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Solar Stocks Up Big on Tax Credit News

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Solar companies are surging Wednesday after Congress agreed to extend a lucrative federal tax credit. SolarCity , which soared as much as 28% in early-morning trading, leads the pack, while SunEdison , First Solar (FSLR - Free Report) , Canadian Solar (CSIQ - Free Report) , and JA Solar are also in the green today.

The deal approves an additional five years of an investment tax credit that was set to expire at the end of 2016. On top of this, it reauthorizes a production tax credit that also benefits wind-power developers which expired at the end of 2014.

The investment credit will apply to any solar projects that begin construction before the end of 2021. The credit will start at 30% of costs before being gradually reduced. The production credit pays 2.3 cents per kilowatt-hour of electricity generated.

This news comes in the wake of the historic deal in Paris, which saw nearly 200 countries agree to limit greenhouse gas emissions and shift towards clean energy (also read How Climate Deal Will Affect Markets).

“Combined with the historic Paris climate agreement, long-term certainty for the ITC sends a strong signal to the marketplace that investment in clean energy is the right way to drive continued economic growth and job creation,” SolarCity CEO Lyndon Rive said in a statement.

It has already been a great week for the solar industry, as the Paris deal and rumors of the tax credit extension had investors in a buying frenzy. The Bloomberg Global Solar Energy Index has gained nearly 10% in the past five days.

Today’s news is also trickling down the supply chain. Enphase Energy (ENPH - Free Report) , which makes inverters used to build solar energy systems, is up over 30% on the day, and competitor SolarEdge Technologies (SEDG - Free Report) is up nearly 13%.

The wind-power industry is also responding well to the tax credits. Vestas Wind Systems VWS and Broadwind Energy (BWEN - Free Report) are up 4.4% and 2.8%, respectively.

Bottom Line

If you didn’t know by now, the clean energy sector has a big future. The debate over climate change is over, and governments and corporations alike are scrambling to transition to clean, renewable sources of energy. That should mean money, money, money, for these companies and their investors.

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