutions to address the energy crisis. This included climate change, energy security as well as affordability. They can accomplish this goal by offering homeowners energy independence, especially considering the climate change problems that are becoming more evident.