European Renewables Ride U.S. Tax Credit Wave: Why Vestas, Ørsted, and SMA Solar Are Key Plays

The U.S. Senate's June 2025 budget reconciliation bill, which scaled back clean energy tax incentives but softened restrictions on Chinese components, has created a paradoxical opportunity for European renewable energy firms. While the legislation phases out key U.S. tax credits for solar and wind projects by 2027, it also removed a proposed 50% excise tax on projects using Chinese-made components—a move that could inadvertently favor European manufacturers with strong U.S. footholds. For investors, this presents a compelling case to pivot toward European companies like Vestas Wind Systems, Ørsted, and SMA Solar Technology, which stand to benefit from reshaped supply chains and extended project timelines.

The Senate Bill's Dual Impact: A Catalyst for European Supply Chains

The bill's removal of the excise tax on Chinese components resolves a critical uncertainty for U.S. developers, who had faced a choice between higher-cost domestic suppliers or cheaper Chinese alternatives. While critics argue this weakens incentives for U.S. manufacturing, it creates space for European firms to expand their share of the U.S. market. European companies already adhere to stricter environmental and labor standards, and many have invested in U.S. manufacturing hubs to comply with “Buy American” provisions.

The extension of tax credits for projects beginning construction by mid-2026 also buys time for developers to finalize deals. This favors firms with existing U.S. project pipelines or partnerships, such as Vestas (VWS.CO) in wind turbines and SMA Solar (S5MA.DE) in inverters. Meanwhile, Ørsted (ORSTED.CO), a leader in offshore wind, benefits from the bill's delayed phaseout of tax credits for projects placed in service by 2027—a timeline that aligns with its large-scale U.S. offshore developments.

Key Plays: Vestas, Ørsted, and SMA Solar

1. Vestas Wind Systems (VWS.CO):
Vestas, the world's largest wind turbine manufacturer, has deep U.S. ties, including a factory in Colorado and partnerships with major developers like NextEra Energy. The Senate bill's removal of the Chinese excise tax reduces competition from lower-cost Chinese rivals like Envision and Goldwind, allowing Vestas to focus on high-margin U.S. projects. The company's stock surged 12% in Q2 2025 as investors priced in this tailwind.

2. Ørsted (ORSTED.CO):
Denmark's Ørsted is the dominant player in offshore wind, with over 5 GW of U.S. projects in development. The Senate bill's extended tax credit timelines—allowing projects to claim the 100% Investment Tax Credit (ITC) if started by mid-2026—directly supports its multi-year projects. Ørsted's U.S. portfolio, including the 900 MW Ocean Wind 1 in New Jersey, is now less vulnerable to tax credit cliffs. The stock has outperformed European utilities by 20% year-to-date, but valuations remain reasonable at 18x 2025E EPS.

3. SMA Solar Technology (S5MA.DE):
Germany's SMA, a leader in solar inverters, faces less direct competition from Chinese manufacturers like Huawei and Sungrow than U.S. firms do. The Senate bill's focus on phasing out tax credits by 2027, rather than imposing immediate penalties, gives SMA time to secure contracts for projects starting construction in 2025–2026. Its U.S. sales grew 30% in 2024, and the stock has gained 25% since the bill's announcement, though it trades at a 40% discount to peers like SolarEdge (SEDG).

Why European Firms Win the Supply Chain Game

The Senate bill's changes highlight a strategic advantage for European companies:
- Regulatory Compliance: European firms are better positioned to navigate the Foreign Entity of Concern (FEOC) rules, which bar projects involving “prohibited foreign entities” (e.g., China-based companies) after 2026. European manufacturers often source components from the U.S., Mexico, or Canada to avoid FEOC penalties.
- U.S. Manufacturing Footprints: Vestas and SMA have invested in U.S. factories, reducing reliance on Chinese imports. Ørsted's offshore supply chain, which uses European-built turbines and U.S. steel, also meets content requirements.
- Long-Term Contracts: The extended tax credit timeline rewards firms with multi-year project pipelines, a strength of European developers with established track records.

Risks and Considerations

• House Uncertainty: The bill still faces hurdles in the House, where amendments could reintroduce stricter FEOC rules or accelerate tax credit phaseouts.
• Global Supply Chain Shifts: While the bill reduces Chinese excise taxes, it also pushes for U.S. content requirements, which could pressure European firms to localize production further.
• Demand Volatility: If U.S. project developers rush to start construction by mid-2026, oversupply could depress margins.

Investment Strategy: Buy the Dip, Target 2026 Catalysts

The Senate bill's passage has already triggered a rally in European renewables stocks, but near-term dips offer entry points. Focus on companies with:
1. U.S. Project Backlogs: Ørsted and Vestas have secured permits and PPAs for projects that can start construction by mid-2026.
2. FEOC-Compliant Supply Chains: SMA's partnerships with U.S. polysilicon producers like Hemlock Semiconductor reduce FEOC exposure.
3. Diversification: Ørsted's expansion into green hydrogen and offshore wind-to-hydrogen projects adds resilience beyond tax credits.

Actionable Picks:
- Vestas: Buy dips below €380/share (52-week low: €300).
- Ørsted: Accumulate near DKK 900/share (current yield: 3.5%).
- SMA Solar: Target €18/share (up from €14.50 post-bill rally).

The Senate bill's messy compromise has created a rare alignment: it reduces near-term regulatory risks for European firms while extending the runway for U.S. growth. For investors with a 3–5 year horizon, this is a chance to capitalize on a reshaped renewable energy landscape.

In a sector where policy remains a wild card, European renewables are now playing with house money—and that's a bet worth making.