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Budget bill risks a 40% drop in home solar installs

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Would end tax credits for solar leasing companies,

homeowners

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Change could hurt manufacturers that supply residential

solar

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Solar firms urge Senate to restore leasing credit before

the

bill becomes law

By Nichola Groom

June 5 (Reuters) - A last-minute tweak to the Republican

budget bill passed by Congress last month would immediately end

subsidies for solar leasing companies that help make rooftop

systems affordable to homeowners, likely leading to a massive

drop in the pace of installations, according to industry

representatives.

President Donald Trump's "big, beautiful bill," now being

taken up by the Republican-controlled Senate, would eliminate a

30% tax credit for solar leasing companies that charge

homeowners a monthly fee for panels - one of numerous cuts

directed at clean energy subsidies passed by former President

Joe Biden.

That provision, inserted shortly before the bill passed the

House of Representatives on May 22, risks stifling a sector that

buys American-made equipment, employs thousands of people and

relieves strain on the grid, according to industry backers.

"That's one of the harsher components of the one big,

beautiful bill currently," said Gabe Rubio, a principal in the

business incentives and tax credits practice at professional

services firm BDO.

Tax credits for homeowners who own their own rooftop systems

would also be eliminated.

The changes could result in as much as 40% less residential

solar capacity being installed over the next five years,

according to energy research firm Wood Mackenzie.

Solar companies are lobbying the Senate to make changes to

the bill before it becomes law.

"America's home solar and storage industry is a powerful

economic growth engine," Sunrun ( RUN ) CEO Mary Powell said in

a statement. "Senate Republicans now have an opportunity to

advance the administration's energy independence agenda by

amending this bill to keep American energy prices low and create

well-paying U.S. manufacturing jobs."

Trump campaigned on a promise to repeal the clean energy tax

credits in Biden's 2022 Inflation Reduction Act, arguing they

are expensive, unnecessary and harmful to business.

Republican backers of the bill say the subsidy cuts would

free up billions of dollars for other priorities.

More than 5 million U.S. homes have solar panels, according

to the Solar Energy Industries Association.

LAST MINUTE CHANGE

An earlier version of the bill had protected the credit for

leased solar systems, but fiscal hawks including Representative

Chip Roy of Texas have said publicly that they pressed for

deeper cuts to clean energy credits at the eleventh hour.

Roy's office did not respond to a request for comment.

Solar leasing was pioneered two decades ago by companies

including Sunrun ( RUN ) and SolarCity, which is now owned by Elon

Musk's company Tesla, and quickly became the primary

way home solar panels were financed.

Under the model, solar installers partner with financiers

that own the rooftop panels and offset their federal tax bills

by claiming the credit. Homeowners either pay a monthly fixed

fee to lease the equipment or pay for the electricity the system

generates under a power purchase agreement (PPA).

In what some analysts have said could be a loophole, the

House bill directly references leased systems but does not

mention PPAs.

About 44% of residential systems sold today are under such

arrangements, according to EnergySage, an online solar

marketplace.

Solar installers say undermining the subsidies could have a

ripple effect on U.S. manufacturers that supply them.

Freedom Forever, a top privately-held installer based in

Temecula, California, said in two years it has gone from using

no U.S.-made equipment to now sourcing 85% of it from American

facilities.

That is thanks to another IRA subsidy that provides bonus

10% tax credits for using American-made equipment.

"The administration wants to bring manufacturing back to the

United States, and that's what our industry has been doing for

the last two to three years," Freedom Forever CEO Brett Bouchy

said.