Shares in renewable energy firms in Europe rose on Tuesday, as analysts argued that proposed changes to U.S. tax policies were not as sweeping as initially expected.
Lawmakers in the U.S. House of Representatives put forward plans on Monday that would phase out clean energy tax credits and other spending on renewable sources, as part of a push to pass President Donald Trump’s multi-trillion dollar budget.
A proposal from the House Committee on Energy and Commerce would raise $6.5 billion by eliminating portions of the the Inflation Reduction Act, a signature clean energy bill passed during former President Joe Biden’s administration. The plan is set to be voted on later on Tuesday.
Meanwhile, a panel from the House Ways and Means Committee, which oversees U.S. tax policy, has called for cancelling several tax credits in the Inflation Reduction Act, including an end to credits for electric-vehicle purchases and home efficiency improvements. Many clean energy subsidies would also be phased out by 2031.
So-called "technology neutral" 45Y tax credits for wind, solar and other clean energy sources were folded into the proposed cuts. These credits, which previously had no expiration date, would slip from 80% in the calendar year 2029 to 60% in 2030, 40% by 2031 and zero after 2031.
Writing in a note to clients, analysts at BMO Capital Markets said that although these cuts were expected, their scale was "much better than anticipated" for the solar and storage sectors in particular.
Analysts at RBC Capital Markets added that while the wind power industry stands to be especially hit by the changes, "worst-case scenarios have been avoided".
"The proposed legislation decreases the attractiveness of the U.S. market, with wind appearing to be a relative loser on the bill [...]," the strategists led by Colin Moody said in a note. "That being said, [the] proposals seem less severe than the worst case that many investors had feared."
Early in European trading on Tuesday, shares in Vestas Wind Systems (CSE:VWS), as well as Orsted (CSE:ORSTED), EDP Renovaveis (ELI:EDPR), and Acciona Energia (BME:ANE), had all climbed.
