Clock ticking on solar, storage lobby to convince Congress to save tax credits

There is still time for the US solar and battery storage industries to make their case to Congress to keep at-risk federal clean energy tax credits, according to Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association.

But the clock is ticking.

Speaking the day after House Republicans unveiled sweeping budget legislation that includes deep cuts and early phaseouts for valuable long-term tax incentives under the 2022 Inflation Reduction Act, Hopper urged attendees at the RE+ Texas conference in Houston to remain engaged.

"You are not alone, but also, we're not alone," Hopper said at the May 13 event. "So, if you fall on the side of the group of people that are like, 'Oh my gosh, the world is ending,' we've already lost."

It is industry members on the other extreme — those who assume everything will work out — who make Hopper most nervous.

"You are high as a kite, my friend," Hopper said. "That is not the reality, and I need you not to be apathetic about your future. ... I can assure you that whatever is happening in Washington is going to radically affect your bottom line."

Hopper asked industry members to reach out to their congressional representatives and let them know the IRA tax credits are vital to meeting the country's energy needs.

"We are in a period of energy growth," Hopper said. "If we want to be at the forefront of [artificial intelligence] dominance, we have to have a reliable, affordable energy system."

The House Ways and Means Committee advanced the GOP tax package on May 14 after rejecting an amendment from Rep. Mike Thompson (D-Calif.) that would have struck the measure's energy-related section.

The bill will likely pass the House of Representatives before Memorial Day, Hopper said. Then it will go to a Senate committee, the full Senate and probably conference committee to hash out differences between the chambers.

House Speaker Mike Johnson (R-La.) has said he wants to send the bill to the president by July 4.

"You can see one, two, three, four or five times that we have an opportunity to influence the outcome of this," Hopper said. "You are the best storytellers we have."

'Really early days on this bill'

Several equity analysts view the draft legislation as less harsh than expected for the solar and storage industries. Numerous solar companies, especially those providing equipment for utility-scale projects, saw their stock prices surge after the GOP released the first version of the budget bill.

In the wake of the "euphoria" rally, however, clean energy industry participants have flagged much room for improvement to the legislation, Jefferies analysts said in a May 14 note.

Wide-ranging restrictions aimed at limiting the ability of "foreign entities of concern" (FEOC) to qualify for incentives are "clearly the most unworkable element" of the GOP bill, Jefferies analysts said, pointing to the battery storage supply chain as especially exposed to risk given limited alternatives to Chinese components.

The proposed language on FEOC "could meaningfully constrain" access to tax credits supporting clean energy installations and manufacturing projects and could be a "poison pill" for the industry, analysts at Roth Capital Partners said in a May 14 note.

Dan Shugar, CEO of solar tracking specialist Nextracker and a SEIA board member, is among the industry executives who see the bill's FEOC treatment as problematic, flagging the issue on a May 14 earnings call. Shugar also pointed to concerns around placed-in-service deadlines and the proposed repeal of tax credit transferability, a popular financing tool that has improved the ability of developers and manufacturers to monetize tax credits.

"It's really early days on this bill," Shugar said. "It was just published. It's going to have quite a journey."

In addition, companies focused on home solar and storage would lose the Section 25D residential clean energy credit at the end of this year under the GOP measure. SEIA plans to do outreach specifically on saving the residential tax incentive, Hopper said.

Overall, the solar industry's primary voice in Washington is ready for the challenge of defending clean energy tax credits, she added.

"This is our moment," Hopper said. "We have been training for this. We have been practicing and honing our message and building and employing people. We have a lot to share."

Uncertainty weighs on manufacturers

Meanwhile, solar and energy storage manufacturers are facing an early phaseout of the IRA's 45X advanced manufacturing production credit under the GOP proposal, coupled with tariffs affecting clean energy supply chains linked to China and Southeast Asia.

Given the combined uncertainties on tariffs and tax credits, some manufacturers are rethinking their investments, company representatives said during the RE+ Texas conference.

"I know there's other colleagues here that are still trying to get their factory up and going in the US," Gordon Brinser, COO at Waaree Solar Americas Inc., an affiliate of India-based Waaree Energies Ltd. "Their boards, parent companies were saying, 'Do we get back into solar?... We have no appetite for this uncertainty.'"

Waaree assembles modules for utility-scale projects at its Houston factory, which currently has 1.6 GW of capacity and is growing to 3.2 GW, Brinser said.

"I think the uncertainty, both whether it's tariffs or the 45X credits, weighs heavily on a manufacturing company," said the veteran solar executive.

Without certainty in the next 30 to 60 days, "companies are going to say, 'Does this really provide the return on investment that we need from our shareholders?'" Brinser added. "For companies like glass factories and or cell providers, that's a major investment and you can't just turn that equipment onto another product in many cases ... It's a huge commitment, and you're all in."

Tariffs have led to higher prices for domestic steel, according to Eric Goodwin, vice president of business development for OMCO Solar, an Arizona-based solar steel company with five factories, all in red states.

"It's not because of demand; there's nothing else driving that but opportunity," Goodwin said. "We see that type of behavior out of the steel mills and out of the service centers ... The bottom line is, tariffs are impacting the US in many different ways."

Though there is a 90-day freeze on China tariffs, in a 30-plus year investment, a 90-day freeze is like 30 minutes of a deal, Goodwin added.

The company's newest factory in Huntsville, Alabama, would not exist without the clean energy credits, Goodwin said.

"As we saw the IRA come into place, and we saw everybody come to the US, and we were already there, it just gave us a nice advantage," Goodwin said. "So, we're heavily involved in all the efforts that are happening to keep this going."