I Bet Congress Was Long Solar Stocks

SCTY was up 34% yesterday, alongside a slew of solar stocks, after congress hooked the industry up with another 5 years of tax breaks. This is especially suprising, given the current cheapness of crude and natty. I suppose they’re all just doing their duty, trying to help save the planet from melting icebergs.

In a surprise move, U.S. lawmakers agreed to extend tax credits for solar and wind for another five years. This will give an unprecedented boost to the industry and change the course of deployment in the U.S.

The extension will add an extra 20 gigawatts of solar power—more than every panel ever installed in the U.S. prior to 2015, according to Bloomberg New Energy Finance (BNEF). The U.S. was already one of the world’s biggest clean-energy investors. This deal is like adding another America of solar power into the mix.

“This is massive,” said Ethan Zindler, head of U.S. policy analysis at BNEF. In the short term, the deal will speed up the shift from fossil fuels more than the global climate deal struck this month in Paris, and more than Barack Obama’s Clean Power Plan that regulates coal plants, Zindler said.

This is exactly the sort of bridge the industry needed. The costs of installing wind and solar power have dropped precipitously—by more than 90 percent since the original tax credits took effect—but in most places coal and natural gas are still cheaper than unsubsidized renewables. By the time the new tax credit expires, solar and wind will be the cheapest forms of new electricity in many states across the U.S.

The tax credits, valued at about $25 billion over five years, will drive $38 billion of investment in solar and $35 billion in wind through 2021, according to BNEF. The scale of the new projects will help push costs down further and will stimulate new investment that lasts beyond the extension of the credits.

Few people in the industry expected a five-year extension. Stocks soared. SolarCity Corp., the biggest rooftop installer, surged 34 percent yesterday. SunEdison Inc., the largest renewable-energy developer, climbed 25 percent, and panelmaker SunPower Corp. increased 14 percent.

The 30 percent solar tax credit was set to expire next year and will now extend through 2019 before tapering to 10 percent in 2022. The wind credit had expired at the end of 2014, and the extension will be retroactively applied from the start of 2015 through 2019, declining in value each year.

I’m not one to chase crazy rallies; but I bet the solar stocks continue higher on this news. Best way to play it is through TAN, or by owning a basket of them.

Here are some of the top solar names in Exodus.