What happened

For the week, shares of the large U.S. residential solar provider Sunrun (RUN -3.27%) traded more than 20% higher as of 12:50 p.m. ET Thursday, according to data provided by S&P Global Market Intelligence.

Solar stocks, in general, appear to be doing well this week in wake of Congress passing the Inflation Reduction Act bill in mid-August.

So what

The Inflation Reduction Act, which will raise $737 billion of revenue, is the largest government bill ever passed to combat global warming.

One of the big things the bill does is offer a large tax credit on several different kinds of solar installation projects, which will allow people to subtract 30% of the expenses from the project from their taxes. Expenses can include the panels themselves, various permitting and inspection fees, contractor labor, storage batteries, and sales tax.

This could drive a lot of growth at Sunrun, the largest U.S. retail solar provider for projects including rooftop solar panels, electric vehicle charging stations, and battery storage. Sunrun had more than 724,000 customers at the end of the second quarter.

The solar market is also still extremely underpenetrated, according to Sunrun, which says its business only makes up less than half a percentage point of the U.S. residential electricity market, which it estimates to be worth $194 billion annually.

Now what

It seems like investors are just starting to wake up to the potential benefits of the Inflation Reduction Act for solar companies. As the largest domestic residential solar player, the company seems like it is in a great place right now.