By Avi Salzman

Clean energy stocks have staged an impressive rebound in the past month, despite a new tax law that took away credits the industry has relied on for years.

The Invesco WilderHill Clean Energy ETF, a basket of clean energy stocks, is up 14% since the bill passed through Congress and landed on President Donald Trump's desk. Those gains, however, may be at risk as soon as next week.

Trump has called for the Treasury Department to impose more stringent rules on renewables projects. Jefferies analyst Julien Dumoulin-Smith wrote the "day of reckoning" for renewable tax credits could come on Monday.

Stocks that could be affected include NextEra Energy, Sunrun, Solaredge, and Enphase. Bloomberg New Energy Finance has estimated 2,500 projects, with the collective power capacity of 383 nuclear reactors, could be at risk from the Treasury rules.

One reason clean energy stocks have been rising in recent weeks is that the tax law left some pathways open for companies to continue to claim tax credits years into the future -- even in areas like wind and solar power. As long as projects begin construction within a year of the bill's passage, they can qualify for credits worth 30% of the value of the project.

A few senators including Lisa Murkowski, a Republican from Alaska, had insisted on that one-year window to create a more gradual phase-down in incentives for renewables. Under historical rules, those projects would have four years to finish construction, meaning that projects completed as late as 2030 might be able to qualify for credits.

But more conservative Republicans urged Trump to close that window. He issued an executive order on July 7 calling on the Treasury "to strictly enforce the termination of the clean electricity production and investment tax credits," issuing new rules within 45 days about what "beginning of construction" means for renewables projects.

Those rules have been pretty consistent since 2013, according to tax lawyers. There are two basic ways to qualify: show you've started a meaningful amount of physical construction, or buy at least 5% of the equipment that you need for a project.

"We've been relying on this for a significant time," said Heather Cooper, a lawyer at McDermott Will & Emery who works with clean energy companies.

Buying a lot of equipment has long been considered a way to safe harbor a project so that it gets grandfathered into prior rules.

The new rules could eliminate the ability for companies to qualify for safe harbor protection solely through equipment purchases, or change the thresholds of how much equipment they need to purchase.

There is also significant uncertainty about when they would go into effect, tax lawyers said. The Trump administration may want the rules to be retroactive to the bill signing or another date, for instance. The Treasury didn't respond to a request for more information.

Some large public companies have relied heavily on safe harbor rules to protect their inventory.

"We've made significant financial commitments over the last few years including in the first half of 2025 to begin construction under these rules that were in effect at the time those commitments were made," said NextEra CEO John Ketchum on the company's latest earnings call. "And in doing so, we believe that we've begun construction on a sufficient number of projects to cover our development expectations through 2029."

Ketchum said he thinks his company's safe harbor strategy has given it an advantage over smaller renewable developers that may not have the financial wherewithal to buy equipment in advance.

Residential solar developer Sunrun is also using an aggressive safe harbor strategy that could preserve its tax credits for longer. That was one reason its stock jumped 32% after reporting earnings last week, analysts said.

But skeptics on the stock say the company's fortunes may change after the new rules are announced.

"While the market rewarded Sunrun's Safe Harbor announcement with a 30% rally yesterday, we think investors may be underestimating the very real possibility that this ends with regulatory scrutiny rather than free money. Caveat emptor," wrote analyst Gordon Johnson of GLJ Research. The stock has already given back some of its gains.

Dumoulin-Smith expects the new safe harbor rules will preserve tax credits for many companies, and there may even be a relief rally on Monday.

At the very least, companies that safe harbored equipment before 2025 should be fine, he wrote, leaving project timelines broadly intact for 2026 and 2027. Some of his favorite stocks include Shoals, XLPR Infrastructure, Clearway Energy, MasTec, Primoris, and Nextracker.

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.

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August 14, 2025 13:50 ET (17:50 GMT)

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