Investing in Solar Energy Stocks

The endless headlines say it all:

• Green Energy Sector Gets Boost From Senate
• Solar stocks enjoy rally as US tax breaks renewed
• Tax Breaks Shine on Solar Companies
• Solar stocks jump after Senate backs tax credits

They go on and on. But you get the idea.

Obviously something is going on regarding investing in solar energy stocks. But there’s something else at work here.

Here’s what all the fuss is about.

Solar Energy Tax Credits

The Senate recently passed a major piece of energy legislation that will give renewable energy stocks, particularly solar stocks, a much needed boost.

Here are the highlights from the bill, as provided by Piper Jaffray, that can give your portfolio a nice bottom line bump. H.R. 6049, or the Energy Improvement and Extension Act of 2008:

• Extends the 30% solar investment tax credit for 8 years with no cap ($2000 former cap)
• Makes utility-scale solar eligible for the tax credit
• Extends the production tax credit for wind for one year
• Extends tax credits for marine and ocean tidal energy projects for two years

While this bill does cover some aspects of wind energy, geothermal, and energy efficiency measures, the big winner by far is going to be the solar industry.

This bill literally creates an 8-year guaranteed market for solar photovoltaic installations.

Before it was passed, companies and project managers were hesitant to start new projects in fear that they wouldn’t be finished by the end of the year when the tax credits expired–rendering them ineligible to recoup an easy 30% of their investment.

Now, they’re guaranteed to get 30% of the upfront cost paid for by the government. With no cap. For eight years.

It’s going to incite a new solar bull market. And we’re already seeing.

Solar Stocks & Tax Credits

In just the one trading day after the Senate vote–which, by the way, passed 92-3–the solar sector as a whole is up about 10%. Some are surging even higher.

But this thing is really just getting started.

Before the bill becomes law, it still needs to be confirmed by the House and signed into law. Each of those parties has show support of the measure.

So the only thing left to do is load up on solar stocks and wait for them to run.

I’d be looking at some of the companies that have high U.S. exposure:

• Evergreen Solar (NASDAQ: ESLR)
• SunPower (NASDAQ: SPWR)
• First Solar (NASDAQ: FSLR) and
• Canadian Solar (NASDAQ: CSIQ)

That is just a short list of solar stocks on the Nasdaq to get you started. If bought at their current levels, each of those plays is sure to return profits in the next few months.

For a longer-term play on the solar bull, consider a solar ETF The two most popular solar ETFs are:

• Market Vectors Solar Energy ETF (AMEX: KWT)
• Claymore/MAC Global Solar Energy ETF (NYSE: TAN)

Each of those holds a number of solar companies operating both domestically and abroad.

More on the solar sector, and all things cleantech in coming issues.

Make sure to pick up some of those solar energy stocks for easy profits.

To green energy, and green profits,

Chris