Why Solar Stocks Skyrocketed Friday

Solar projects have been slowed by uncertainty regarding if using panels produced in the U.S. containing Chinese solar cells would still qualify for the entirety of a 40% investment tax credit included in last year’s Inflation Reduction Act. The U.S. Treasury Department addressed those concerns with new guidance on Friday, sparking a widespread rally.

First Solar FSLR was the biggest beneficiary, rising over 25%. Array Technologies ARRY, SolarEdge Technologies SEDG, and Enphase Energy ENPH also traded higher.

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The Inflation Reduction Act includes a 30% investment tax credit for new solar renewable energy projects and facilities. It also includes an additional 10% credit if facilities are built using a required amount of U.S.-produced steel, iron, and manufactured products.

Treasury Dept. Delivers Good News for Solar Stocks

The Treasury said that as long as 40% of the total cost of components used in the project are made with domestically produced materials, the project will qualify for the perk. Previously, it wasn’t clear if that would be true if 100% of the solar cells were manufactured overseas.

The news encouraged investors because clarity into the rebate should allow projects to move forward this year, boosting solar suppliers' top and bottom lines.

In the first quarter, First Solar’s sales rose 49% to $548 million; however, that was a steep decline from the prior quarter’s $1 billion due to “an expected shift in the timing of module sales as we increased shipments to our distribution centers, both to mitigate logistics costs as well as to align future shipments to customers with contractual delivery schedules,” according to management.

Earlier this year, First Solar began production of its latest series 7 module at its third manufacturing plant in Ohio. The Series 7 is designed for large projects, and it’s manufactured mainly using U.S. components, including glass and steel, to take advantage of the credit. The company is targeting initial shipments next month.

A fourth factory expected to be finished next year is under construction in Alabama. On the company’s first-quarter earnings conference call, First Solar said, “Excluding India, we are now sold out through 2026.”

Separately, First Solar announced that it's acquiring thin-film solar play Evolar AB for $38 million upfront, plus up to an additional $42 million to be paid upon achieving milestones.