Biden wants to sign the biggest climate law in history. These stocks could see the biggest upleg
The largest climate finance package in US history is on its way to President Joe Biden’s desk, with initiatives that could permanently transform the nation’s energy system. The impact on the clean energy space is huge, with the bill affecting nearly every industry from solar to wind, hydrogen, nuclear, electric vehicles and other emerging technologies. Aside from the impact on US renewable energy development, there are also global implications. “The United States Congress is taking real action on climate change in our home market,” said Tom Steyer, the billionaire financier and 2020 presidential candidate the rest of the world and our global cooperation to resolve this crisis,” he added. Clean energy stocks soar Clean energy stocks have been on a soar since Senate Majority Leader Chuck Schumer, DN.Y., and Senator Joe Manchin, DW.V. announced their surprise deal at the end of July. A little over a week later, the Senate quickly passed the package, and the House of Representatives approved the bill on Friday. The deal follows a months-long deadlock in Washington that had stalled and sidelined President Joe Biden’s agenda to tackle the climate crisis. The sudden advance surprised Wall Street and climate officials alike. “I think right before this deal was announced, we probably weren’t that optimistic at that moment that something would be done quickly,” said Peter Faricy, SunPower’s CEO. “The interesting thing for me is that there has always been strong support for the clean energy part,” he added. Some renewable energy-related initiatives have garnered bipartisan support due to heavy expansion in Republican-led areas. Texas, for example, is perhaps best known for its oil and gas fields. But the state led the country in new renewable projects last year. The Inflation Reduction Act, passed on Friday, will have a significant impact on the solar industry. It will increase the investment tax credit to 30% and extend it at that rate for the next decade. The ITC and the Production Tax Credit, which provide the corresponding incentive for the wind industry, have usually been approved in multi-year increments, which has led to a kind of boom-and-bust cycle within the renewable energy sector. SunPower’s Faricy said the ITC’s expansion to a higher level is a game changer for the industry. “This is the kind of action by the US government that will actually accelerate the growth that we’re seeing now,” he said. SunPower shares gained 10.6% last week. Its other home installers, Sunrun and Sunnova, saw their shares rise 8.7% and 6.5%, respectively. All three are up more than 40% over the past month. Solar component suppliers like Enphase and SolarEdge could also rebound on a surge in demand as homeowners seek to take advantage of the credit. This is especially true when utility bills increase in the face of an increase in commodity prices. The bill also includes a new standalone energy storage credit that could lift names like Fluence Energy and ESS Tech. Shares of both companies are up more than 70% over the past month. In addition to asking consumers to switch to solar power and utilities to add renewable energy, the Anti-Inflation Act also includes rebates for electric vehicles. There are some restrictions, including income and vehicle price, but it also extends the used car discount. Wells Fargo analysts said Tesla and General Motors are big beneficiaries as they will be able to use the credits again. Previous laws had a cap of 200,000 vehicles sold, after which point companies could no longer use the loans. Jumpstarting US Manufacturing But the bill not only encourages consumers to make green energy product choices – it also gives domestic manufacturers incentives to build and develop new supply chains. Shares in solar panel maker Maxeon Solar and First Solar are up more than 70% over the past month. JPMorgan and KeyBanc upgraded First Solar to an overweight rating this week on the uptrend in the IRA. “We consider the Inflation Reduction Act to be the largest policy change in U.S. history to accelerate growth in what we believe is already an inevitable energy transition toward renewable energy,” the company wrote in a note to clients on Monday. Analysts led by Mark Strouse also upgraded shares of wind turbine blade maker TPI Composites to overweight. NextEra Energy and AES Corporation, both utilities with large renewable energy portfolios, saw their shares rise 13% and 18%, respectively, over the past month. Andres Gluski, CEO of AES, said the new legislation will bring visibility across the clean energy ecosystem. “You want a constant supply — your factories that build wind turbines or solar panels are running at their best,” Gluski told CNBC. “This [the IRA] establishes this for a longer period of time – that’s very positive,” he said. The EV rebates are also tied to domestic supply chains. Over time, an increasing proportion of the battery materials in EVs must be sourced from the US or its free trade allies in order to qualify for the credits. Biden has called the development of domestic supply chains for critical minerals a national security issue. He had previously invoked the Defense Production Act in relation to mineral mining and refining, with the Anti-Inflation Act allocating additional funds for the DPA. Albemarle operates the only US lithium mine currently in production. Lithium Americas and Piedmont Lithium are both in the process of developing mines, although each company is at least several years away from production. “I think the incentives to tie it to building a national supply chain and domestic supply chain are excellent,” said Piedmont Lithium CEO Keith Phillips. He said he was skeptical when he first heard about the deal b between Sen. Manchin and Sen. Schumer given the many false starts surrounding the Build Back Better plan. But now, looking ahead, he’s optimistic. “I think it’s great for anyone who has critical materials in the U.S. and other friendly nations,” he told CNBC. However, some have argued that creating domestic supply chains could hamper renewable energy expansion in the short term, given the current unavailability of these critical minerals in the U.S. “This may help stimulate domestic investment in the longer term boost but also slow down certain decarbonization sectors in the shorter term that are critically dependent on imports from China, like batteries, electric vehicles and solar power.” Hydrogen stocks are also having a strong week as the bill also includes funds to incentivize a green hydrogen industry. Names like Plug Power, Bloom Energy and FuelCell Energy all posted strong gains. The legislation, which includes $369 billion on energy security and clean energy regulations, passed the House of Representatives by a majority of 220 to 207. The bill is a major victory for Democrats ahead of the upcoming midterm elections. “This is a truly great time for people who want to see the United States lead the world in positive clean energy transition. There’s never been a better time,” said SunPower’s Faricy. – CNBC’s Michael Bloom contributed to the coverage.
https://www.cnbc.com/2022/08/13/biden-is-set-to-sign-the-largest-climate-bill-in-history-these-stocks-could-see-the-biggest-boost.html Biden wants to sign the biggest climate law in history. These stocks could see the biggest upleg
