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Sunrun’s (NASDAQ:RUN) energy storage business stands to benefit from continued investment tax credits ( ITC (NSE:ITC)) through 2037, according to a new Mizuho (NYSE:MFG) research note published Monday. Unlike solar and wind projects facing phase-outs, energy storage projects that begin construction by the end of 2033 will receive 100% of available tax credits.
The investment firm highlighted that energy storage tax credits will only begin stepping down to 75%, 50%, and 0% for construction starts in 2034, 2035, and 2036, respectively. This extended timeline provides significant runway for Sunrun’s storage business compared to solar projects, which will see credits decline from 100% in 2025 to 60%, 20%, and 0% for projects starting construction in 2026, 2027, and 2028.
Mizuho noted that bonus adders remain unchanged, allowing projects with domestic content and energy community designations to still achieve up to 30% ITC subsidies through 2030, even with the base credit reductions. A project starting in 2026 and completed by 2030 could qualify for the full 30% through a combination of base credits and bonus incentives.
The research firm also addressed Foreign Entity of Concern (FEOC) requirements, stating they are "achievable for those with domestic content." The requirements establish a ratio of non-Chinese manufactured products based on IRS safe harbor tables, which Mizuho describes as "not too punitive" and designed to gradually increase domestic content levels.
The analysis concluded this regulatory clarity creates a "positive" outlook for Sunrun’s energy storage business, along with other companies in the sector including Fluence Energy (NASDAQ:FLNC) and Canadian Solar (NASDAQ:CSIQ). According to InvestingPro data, Canadian Solar currently trades at a Price/Book ratio of just 0.27, suggesting potential undervaluation, though the company faces challenges with a 15.7% gross profit margin and significant debt levels. Mizuho specifically noted the FEOC pathway benefits energy storage companies with domestic manufacturing capabilities, as "developers can’t use China cell/battery system for investment credits."Want deeper insights? InvestingPro subscribers have access to over 10 additional key metrics and exclusive ProTips about Canadian Solar, along with comprehensive financial analysis available in the Pro Research Report.
In other recent news, Canadian Solar Inc. reported first-quarter earnings that exceeded expectations, driven by higher product shipments. The company provided second-quarter guidance that surpassed estimates, particularly in gross margin percentage. However, Canadian Solar revised its fiscal year 2025 sales forecast downward due to reduced solar module sales in less profitable markets and delays in battery sales in the U.S. due to tariff uncertainties. Mizuho Securities increased its price target for Canadian Solar to $17.00, maintaining an Outperform rating, while Jefferies adjusted its target to $13.70, keeping a Buy rating. JPMorgan maintained an Underweight rating with a price target of $7.00, noting risks related to legislative developments. Oppenheimer reiterated its Outperform rating with a price target of $23.00, highlighting Canadian Solar’s strategic shift towards more conservative sales volumes. The company also filed a Form 6-K with the SEC for May 2025, detailing its financial results and compliance with reporting requirements. Canadian Solar continues to explore ways to adapt to potential changes in U.S. legislative policies that could impact its operations.
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