Trump’s Megabill Was Supposed to Kill Solar. Why Sunrun, First Solar Stocks Are Rising.

The draft bill includes a new tax on supplies from China. Photo: Dreamstime

Enphase Energy, NextEra Energy and other solar-related stocks were falling in early trading Monday after the latest version of the Senate’s big tax and spending bill delivered a surprise blow to the industry.

But the bill also had a few relatively positive changes for some companies. That gave a lift to some solar names, including First Solar and Sunrun. First Solar, for instance, could benefit from new taxes on imported renewable-energy equipment because those taxes would make its domestically made products look cheaper by comparison.

There was plenty of downbeat news for the broader sector. First, the draft bill would phase out tax credits for large-scale wind and solar projects by the end of 2027, earlier than in previous versions. Projects must now be in service by Dec. 31, 2027, to qualify.

The latest draft also includes an unexpected new tax on projects that use supplies from China, the world’s biggest source of renewable-energy equipment. It will also phase out residential solar credits by the end of the year, similar to the version of the bill passed by the House of Representatives.

The Senate could approve its bill as soon as Monday. The Senate and House would then have to agree on one version that would be sent to President Donald Trump for his signature.

Enphase Energy fell 3.4% early Monday, while power companies that install large-scale solar projects were also getting hit. NextEra Energy and AES were down 4.8% and 5.5% respectively.

Sunrun, the largest U.S. residential solar developer, meanwhile, was up more than 5%. The Senate extends the amount of time it can claim certain investment tax credits. SolarEdge, which sells equipment to the residential solar industry, was up 3.9%.

And the tax on companies using Chinese-made equipment could help certain U.S. solar firms. Shares of First Solar, the largest U.S. solar manufacturer, jumped 8.6% in morning trading. Baird analyst Ben Kallo said the tax on companies using Chinese components was “good for domestic producers such as First Solar, Nextracker (solar) and GE Vernova (wind),” though he also argued that the measure would “shrink the pipeline” of projects.

The most burdensome changes to the rules for renewables were causing substantial pushback. Sen. Ron Wyden, a Democrat from Oregon, called the new bill “an outright massacre” to wind and solar. “This is a death sentence for the wind and solar industries in America,” he said in prepared remarks.

Even some business groups that aren’t normally associated with environmentalism oppose the changes. Neil Bradley, chief policy officer at the U.S. Chamber of Commerce, praised the bill on X but also wrote that “taxing energy production is never good policy, whether oil & gas or, in this case, renewables. Electricity demand is set to see enormous growth & this tax will increase prices. It should be removed.”

Tesla CEO Elon Musk said the latest draft bill was “utterly insane and destructive,” in a post on X Saturday. “It gives handouts to industries of the past while severely damaging industries of the future,” he added.

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Write to Callum Keown at callum.keown@dowjones.com