Stunning reversal: Senator Joe Manchin just reached a deal with Democrats that includes $369 billion in climate spending — and solar stocks are on fire

A wild ride for solar

Solar stocks took a big hit on July 15 when reports came out that Manchin wouldn’t support the package.

On that day, First Solar plunged 8.1%, Sunrun dropped 6.4%, Sunnova Energy International fell 5.0%, while SunPower was down 3.4%. The Invesco Solar ETF (TAN) tumbled as much as 7% at one point before ending the session with a 2% loss.

But with Manchin’s reversal, sentiment has completely changed.

As of Thursday morning, First Solar climbed 14%, Sunrun jumped 19%, Sunnova Energy International surged 23%, while SunPower edged up 12%. It looks like a huge victory for the sector as the Invesco Solar ETF rose 5%.

“The entire clean energy industry just breathed an enormous sigh of relief,” said Heather Zichal, CEO of American Clean Power, a trade association that represents solar and wind energy companies. “This is an 11th hour reprieve for climate action and clean energy jobs, and America’s biggest legislative moment for climate and energy policy.”

Despite Thursday morning’s surge, however, Sunrun, Sunnova Energy International and Sunpower are still down year to date.

For those who don’t want to pick individual winners and losers, ETFs like TAN, the First Trust Global Wind Energy ETF (FAN), and the iShares Global Clean Energy ETF (ICLN) could provide a good starting point for further research.

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Is coal dead now?

Climate advocates point out that Manchin has longtime ties to the coal industry.

Manchin helped found coal brokerage firm Enersystems, Inc. in 1988. And according to CNN, he had a between $1 million and $5 million stake in the company in 2021.

CNN further notes that financial disclosures show Manchin making over $536,000 from his share in Enersystems last year. To put that in perspective, his Senate salary was $174,000. To be sure, coal is no longer making headlines in the investing world. In fact, the only coal-focused ETF — the VanEck Vectors Coal ETF (KOL) — stopped trading in December 2020.

But the industry is far from dead.

Alliance Resource Partners (ARLP), a diversified producer and marketer of steam coal to major U.S. utilities and industrial users, recently raised its cash distribution to investors by 40%. The stock is also up 68% year to date, in stark contrast to the broad market’s double-digit decline.

Another example is Peabody Energy (BTU), a coal producer headquartered in St. Louis. The company’s products are essential for electricity generation and steelmaking. Its shares are up 94% in 2022.

Manchin’s surprise deal, however, did shock coal stocks a bit. Alliance Resources Partners is down 2.4% on Thursday morning, while Peabody Energy slipped 3.6%.