What happened 

Solar energy stocks had a great day on Wednesday after the two Democratic candidates in Georgia's runoff Senate election appear to have won. The wins would give Democrats full control of Congress, allowing them to pass renewable energy legislation and seat political appointments that may have otherwise been blocked. 

Shares of First Solar, SolarEdge, JinkoSolar, Enphase Energy, and ReneSolar were all up by double digits at their peak today. 

Company Gain at Peak Gain at 3 p.m. EST
First Solar (NASDAQ:FSLR) 10.8% 8.3%
SolarEdge (NASDAQ:SEDG) 18.4 10.4%
JinkoSolar (NYSE:JKS) 14% 5.6%
Enphase Energy (NASDAQ:ENPH) 15.8% 12.1%
ReneSola (NYSE:SOL) 24.6% 12.2%

Data source: Google Finance. 

So what

The Senate will be key to Democrats passing any renewable energy legislation like increased subsidies or funding for new technologies. Project developers like First Solar, JinkoSolar, and ReneSola could all benefit if there are increased tax subsidies, like the two-year extension of the investment tax credit that was included in the recent stimulus package. If there are any other packages passed it's reasonable to assume that developers would benefit from them. 

Utility-scale solar installation in a desert.

Image source: Getty Images.

I think the approval of political appointees will be the greatest impact of the Senate flip, particularly at the Federal Energy Regulatory Commission, which regulates utilities across the country. Chairman Neil Chatterjee's term ends in mid-2021, allowing Biden to replace him with a Democrat.

Overall, controlling the Senate will likely mean more favorable policies for solar energy and that should lead to more installations. As component suppliers, SolarEdge and Enphase Energy will be riding the growth of others in the industry, which should also help their financial results. 

Now what

The tailwinds continue to support solar energy stocks and the Senate win will likely be an incremental benefit to the industry. That said, solar stocks have had an incredible run over the last six months and investors are pricing in a lot of growth for the industry. It make take time for that growth to materialize, which makes me hesitant to jump into these hot stocks right now. We've seen boom and bust cycles in the solar industry before and more subsidies haven't necessarily translated to higher profits. 

With all of that said, the solar industry is set up for a positive policy environment in the near term, at least, and that should help these companies' operations, no matter where their stocks are headed. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.