Shares of Shoals Technologies Group (SHLS) are soaring 19.68% in Tuesday's trading session, as the US solar energy sector experiences a broad rally. The surge comes in response to draft proposals in the US reconciliation bill that were deemed "better than expected" for the clean energy industry.

The proposed legislation includes a gradual phase-out of the "technology-neutral" 45Y tax credits for wind, solar, and other clean energy sources. According to the proposal, these credits will step down from 80% for facilities placed in service during 2029, to 60% by 2030, 40% by 2031, and zero thereafter. This more gradual reduction has been welcomed by investors in the solar sector.

Analysts at Rothschild & Co noted that "the better-than-expected outcome for phase downs is an overall positive for our utility-scale solar universe," specifically mentioning Shoals Technologies among the companies set to benefit. The favorable policy outlook has triggered a sector-wide rally, with other solar energy stocks such as First Solar, Array Technologies, and Sunrun also posting significant gains. However, it's worth noting that companies focused on residential solar, like Enphase Energy and SolarEdge Technologies, are facing headwinds due to the proposed elimination of residential Solar Investment Tax Credits after 2025.