Solar stocks enjoy rally as tax breaks renewed

LOS ANGELES (Reuters) - Solar stocks rallied on Wednesday after the U.S. Senate voted to continue tax breaks worth $18 billion for renewable energy sources, including a generous eight-year extension for solar.

Top gainers included top U.S. solar company SunPower Corp, which soared as much as 12.7 percent to $98.60 on the Nasdaq. Solar cell maker Evergreen Solar Inc rose as much as 14.5 percent to $6.58 and solar installer Akeena Solar Inc gained as much as 25 percent to $5.33.

Chinese solar companies also rallied on the news. Yingli Green Energy Holding Co Ltd, also boosted by the announcement it would supply 1.4 megawatts (MW) of solar panels to a Rutgers University campus, was up 8.6 percent at $13.59 in early afternoon trading.

Trina Solar Ltd shares rose 6.8 percent to $29.28, helped by news that it would provide 2.4 MW in cells for a project in Atlantic City, New Jersey, in what it said would be the largest single rooftop solar installation in the United States.

Federal renewable energy tax credits, which had been set to expire at the end of this year, are considered critical to helping solar power compete with electricity from dirtier sources such as coal and fossil fuels. The Senate's failure to extend the subsidies on eight occasions earlier this year put a major damper on solar stocks as investors fretted a lack of government support would cause U.S. solar demand to slump next year.

"The solar industry wins big in this bill," Raymond James analyst Pavel Molchanov said in a client note, pointing to the bill's provision allows utilities to claim the tax breaks.

In addition, the bill eliminated a $2,000 cap on tax credits for residential solar systems.

"The bill therefore opens the door to vastly greater domestic adoption of solar power within the residential and utility markets," Molchanov wrote.

The renewable tax credits measure, which is expected to be approved by the House of Representatives and President George W. Bush, gives businesses a 30 percent tax credit to offset the development costs of solar and other clean energy projects.