For years, solar energy companies have benefited from tax breaks worth at least 30% of the value of their projects -- a perk that convinced hundreds of thousands of people to install panels on their roofs and drove utilities to set up solar arrays in fields all over the country.
Those halcyon days are just about over. On July 4, the 30% subsidy for utilities will disappear, as a result of the tax bill Republicans passed last year. For homeowners, the tax break already vanished a few months ago.
A change like this would normally be a disaster for an up-and-coming industry competing against entrenched electricity sources like coal and natural gas. But solar isn't up-and-coming anymore. It provided more power to the electric grid than coal in May, the first month that's ever happened, according to Ember Energy. The loss of the subsidy is undoubtedly a negative for the industry, but it will play out very differently for different companies -- some of which still look attractive.
For residential solar players -- the ones that sell panels to homeowners or make the equipment for them -- the change is a bigger deal. Residential installations are expected to fall by 21% this year. Some companies are shifting their business models to other growth avenues.
Solar developer Sunrun, known for leasing panels to people for their roofs, announced this past week it will partner with Tesla to combine the power from all those rooftop panels to help provide electricity to data centers. The stock leapt 13% on the news. Residential solar equipment companies SolarEdge Technologies and Enphase Energy have also seen enormous gains in 2026 after announcing plans to make power equipment for data centers. At one point, both stocks had doubled for the year. For now, the gains for all three companies look speculative, based on untested products that may not come to pass.
For some companies focused on the utility-scale solar market, however, the loss of the tax subsidies looks manageable. Solar companies that sell to utilities and other large-scale power developers can profit off the boom in electricity demand spurred by artificial-intelligence data centers and other sources. Declines in the cost of solar panels have made solar cost-competitive with sources like natural gas, even without subsidies.
One stock that serves the utility-scale industry has found a particularly promising way to tap into the data-center boom. California-based Nextpower is known for technology that allows panels to track the sun throughout the day. But it's expanded into new areas, becoming a one-stop shop for products and tech that make solar more efficient.
In May, Nextpower bought a private company called Prevalon, which installs battery systems that can be paired with panels to store and manage electricity flows. In particular, Prevalon makes software that regulates the power used by data centers, whose needs can swing dramatically in short periods. BNP Paribas analyst Moses Sutton wrote after the deal that it cements "Nextpower as the all-around way for investors to play AI-supported solar + storage growth." Sutton raised his price target to $182. Shares were recently trading around $113.
Solar policies are dimming. Some of the stocks have found new ways to shine.
Write to Avi Salzman at avi.salzman@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
June 26, 2026 01:30 ET (05:30 GMT)
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