As Green Chip editor Nick Hodge wrote yesterday before the Senate's passage of the financial system rescue bill in his Grid Parity blog, we are set for:
- A one-year extension of the production tax credit (PTC) for wind installations
- An 8-year extension of the investment tax credit (ITC) for solar and
- removal of the prior $2,000 cap for residential solar installation
Nick pointed out great profit opportunities ahead in several individual equities like SunPower (NASDAQ:SPWR), Evergreen Solar (NASDAQ:ESLR), and Canadian Solar (NASDAQ:CSIQ).
I'll add that since the market trends we see in individual countries feed companies based all over, positive moves in the U.S. should help our international green energy watch list of Chinese companies JA Solar (NASDAQ:JASO), Yingli Green Energy (NYSE:YGE) and Renesola (NYSE:SOL).
But, friends, the path to those profits runs through Capitol Hill, which lately has been a tough climb.
Renewble Energy Incentives... From First Priority to Third Prong
Rather than making renewable energy incentives the top priority in a separate measure, as was the original plan for Energy Improvement and Extension Act of 2008 (H.R. 6049), we now have Bloomberg calling clean tax credits the "third prong" of the restructured rescue plan's massive new section on taxation.
H.R. 6049 included renewable tax credits that had been proposed by the lower house of Congress eight times before, and at the end of September the Senate finally went for it. But then the House changed the bill up to include a pay-as-you-go system that, though logical, broke the bicameral deal by knocking off necessary Senate votes. That blocked the legislation and upward market movement we expected to see.
Investors are skittish to start October, and renewable energy shareholders especially so, knowing that lately what the Senate giveth, the House taketh away.
Today we're in a situation where renewable energy is lumped in with a hodge-podge of pet projects, many of which far less deserving of inclusion in this market rescue operation the Congress is waging. And that's a shame.
Bloomberg is calling the renewable tax credit package the "third prong" of the bailout's tax breaks, rather than focusing on the credits as the big bottom-up boost to the economy that they are, encouraging both spending and energy independence.
With a dismal attitude across the market, Thursday brought major declines across Wall Street. Renewables got smacked hard, with double-digit drops in some cases.
Nevertheless, we see progress in the way Washington has moved on renewable energy over the years. Solar, wind, geothermal, and other sources are now recognized as home-grown elements in an essential energy mix that will provide hundreds of thousands of jobs and keep billions of dollars in the U.S., instead of turning them into petrodollars overseas. At the same time, the international economy developing around renewable fuel sources is vibrant and cooperative, and the stock market opportunities are plentiful.
If and when the bailout package gets through, I suggest pulling the trigger on a couple of clean energy ETFs, like:
- Market Vectors Global Alternative Energy (NYSE:GEX), which delivers great worldwide leaders like Vestas and Q-Cells
- PowerShares Cleantech Portfolio (AMEX:PZD), and
- PowerShares WilderHill Clean Energy (AMEX:PBW), the top historical performer in renewable energy exchange-traded funds
We'll keep you up to date with the latest action on Capitol Hill and what it means to your green power portfolio.