Shares of stocks tied to the renewable energy industry went off like a rocket on Monday, responding to a Biden administration plan to quadruple the share of green energy in America's economy by 2030.
As of 1:45 p.m. EDT, shares of lithium miners Lithium Americas (NYSE:LAC) and Albemarle (NYSE:ALB) are up 9.3% and 7.2%, respectively. Chinese solar module maker JinkoSolar Holding (NYSE:JKS), which gets nearly 29% of its revenue from sales to North America (according to data from S&P Global Market Intelligence), is following the lithium mining stocks higher -- up 8.1%.
So what's all the excitement about? As The Wall Street Journal reported this morning, additions to the world's capacity to generate electricity from renewable sources soared 50% in 2020, led by growth in the U.S., which added 80% more renewable capacity in 2020 than it did in 2019.
Currently, the U.S. generates 20% of its energy from renewable sources such as wind and solar -- roughly equal to the contribution from nuclear energy. But the Journal notes that the administration's policy calls for "80% of U.S. power to come from clean energy by 2030" -- a four-fold increase in less than 10 years.
WSJ observes that such a rapid increase will necessitate "building about 600 gigawatts of new wind and solar facilities, or about 60 gigawatts a year." On the one hand, that's obviously good news for companies like Jinko, which sell solar modules to U.S. solar panel installers. On the other hand, because much of renewable energy is generated at inopportune times, and must be stored for when it's later needed, the increase in renewable capacity will almost certainly necessitate an increase in the production of industrial scale energy storage facilities to hold it -- increasing demand for lithium from companies like Lithium Americas and Albemarle.
Long story short, the Biden administration's proposal for "greening" the U.S. economy could be great news for both solar stocks and lithium stocks -- if the revolution happens. On a more cautionary note, WSJ observes that while you shouldn't "bet against a committed U.S. federal government and a supportive populace," the plan "envisions triple-digit billions of dollars of tax credits for clean energy over the course of a decade. But [those credits] aren't in the bipartisan infrastructure bill" currently working its way through Congress.
It's not yet certain that either Congress or voters will support spending "triple-digit billions" to subsidize green energy -- or pay the higher tax bills that those subsidies imply. In the meantime, S&P Global data shows that none of the three stocks named is currently generating positive free cash flow from their businesses. Unless subsidies are forthcoming, it remains to be seen if they can be profitable on their own.