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Why Did Plug Power, Enphase, and SunPower Stocks Pop?

By Rich Smith - Oct 19, 2021 at 3:32PM

Key Points

  • In Washington, D.C., negotiations over the president's twin infrastructure bills continue.
  • One thing that has not changed: Sen. Manchin's opposition to $150 billion in clean energy spending.
  • A compromise to save the reconciliation bill could actually end up sacrificing investments in green energy.

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It really doesn't make sense.

What happened

Investors in renewable energy companies such as Plug Power ( PLUG -7.88% ), Enphase Energy ( ENPH -5.26% ), and SunPower ( SPWR -5.34% ) are cheering today, as shares of the stocks have risen 2.6%, 4.2%, and 7.6%, respectively, as of 2:20 p.m. EDT Tuesday.

This is rather strange, however, because the news today sounds mostly bad for investors in renewable energy stocks.

Three colorful arrows racing straight up on a black background

Image source: Getty Images.

So what

In Washington, D.C., negotiations continue over passage of two infrastructure bills, one valued at $1 trillion, another at $3.5 trillion (or less) -- and both offering billions of dollars of support for green energy initiatives.

Now, on the one hand, so long as legislators keep talking, there's the chance that both bills will be passed, delivering windfall profits for fuel cell companies such as Plug Power, and solar stocks like Enphase and SunPower. Perhaps this optimism is what investors are holding onto today. But as The Hill reports today, the prospects for passage of the bigger, more valuable bill look especially dim right now.  

This $3.5 trillion reconciliation bill (so named because it can only conceivably be passed through the legislative mechanism of reconciliation between House and Senate, which would require only 50 Senate votes) includes "a $150 billion clean electricity plan," notes The Hill, and is clearly the biggest prize for green energy companies. The problem is, one of the 50 necessary Senate votes -- that of West Virginia Sen. Joe Manchin -- stands in "staunch opposition" to the green energy largesse. And not only is Manchin not budging on his position, but proponents of the bills say Manchin "doesn't want to work it out" -- suggesting even a compromise on a smaller number than $150 billion may not happen.

Now what

And even that's not the worst news for investors in companies like Plug, Enphase, and SunPower. In an attempt to salvage something from the reconciliation bill, The Hill quotes one unidentified Senate Democratic aid confiding that President Joe Biden may be encouraging his allies in Congress to abandon the clean electricity plan so as to salvage the rest of the reconciliation bill.

In this scenario, Democratic moderates might offer progressive advocates of the reconciliation bill a consolation prize: In exchange for abandoning support for green energy subsidies, they would "add more funding for [other, not energy-related] social spending programs" to the bill instead. Such a move might help get Manchin on board -- but it wouldn't do much for renewable energy investors.

And if this is the way things end up working out, then today's stock price gains for green energy stocks could be short-lived.

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.

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Stocks Mentioned

Plug Power Inc. Stock Quote
Plug Power Inc.
PLUG
$36.71 (-7.88%) $-3.14
SunPower Corporation Stock Quote
SunPower Corporation
SPWR
$27.12 (-5.34%) $-1.53
Enphase Energy, Inc. Stock Quote
Enphase Energy, Inc.
ENPH
$236.86 (-5.26%) $-13.14

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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