What: The solar industry is on the doorstep of the biggest win it's ever had in Congress, an extension of the investment tax credit (ITC). The market loved the deal and shares of SolarCity (NASDAQ:SCTY), SunPower (NASDAQ:SPWR), First Solar (NASDAQ:FSLR), Sunrun (NASDAQ:RUN), SunEdison (NASDAQOTH:SUNEQ), and Canadian Solar (NASDAQ:CSIQ) all popped on the news.
So what: According to a deal reached last night, the 30% ITC will be extended through 2019. From there it will step down to 26% in 2020, 22% in 2021, and 10% permanently starting in 2022. This is a massive win for the solar industry, which was going to hit a cliff at the end of 2016 if the ITC fell from 30% to 10% as it was supposed to.
It's worth noting that this extension hasn't actually passed Congress, but it appears to be headed in that direction.
Now what: This is a huge lifeline for many in the solar industry, especially those who are hanging by a thread already. SunEdison and Sunrun are two companies who could have been in dire straights financially without the ITC extension. This doesn't ensure their survival, but it certainly helps.
For industry leaders like SolarCity, SunPower, and First Solar this will give them more certainty going forward and will likely allow them to improve profitability as well. These are the three companies I would look at as the biggest winners on Wednesday. A falling ITC could have squeezed out weaker competitors and that could have been good for all three long-term, but an extension will ensure greater growth on the top and bottom line than they would have had before.
Travis Hoium owns shares of First Solar and SunPower. The Motley Fool owns shares of and recommends SolarCity. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.