What happened 

Solar energy stocks have been under pressure all year, but finally got a little good news on Thursday. Senators Chuck Schumer and Joe Manchin announced an agreement on a climate change package that's estimated to pump $369 billion into climate change solutions with solar energy being a major beneficiary. 

Shares of SolarEdge (SEDG 1.92%) traded up to 15.6% higher today, Sunrun (RUN -2.43%) jumped as much as 34.3%, First Solar (FSLR -1.46%) popped 20.6%, SunPower (SPWR -1.02%) was up 16.9%, and Canadian Solar (CSIQ 0.60%) rose 12.1%. Stocks settled slightly as the day went on but at noon ET shares were up double-digits across the board. 

So what 

The climate change bill, which is being called the Inflation Reduction Act of 2022, has been agreed to but hasn't been passed. But Manchin is the crucial vote, so it's likely to pass Congress and get approval from the White House. Here are the keys for solar companies. 

  • Production tax credits for U.S. manufacturing of solar panels, wind turbines, batteries, and minerals. 
  • Investment tax credit for EV, wind, and solar manufacturing plants. 
  • Extension of the solar investment tax credit at 30% until 2032.
  • $30 billion in grants and loans for states and utilities to advance clean energy. 

These subsidies will benefit the companies I mentioned in different ways. As installers, Sunrun and SunPower will directly benefit from the higher investment tax credit, which they use to finance rooftop solar projects.

First Solar is already the biggest solar manufacturer in the U.S. and is doubling production over the next two years. Canadian Solar could expand here as well. 

SolarEdge is a product supplier to companies that will get more direct benefits, but it could see an incremental boost in demand from subsidies. 

Now what 

This is a big, aggressive plan for U.S. clean energy and is far more than the industry was expecting from Congress, especially after talks appeared to have collapsed in recent weeks. I'm usually skeptical of the impact subsidies will have, but a decade-long extension of the investment tax credit and credits for manufacturing could have a big, long-lasting impact on the industry. 

For U.S.-centric companies like Sunrun, SunPower, and First Solar, this should be a meaningful boost for years to come. It'll take time for the impact to be felt and this bill hasn't even passed yet, but it's hard not to be bullish on the industry today. 

I'm bullish on solar energy long term, and right now it's easy to see why investors are getting increasingly bullish on solar energy stocks as well.