EU green energy firms hit as U.S. slashes wind and solar tax breaks

Investing.com -- Shares of European renewable energy firms declined Monday following the release of a new U.S. Senate draft bill that tightens eligibility criteria for clean energy tax credits and accelerates the phase-out of subsidies for wind and solar power. 

The latest version of the On Beautiful Budget Bill (OBBB) has raised investor concerns about the outlook for utility-scale renewables, particularly wind, in the U.S. market.

European-listed stocks such as Vestas Wind (CSE:VWS) Systems, Ørsted, Nordex (ETR:NDXG), SMA Solar Technology, Solaria Energía, and EDP Renováveis were all trading lower between 1% and 6% at 05:31 ET (09:31 GMT). 

The bill requires wind and solar projects to be placed into service by the end of 2027 to qualify for the Investment Tax Credit ( ITC (NSE:ITC)) and Production Tax Credit ( PTC (NASDAQ:PTC)), shortening the timeline compared to prior proposals that focused on a start of construction deadline. 

Analysts at Morgan Stanley (NYSE:MS) described the change as “more prohibitive” and said it would likely constrain the number of new projects that can be completed in time to claim the credits.

According to analysts at Barclays (LON:BARC), the new draft marks a further step back from earlier Senate and House proposals and could have “negative P&L and backlog implications” for companies like Vestas Wind Systems. 

The revised timeline leaves “virtually no room” to start new wind projects, they wrote, warning that Vestas has roughly 2.0/0.4 GW of U.S. projects in backlog, around 35% of all announced U.S. turbine deliveries after 2024, where deliveries are not scheduled to begin until late 2026 or 2027. 

These projects now face heightened risk if they miss the narrowed in-service window. In addition to the accelerated subsidy cut-off, the Senate draft introduces a new tax penalty tied to foreign content restrictions. 

Wind projects that exceed specified thresholds for “material assistance” from foreign entities of concern will face a tax calculated as 50% of the amount by which the project fails the material assistance cost ratio, multiplied by the cost of manufactured components. This tax applies even to projects ineligible for ITC/PTC post-2027.

Barclays analysts further highlighted that advanced manufacturing credits under Section 45X, from which Vestas is expected to benefit by €130m in 2024 and €175m in 2025 (roughly 17–18% of reported and guided EBIT), are now scheduled to expire at the end of 2027. 

These credits are also subject to stricter non-FEOC content rules starting in 2026. In contrast, solar manufacturers face fewer restrictions and longer credit windows, reinforcing a policy tilt toward solar over wind in the U.S. tax framework.

The regulatory shift triggered a negative market reaction across the European renewables sector. 

While some technology segments, such as residential solar and fuel cells, received modest support in the new bill, analysts at Morgan Stanley said the overall structure remains “highly disruptive” to utility-scale wind and solar developers if passed in its current form.

A Senate vote is expected following a period of limited debate and amendment. The final version of the bill must be reconciled with the House before it can be sent to the president for signature.