Solar CEOs Unfazed by GOP Repeal Threats

Key Takeaway

• Solar CEOs believe GOP threats to repeal the IRA won't impact clean energy investments, citing strong Red State manufacturing ties.
• First Solar and Enphase highlight domestic job creation and investment growth as key defenses against potential policy reversals.
• Analysts see a low but real risk of IRA tax credit repeal, with political dynamics possibly preserving wind and solar incentives.

Resilience in Clean Energy Investments

Despite the political uncertainty surrounding the 2024 election and potential Republican efforts to repeal the Inflation Reduction Act (IRA), CEOs in the solar industry remain confident in the continued support for clean energy investments. The IRA, heralded as the largest investment in clean energy in U.S. history by the Biden administration, aims to accelerate the transition to renewable fuels while creating manufacturing jobs. However, Republicans have signaled intentions to dismantle the IRA, with the House Budget Committee recently advancing a budget resolution to repeal what they call "green corporate welfare."

The Economic Impact of the IRA

The solar industry, a significant beneficiary of the IRA tax credits, has seen a surge in investments since the law's enactment in 2022. Utility-scale solar and energy storage projects grew by 50% to $53 billion in 2023 compared to the previous year. Congressional districts represented by Republicans have disproportionately benefited, with 57% of the 211,000 jobs created across 45 states and Puerto Rico since the IRA's passage located in GOP districts. This growth underscores the importance of the IRA in bolstering domestic manufacturing and job creation in the clean energy sector.

CEOs Counter Repeal Threats with Economic Benefits

First Solar CEO Mark Widmar and Enphase CEO Badri Kothandaraman have expressed confidence that the GOP would not undermine domestic manufacturing by repealing IRA provisions. Widmar highlighted the strategic placement of First Solar's factories in Republican states, emphasizing the direct and indirect support of over 16,000 jobs, projected to grow to 30,000 by 2026. Kothandaraman bluntly stated that repealing the IRA tax provisions would be detrimental to U.S. manufacturing, which has thrived under the current administration.

Political and Investment Landscape

Despite the threats to the IRA, the likelihood of Congress repealing the tax credits is considered low, requiring unified Republican control of the government. Wolfe Research estimates a 40% chance of GOP winning unified control, with a 50% chance of rolling back some tax credits if that occurs. However, the electric vehicle tax credits face the greatest risk, while wind and solar tax credits may see an earlier phase-out rather than full repeal. The resilience of the IRA provisions, embedded in the tax code, suggests a durable impact on the clean energy market, with CEOs like Nextracker's Dan Shugar and Sunnova's John Berger highlighting the political tailwinds supporting their operations.

Street Views

• Tobin Marcus, Wolfe Research (Neutral on the likelihood of IRA tax credits repeal):

  "The overwhelming likelihood is this stuff will stay in place... Investors, however, need to be mindful of the risk because six months from right now we could find ourselves in a world where people are staring down the barrel of a Republican trifecta."

Management Quotes

• Mark Widmar, CEO of First Solar:

  "There’s no doubt Republicans will consider repealing provisions of the IRA to fund tax cuts and reign in the deficit if they secure a clean sweep... Where we put our factories are in Republican states. They don’t want to undermine that." "We’re trying to stay actively engaged with Republicans in that regard and help them understand what we’ve been able to create here and the benefits of having a constructive policy, which may be different than what [the] IRA is, but still a constructive policy to support renewable energy."

• Badri Kothandaraman, CEO of Enphase:

  "We are making millions of microinverters in two plants in the U.S. They would be stupid to basically harm that... U.S. manufacturing is at its best right now — that’s the best thing Biden did." "I doubt Trump will do anything to reverse that. That’s our position."

• Dan Shugar, CEO Nextracker:> "The IRA provisions that are really most impactful to the market are tax code... Those tend to have a lot of persistence. The day after the election, those don’t evaporate."> "Most of the factories that we’re building are across political spectrum so there's lots jobs lots places.. We think there's lot political tailwinds for what doing,"

• John Berger, CEO Sunnova:> "We don't need any more subsidies or anything else nature can certainly make do with this I think're good political position first time."