Solar stocks booked heavy losses Friday morning after Sen. Joe Manchin told Senate leadership that he would not support an economic package that included new federal spending on clean energy.
Lawmakers have been attempting to cobble together a spending package before August, but have needed the West Virginia Democrat's support. The Washington Post first reported Thursday evening that Manchin had informed Senate Majority Leader Chuck Schumer he could not support a $300 billion clean energy tax incentive provision.
Without Manchin's support for clean energy initiatives, it is unlikely Congress will have the votes to pass policy addressing climate change. This has been a top priority for President Joe Biden, who has said he wants to reduce U.S. greenhouse gas emissions 50% below 2005 levels by 2030.
Cowen analysts wrote Friday that "despite the disappointing news, the economic rationale for the shift toward renewable power is increasingly compelling and keeps us constructive on the (solar stocks) group."
"Losers in this process are EVs, hydrogen and (energy) storage, in our view," also beneficiaries of the proposed spending plan, the analysts wrote.
Cloudy Day for Solar Stocks
Enphase Energy initially dropped nearly 10%, then pared back to a 1% decline, to 194.91, at the close of Friday market trading. SunRun trimmed losses to 6.4%, trading at 23.56. China's solar energy giants were also not immune.
Among China-based names, Daqo New Energy fell off 13%, then eased to a 4% loss, while JinkoSolar trimmed a 10% drop to 2.7%. China stocks suffered hard hits in general on Friday, after an unexpectedly weak reading on the country's Q2 GDP growth.
California-based Enphase ranks second in the Energy-Solar group behind DQ. ENPH broke out of a double bottom base pattern with a 193 buy point in early June, according to MarketSmith analysis. Shares quickly reversed more than 8% below that buy point. That triggered the automatic sell rule. The stock has not yet formed a fresh valid base pattern.
Enphase Energy has a best-possible Composite Rating of 99. It has a 96 Relative Strength Rating, an exclusive IBD Stock Checkup gauge for share price movement with a 1 to 99 score. The rating shows how a stock's performance over the last 52 weeks holds up against all the other stocks in IBD's database. Its EPS rating is also a strong 96.
Fuel Cell Plays, Utilities Feel Pain
Quanta Services whittled early losses to a gain of 0.5% Friday, trading more than 128. Quanta specializes in infrastructure projects for the energy and communications sectors.
The subcontractor 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 Utility and Infrastructure Solutions (27%).
PWR is back above its 50-day moving average as it forms an imperfect cup-with-handle pattern with a 138.56 buy point. The buy range extends to 145.49. The handle may morph into a base of its own, offering investors a lower entry point, according to IBD Leaderboard analysis.
Utilities, which have become major customers to the solar energy industry, also took a beating. NextEra Energy fell 1.8% Friday. The Florida-based energy generation company fell back toward its 50-day moving average. AES dropped 0.8%.
Among fuel cell companies, FuelCell Energy sank 7.7% and Plug Power tumbled 13%.
The Policy In Question: Why Solar Stocks?
Details have remained unclear amid Senate negotiations. The sticking point appears to have been $300 billion in clean energy tax credits. The tax credit structure and how clean energy companies could use the credits had been in flux, according reports.
Discussions included providing a tax credit for zero-emission power sources until emissions are reduced by 75% from 2021 levels. Refundable tax credits for consumers who purchase electric vehicles have also been on the table. Along with tax credits for charging infrastructure and new investment tax credits for transmission and stand-alone energy storage.
Status Update
Earlier this week the package seemed to include 10-year extensions for wind, solar, carbon capture, nuclear energy and energy storage technologies tax credits. They were also looking at billions for other credit incentives to support domestic clean energy manufacturing capabilities, according E&E News.
However, on Thursday Manchin said he could not support any clean energy provisions. The senator has signaled he prefers a slimmed-down economic package that includes prescription drug price reductions and a two-year extension of Affordable Care Act subsidies, the Wall Street Journal reported.
Late last year, the White House announced a $320 billion clean energy tax credit framework. That proposal included incentives to cut costs for Americans to install solar panels and to purchase electric vehicles. EV tax credits under the proposal would have lowered the cost of a vehicle by $12,500 for a middle-class family, according to the White House.
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 necessary to pass legislation, he may use an executive order to accomplish his energy agenda.
"If the Senate will not move to tackle the climate crisis and strengthen our domestic clean energy industry, I will take strong executive action to meet this moment," Biden said in a statement.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
