Inside The Recent Run of Clean Energy & EV ETFs

On August 18, 2025, the U.S. Treasury Department released guidance clarifying which solar and wind projects qualify for clean energy tax credits under President Donald Trump’s “One Big Beautiful Bill.”

The legislation phases out tax credits for new renewable energy projects unless construction begins by July 4, 2026. The IRS update eased investor concerns by setting clear qualification criteria.

These projects remain eligible under the 5% “safe harbor” rule. Developers qualify if they invest at least 5% of total project costs and complete construction within four years.

Larger installations will no longer be able to rely on the 5% safe harbor. Instead, they must demonstrate that “physical work of a significant nature” has begun in order to qualify for tax credits.

Analyst Takeaways

Analysts at Jefferies described the update as a “clear win” for residential solar. Many feared stricter rules, including retroactive changes to Jan. 1, and a reduced safe harbor window from four years to just 2.5 years.

Citi analysts also described the guidance as “better than anticipated,” as it was not retroactive. They noted concerns that the investment threshold could have been raised to above 10%, which did not materialize, providing a relief to investors.

Clean Energy ETFs at a 52-Week High

Against this backdrop, below we highlight a few clean energy-based exchange-traded funds (ETFs) that have been hovering around a 52-week high. These ETFs are Wilderhill Clean Energy Invesco ETF PBW, Nasdaq Green Energy Index ETF QCLN, SPDR Kensho Clean Power ETF CNRG and SPDR S&P Kenso Smart Mobility ETF HAIL.

Most electric vehicle ETFs rallied lately. Along with better-than-expected regulations for clean energy, Ford’s $5 billion U.S. investment plan also boosted EV stocks. If these were not enough, Fed Chair Powell indicated a September rate cut possibility on Aug. 22, 2025, which triggered risk-on sentiment in the market and pushed up EV and AI-centric stocks like Tesla (TSLA).

Tesla shares rose more than 6% on that day, which more than made up for their mid-week slump and helped the stock close out the week with 3% gains. Over the past week, Tesla shares have gained 6.9%.

Since Tesla has a presence in several EV ETFs like iShares Self-Driving EV and Tech ETF IDRV and Global X Autonomous & Electric Vehicles ETF DRIV, these ETFs gained considerably last week.

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This article originally published on Zacks Investment Research (zacks.com).

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