Energy Bill Legislation

The most important clean energy legislation to come out of either chamber of Congress in quite a while actually came as part of the $700 billion (and growing) financial bailout package passed in early October 2008.

That bill, aimed at helping the country avoid one of the worst financial disasters in generations, included a much-needed extension of some critical clean energy provisions.

Let’s go over what legislation was included in that bill, and seek out the companies that stand to gain the most from its passage.

Alternative Energy Tax Credits: What They Mean to Renewables

The most important part of the bill was the extension of the renewable energy production tax credit for one year and the investment tax credit for eight years.

The production tax credit (PTC) benefits companies that produce electricity from wind, biomass or waves and currents from oceans, rivers or irrigation canals.

The investment tax credit (ITC) allows the recuperation of 30% of the cost for new solar and fuel cell installations though 2016 with no cap amount.

Also included in the bill was:

• A 30 percent investment tax credit (up to $4,000) for installations of small wind turbines, such as residential-scale windmills
• Expansions of credits for producers of biodiesel, ethanol and other biofuels, as well as retailers who sell such fuels
• Tax credits for refineries, factories and other businesses that use carbon-capture systems
• Extension of tax deductions for builders of energy-efficient buildings and homes and manufacturers of energy-efficient appliances
• Tax credits of $2,500 for owners of plug-in electric cars and up to $15,000 for plug-in electric trucks
• Tax credits for employers who offer reimbursements to employees who buy, store or service bicycles used to commute to and from work

The bill authorized up to $800 million in bonds to help finance power plants that generate electricity from wind, biomass, wave or other renewable energy sources.

All the clean energy measures are being paid for by rolling back $17 billion worth of tax breaks formerly being granted to Big Oil.

The rationale for including clean energy in the bill was multifaceted, but hinged on the amount of new jobs and new investment the provisions would bring to the country, making clean energy a crucial pillar of our economy in the new century.

And if clean energy is going to have a major role, there will plenty of investment opportunities for the savvy investors paying close attention to the trend.

Long-Term Investments Based Partly on Clean Energy Legislation

So we know about the policy side of things.

Now we need to know which companies have best chance of benefiting from the legislation.

(Clean energy legislation alone is not enough to justify investment in any particular company. But this legislation, combined with due diligence and other market factors, can lead to the discovery of some very lucrative investments. These are all long-term plays, as market volatility is currently squashing short-term prospects.)

Really all you need to translate the recently passed energy legislation into investment advice is some common sense and a bit of logic.

The two major pieces were the tax credits for wind a solar installations.

So, almost by default, you should be looking for wind and solar installers and producers that operate and do business in the U.S.

This immediately brings some stalwarts to mind.

I know I’ve been harping on these companies lately, but First Solar (NASDAQ: FSLR) and SunPower (NASDAQ: SPWRA) are the two screaming buys here.

Both are leaders in the their respective domestic industries: thin film solar and traditional solar panels.

And both have been knocked down a few pegs during this market turbulence.

Once credit conditions ease, and the market returns to some stage of normalcy, these two will be among the earliest solar stocks to reemerge as big winners.

Getting now, at their current low prices, will ensure a long-term boon to your portfolio.

Beyond that, I’d be looking at some solar installers, whose business will pick up in light of the 30% rebate now offered with no cap.

Check out Clear Skies Solar (OTCBB: CSKH) and Akeena Solar (NASDAQ: AKNS) there.

Lastly, you’ll want some exposure to the windier side of things…

Value Alert: Wind Energy Stocks

Since there are no domestic wind turbine juggernauts (they’re all in Europe) you’ll have to look for some bit players.

I like ABB (NYSE: ABB), which is not a pure play wind investment, but is making good inroads to the business, providing critical electrical components, transmission projects, and wind farm construction.

ABB is a steal under $20.

And, if you’re willing to take on some risk and wait it out, Composite Technology Corp. (OTCBB: CPTC) is going to be huge player in the wind game.

Trading for less than a dollar now, Composite is poised to have vital role in specialty turbine production and crucial transmission parts. Be patient, returns on that one could take some time.

To green energy, and green profits,

–Chris Hunter
www.CleanEnergySector.com