Clean Energy ETFs Fall As Senate Bill Cuts Support for Solar

Shares of exchange-traded funds that hold alternative energy stocks plunged Wednesday, following the release of the US Senate’s budget bill that would eviscerate federal tax credits for solar power, wind power, electric cars, and other clean energy programs, as well as those for energy-efficiency initiatives.

According to news reports, most of the cuts initially proposed in the version of the bill from the House of Representatives have been kept. Most of the tax credits will be phased out over the next six months.

The $1.4 billion iShares Global Clean Energy ETF ICLN closed down 4.3% while the $413 million First Trust NASDAQ Clean Edge Green Energy ETF QCLN dropped by 2.6%. The $634 million Invesco Solar ETF TAN was hit especially hard, falling 8.1%. The more globally focused $149 million First Trust Global Wind Energy ETF FAN was only down 2.4%.

Underlying the plunge in clean energy ETFs are sharp declines in solar stocks. Shares of rooftop solar provider Sunrun RUN plummeted 42%. Meanwhile, Enphase Energy ENPH was down 23% and First Solar FSLR lost 18%.

“We see the Senate proposal as better than expected for nuclear and battery storage, in line with expectations for utility-scale wind and solar, and worse than expected for rooftop solar,” says Morningstar analyst Brett Castelli. “The earlier House version of the tax bill called for ending rooftop solar incentives at year-end 2025, but there were expectations in the market that the Senate would make positive changes. This turned out not to be the case, sending rooftop solar equities—Enphase, SolarEdge, and Sunrun—tumbling."

“The other surprise in the Senate proposal is language to limit domestic manufacturers from claiming multiple credits on components as to one credit on the final component,” Castelli says. “This creates uncertainty for First Solar.”

The broader market, represented by the Morningstar US Market Index, closed down 0.5%.