Trump’s energy bill reshapes clean tech winners and losers: Mizuho
The "One Big Beautiful Bill" (OBBB) reorients federal support in the clean energy sector towards energy storage, nuclear energy, and domestic manufacturing, while decreasing incentives for solar and wind projects and imposing new regulations targeting supply chains linked to China.
Mizuho Securities identifies companies like First Solar, Bloom Energy, and Sunrun as beneficiaries of the OBBB, while downgrades are issued for Fluence Energy, Nextracker, and others due to increased regulatory challenges and market saturation concerns.
The OBBB maintains tax credit eligibility for solar projects starting construction by mid-2026, but potential construction and interconnection delays, along with tighter Treasury Department regulations, may affect the sector's growth.
The bill boosts manufacturing and energy storage sectors in the U.S. but phases out subsidies for solar and wind, potentially creating an initial demand surge followed by a significant decline post-2026, particularly impacting companies reliant on Chinese supply chains.
Recommendation Rating: Transformative Impact on Clean Energy Sector
A groundbreaking clean energy initiative by President Trump, known as the "One Big Beautiful Bill" (OBBB), is causing significant shifts within the U.S. renewable energy market. This new policy is altering market forecasts and leading to revisions in analysts' ratings for various solar companies.
Mizuho Securities analyst Maheep Mandloi highlights that the OBBB distinctly redirects federal support from utility-scale solar projects toward energy storage, nuclear energy, fuel cells, and domestic manufacturing. Concurrently, the legislation accelerates the reduction of tax incentives for solar and wind, implements stricter compliance regulations, and introduces fresh restrictions on supply chains linked to China.
Identifying Winners and Losers
In the evolving landscape shaped by the OBBB, Mandloi identifies First Solar (NASDAQ:FSLR), Bloom Energy (NYSE:BE), and Sunrun (NASDAQ:RUN) as prime beneficiaries of the expanded subsidies and beneficial technological mandates.
In contrast, he downgraded Fluence Energy (NASDAQ:FLNC), Nextracker (NASDAQ:NXT), Shoals Technologies (NASDAQ:SHLS), and Enlight Renewable Energy (NASDAQ:ENLT) due to increased regulatory challenges and concerns over market oversaturation.
Sunrun, the frontrunner in residential solar leasing, experienced a remarkable 62% increase in its price target, now set at $21, thanks to the reinstatement of the Investment Tax Credit (ITC) for leases lasting until 2030. However, sales of solar systems, previously bolstered by the 25D tax credit, are set to experience a decline in support after 2025. This change negatively impacts inverter manufacturers associated with solar loans, including Enphase (NASDAQ:ENPH) and SolarEdge (NASDAQ:SEDG).
Utility Solar Faces New Challenges
The OBBB allows full tax credit eligibility for solar projects that commence construction by July 2026. Nevertheless, Mandloi warns that deadlines for actual construction and interconnection issues may hinder the sector's ability to ramp up installations effectively. Furthermore, Trump’s recent executive order is complicating eligibility criteria by instructing the Treasury Department to tighten "safe harbor" provisions, potentially raising financial thresholds or introducing new permitting requirements.
Consequently, Mizuho adjusted its rating for Nextracker and Shoals to Neutral from Outperform, while reducing Nextracker’s price target by 3% to $65. The firm's outlook for Enlight was also downgraded from Neutral to Underperform.
A Boost for Manufacturing and Energy Storage
Domestic manufacturers in the clean energy sector, particularly those operating outside of China’s supply chain, are expected to be the primary beneficiaries of the OBBB. The 45X manufacturing tax credit remains in place, and measures that restrict eligibility for entities considered "Foreign Entities of Concern" (FEOCs) target companies associated with China, Russia, Iran, and North Korea.
First Solar and Canadian Solar (NASDAQ:CSIQ) stand to gain from this framework as their U.S.-based facilities now qualify for subsidies. Mizuho has increased Canadian Solar's price target by 13% to $17 and First Solar's by 1% to $278.
Energy storage has also retained its ITC eligibility through 2033. Although Chinese firms dominate the battery supply chains, U.S. integrators like Fluence Energy may see short-term benefits. However, Mandloi cautions that as new competitors localize their production, competition may heighten within a year or two. As a result, FLNC’s price target was raised by 67% to $10, but it was still downgraded to Neutral.
Fuel Cells and Nuclear Energy Gain Favor
In an unexpected development, the OBBB reinstates the 30% ITC for fuel cells powered by natural gas, providing a boost to companies such as Bloom Energy, which has had its target increased by 19% to $31. Additionally, new nuclear technologies will continue to receive extended tax credit support through 2033, with Mandloi recognizing this sector as a long-term beneficiary of the OBBB.
Wider Impacts on Clean Technology
While the OBBB protects manufacturing credits and energy storage incentives, the rapid phase-out of solar and wind subsidies may lead to a temporary spike in demand followed by a more uncertain future. Mandloi anticipates a 20% increase in demand leading up to the 2026 deadline, followed by a subsequent 20% decline.
Moreover, the new bill significantly restricts Chinese companies' access to U.S. clean energy subsidies, posing difficulties for firms that depend on Chinese-manufactured batteries or solar panels. Given that Beijing controls up to 85% of the global battery cell supply chain, companies must focus on diversifying their sources to maintain eligibility for incentives.