Renewable Energy Stocks Should Thrive on Stimulus Boost – Barron’s

Jean-Francois Monier/AFP via Getty Images

The stimulus deal that passed Congress late on Monday gave a big boost to renewable energy companies, including extending tax credits that could be worth tens of billions of dollars to the solar and wind industries.

While Republicans and Democrats seem far apart on their plans to address climate change, the deals they came to regarding renewables were remarkably ambitious, according to some people representing climate-friendly energy industries.

The money could give new momentum to stocks of solar installers and others that had risen before the election but had given back some of those gains more recently.

Among the energy stocks that could gain from provisions in the bill are solar installer Sunrun (ticker: RUN) and SunPower (SPWR), solar equipment makers SolarEdge Technologies (EDGE) and First Solar (FSLR), nuclear power component maker BWX Technologies (BWXT), and industrial companies like General Electric (GE) that have shifted some of their business to renewables like wind.

As the bill has come together, renewable stocks have rebounded following a postelection lull. The Invesco Solar exchange-traded fund (TAN) is up 29% since Dec. 9.

The bill includes billions of dollars in research funding for solar, wind, hydropower, and geothermal energy. And it articulates a goal of 100% clean energy for the United States—a statement that seems remarkable given the normal rhetoric about climate change in Congress.

“It is the sense of Congress that in order to reduce emissions and meet 100% of the power demand in the United States through clean, renewable, or zero emission energy sources while maintaining United States leadership in science and technology, the Secretary of Energy must prioritize funding for critical fundamental research infrastructure and for basic research and development activities carried out through the Office of Science,” the bill says.

It was just a few weeks ago that President-elect Joe Biden’s statement at a debate that the U.S. should phase out fossil fuels was seen as enormously controversial.

The extension of solar and wind tax credits was a crucial goal that Republicans had resisted for several years. The credits, which helped make solar cost-competitive with fossil fuel power sources, had already dropped to 26% from 30%, and were set to fall even further next year.

But because of this bill, that decline will now be pushed back by two years, giving renewables a cost benefit that should drive further adoption. Solar Energy Industries Association President Abigail Ross Hopper hailed the “bipartisan consensus on many of these issues.”

And nuclear energy got some benefits, too, with the government authorizing $1.5 billion in funding for Energy Department programs to advance nuclear projects and research. Some of that money will go to reactor demonstration projects that have selected concepts from companies including GE and BWX Technologies, along with Holtec, X-energy, Westinghouse, TerraPower, and Kairos, according to the Nuclear Energy Institute.

Congress also added rules that will phase out the use of hydrofluorocarbons, chemicals used in refrigerators and other appliances that are a major contributor to global warming. That provision alone could reduce the increase in temperatures by half a degree Celsius by the end of the century, according to the World Resources Institute.

Write to Avi Salzman at avi.salzman@barrons.com

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