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Solar stocks: These companies crash after Manchin nixes climate spending

Solar stocks posted heavy losses Friday morning after Sen. Joe Manchin told the Senate leadership he would not support an economic program that includes new federal spending on clean energy.




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Lawmakers tried to cobble together a spending package before August, but needed the support of the West Virginia Democrat. The Washington Post first reported Thursday night that Manchin advised Senate Majority Leader Chuck Schumer that he could not support a $300 billion clean energy tax incentive provision.

Without Manchin’s support for clean energy initiatives, Congress is unlikely to have the votes to pass climate change policy. This has been a top priority for President Joe Biden, who has said he wants to reduce US greenhouse gas emissions by 50% below 2005 levels by 2030.

Cowen analysts wrote on Friday that “despite the disappointing news, the economic case for switching to renewable energy is increasingly compelling and keeps us constructive on the (solar stocks) group.”

“The losers in this process are electric vehicles, hydrogen and (energy) storage, in our view,” also beneficiaries of the proposed spending plan, the analysts wrote.

Cloudy day for solar actions

Enphase Energy (ENPH) initially fell almost 10%, then fell back 1% to 194.91 as of Friday’s close. SunRun (CLASSES) cut its losses to 6.4%, trading at 23.56. Chinese solar energy giants were not immune either.

Among China-based names, Daqo New Energy (DQ) fell 13%, then fell 4%, while JinkoSolar (JKS) cut a 10% decline to 2.7%. Chinese stocks took a beating in general on Friday, after a surprisingly weak reading of the country’s second-quarter GDP growth.

California-based Enphase ranks second in the Solar-Energy Group behind DQ. ENPH broke out of a double-bottom base pattern with a buy point of 193 in early June, according to MarketSmith Analysis. Stocks quickly reversed more than 8% below this buy point. This triggered the auto sale rule. The stock has yet to form a valid new base pattern.

Enphase Energy has a Best Composite Rating of 99. It has a Relative Strength Rating of 96, an exclusive IBD Stock Checkup gauge for stock price movement with a score of 1 to 99. The rating shows how the performance of a stock over the past 52 weeks holds its own against all other stocks in the IBD database. Its EPS rating is also a solid 96.

Fuel cell games, utilities feel pain

Quantum Services (REP) pared its early losses to a 0.5% gain on Friday, trading above 128. Quanta specializes in infrastructure projects for the energy and communications sectors.

The contractor giant recently announced a renewable energy segment, which includes services for solar and wind projects. Its other segments include electric power (59% of revenue) and underground utilities and infrastructure solutions (27%).

PWR is back above its 50-day moving average as it forms an imperfect cup-handle pattern with a buy point of 138.56. The buy range extends up to 145.49. The handle can turn into a full-fledged base, giving investors a lower entry point, according to IBD Ranking Analysis.

Utilities, which have become the solar industry’s biggest customers, have also been hit hard. NextEra Energy (BORN) fell 1.8% on Friday. The Florida-based energy company fell back towards its 50-day moving average. AES (AES) fell 0.8%.

Among fuel cell companies, fuel cell energy (FCEL) fell 7.7% and Plug hole (PLUG) fell 13%.

The policy in question: why solar actions?

Details remained unclear amid negotiations in the Senate. The sticking point seems to have been $300 billion in clean energy tax credits. The structure of tax credits and how clean energy companies could use the credits were changing, according to reports.

Discussions focused on providing a tax credit for zero-emission energy sources until emissions are reduced by 75% from 2021 levels. Refundable tax credits for consumers buying electric vehicles have also been on the table. With tax credits for charging infrastructure and new investment tax credits for autonomous energy transport and storage.

Status update

Earlier this week, the package appeared to include 10-year extensions for tax credits on wind, solar, carbon capture, nuclear power and energy storage technologies. They were also considering billions for other credit incentives to support national clean energy manufacturing capabilities, according to E&E News.

However, on Thursday, Manchin said he could not support any clean energy provision. The senator has signaled that he prefers a lightened economic package that includes reductions in prescription drug prices and a two-year extension of Affordable Care Act grants, The Wall Street Journal reported.

Late last year, the White House announced a $320 billion clean energy tax credit framework. This proposal included incentives to reduce the costs for Americans to install solar panels and buy electric vehicles. According to the White House, the electric vehicle tax credits under the proposal would have reduced the cost of a vehicle by $12,500 for a middle-class family.

Biden on Friday afternoon announced that clean energy and climate change initiatives remain a top priority. The president added that if Senate Democrats fail to secure the votes needed to pass legislation, he could use an executive order to accomplish his energy agenda.

“If the Senate does not act to address the climate crisis and strengthen our national clean energy industry, I will take strong executive action to respond at this time,” Biden said in a statement.

Please follow Kit Norton on Twitter @KitNorton for more coverage.

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