Solar Energy Stocks Recharged by Energy Bills

The recently passed Inflation Reduction Act is pushing investors to invest in solar energy stocks and other green companies. It provides approximately $369 billion to strengthen energy development and combat climate change. It’s not clear how long the party will last, but it’s likely that it will last until midnight.


Known as the IRA, the law’s goals are to increase energy self-sufficiency, reduce reliance on imports from China, and revitalize the industrial sector. It is also designed to create jobs for America and accelerate the transition to renewable energy.

This is the largest increase in federal spending on alternative energy in US history. What’s more, the impact could persist for the next decade.

John Hale, Morningstar’s global head of sustainability, told Investor’s Business Daily, “We want the federal government to support the transition to clean energy and do more broadly to address climate change. We will look back a few years from now as a time when we made a public commitment.”

Solar energy production tripled

The Senate passed the IRA bill on August 12th. President Joe Biden signed the bill into law on August 16th.

The United States plans to triple its domestic solar capacity by 2024, according to a White House statement. The formation of the IRA is expected to boost interest in clean energy and solar energy stocks.

Hale noted that two weeks before Congress announced the IRA accord on July 27, there was a net outflow of $223 million from exchange-traded funds in the clean energy sector.

However, in the two weeks since the deal was announced, investors have flooded the group of funds. According to Hale, the ETF brought in about $433.6 million in net inflows. Morningstar tracks about 24 solar and other renewable energy ETFs.

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“This law will make it more likely that more investors will consider how their entire portfolio can adapt to climate risk and benefit from the inevitable transition to a low-carbon economy. ,” said Hale.

Retains number one position

IBD’s ‘Energy-Solar’ industry group holds the number one position out of 197 tracked industry groups. An IBD trade association is a combination of companies in the same business.

Industry group rankings are based on the average six-month price and performance of each group’s stocks. Rankings are updated daily and published in the IBD Weekly newspaper and data tables on Investors.com.

Solar Energy Group shares include: first solar (FSLR), enphase energy (Enf), canadian solar (CSIQ) When Dako New Energy (DQMore).

other solaredge technology (SEDG), jinko solar (JKS) When sun power (SPWR).

It’s unclear how long this group can stay on top of the IBD industry, or if these stocks are showing signs of slowing down.

New tax credit for solar power

The key to the passage of IRA legislation was America’s Solar Energy Production Act. This will create a new tax credit designed to rapidly scale up solar production and bring major solar supply chains online. Abigail Ross Hopper, president and chief executive of the Solar Energy Industry Association, said it could also accelerate the transition to clean energy..

The law “helps to immediately stimulate private investment in production capacity across the solar supply chain, including batteries, create thousands of manufacturing jobs, and support energy independence.” When passed, Hopper said in writing.

Key beneficiaries of the bill include First Solar, which manufactures solar modules for homes and businesses around the world.

In a written statement, Mark Widmer, CEO of First Solar, said, “Solar manufacturers are working to develop durable, durable solar power systems designed to revitalize and expand domestic manufacturing and innovation at scale. It will benefit for the first time from some long-term industrial policy.

Big jump in solar energy stocks

First Solar’s stock has surged 56% since the IRA clearance deal on July 27th. During that time, Enphase Energy was up 34% and SunPower was up 66%. Canadian Solar jumped 29% as Sunrun jumped 48%.

Morningstar analyst Brett Castelli, who covers clean energy, said there are several factors investors should consider.

For one, the law includes a 10-year extension to solar and wind tax credits, he said in a note to customers. It provides ample time to build new competencies, he writes.

Other incentives designed to support new technology were not previously tax deductible. Two areas with the greatest potential benefits are hydrogen and energy storage.

Additionally, the law provides incentives for domestic manufacturing of solar panels and equipment. Providers used to primarily import these materials.

Incentives for solar panel production

“The legislative provisions significantly increase the incentives to manufacture solar panels and inverters domestically,” Castelli wrote.

Hale also said it’s never too late for investors to jump on the green stock bandwagon.

“This is a long-term trend,” Hale said. “For those still considering investing in renewable energy, don’t worry about missing the first news.”

According to the Solar Energy Association, the legislation “includes important incentives that will eventually lead to a resurgence of solar cell manufacturing in the United States.” The remarks came as part of a white paper posted on the group’s website.

The association further stated that “significant new investment in solar modules, trackers, inverters and rack capacity in the country is expected to occur within the next two to three years as a direct result of the IRA, followed by new investment in solar. I can do it,” he said. Ingots, wafers and cells production capacity he will increase within 3-5 years. “

Follow Brian Deagon on Twitter. @IBD_BDeagon Learn more about technology stocks, analytics and financial markets.

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