Renewable Energy Tax Credits

As part of the $850 billion economic stimulus, a Senate panel today approved $31 billion in renewable energy tax credits.

This is just one, in a series of recent events, that point to now being the time to load up on clean energy and related infrastructure stocks. But before I get into the other reasons to place bets on what will be one of the hottest sectors of 2009, let me first chronicle new renewable energy tax credits, and what their impact on the market will be.

The bulk of the tax package would go to solar and wind companies that are having a tough time financing projects in this market environment.

Both the Senate and House versions of the bill extend the federal renewable energy production tax credit for three years. This will provide much needed policy transparency and visibility, which will foster confidence when it comes to planning and initiating new renewable energy projects.

Of course, new renewable energy projects mean there’s also a way to find personal profit.

Both versions of the bill also allows renewable energy projects in place in 2009 and 2010 to claim and up front 30% tax credit instead of being paid out over 20 years as is normally done. This up front incentive will ensure more clean energy projects are planned for the next two years.

And that’s exactly the point: stimulation. But stimulating the renewable energy industry isn’t just good for the broad economy. If you play it right this can be your own personal stimulus.

The profits shouldn’t be hard to find, because so many sectors are going to benefit from the coming stimulus.

According to Reuters, other incentives included in the bills will”

• Increase the tax credit for service stations that install pumps that dispense alternative energy fuels like hydrogen, natural gas and gasoline made from 85 percent ethanol
• Give homeowners a tax credit equal to 30 percent (capped at $1,500) of the amount they paid for energy-efficient furnaces, hot water boilers and other energy savings improvements
• Authorize $1.6 billion in new clean renewable energy bonds to finance facilities that generate electricity from wind, biomass, geothermal energy, small irrigation, hydro power, landfill gas, ocean currents and trash burning facilities
• Allow states to issue $2.4 billion in conservation tax credit bonds to finance loans and grants to individual homeowners to retrofit existing housing
• Provide individuals with a 30 percent uncapped tax credit for buying solar water heating property, small wind energy property and geothermal heat pumps

That’s a lot of profit potential. It’ll take some research to find the best companies, but here’s a little head start.

Infrastructure Companies

Last week I told you about six infrastructure stocks that would be good buys heading into this legislation.

Today, five of those stocks are in positive territory, with only Caterpillar (NYSE: CAT) in the red.

You could be up nearly 20% on Chicago Bridge and Iron (NYSE: CBI) and Shaw Group (NYSE: SGR).

Here’s the chart:

The same advice still applies: seek out the large construction and infrastructure companies that will be executing a great deal of new water and transmission projects.

You can add American Superconductor (NASDAQ: AMSC) and EMCOR (NYSE: EME) to that group.

I’d be buying and holding these large companies at current levels.

While individual sectors, like wind and solar, could flounder a bit longer thanks to economic uncertainty, infrastructure stocks are bound to continue rising steadily.

Don’t get me wrong, you can still trade solar and wind stocks for profit, but it takes more active trading than the buy-and-strategy you should employ with infrastructure stocks.

To green energy and green profits,

Chris
Clean Energy Sector