What happened

It was a busy weekend in Washington, D.C. -- and renewable energy companies are reaping the benefits. With the passage of the Inflation Reduction Act taking a significant step closer to reality, investors are gobbling up shares of various clean energy tickers to start the week. In addition, some bullish attention from analysts is also helping to motivate investors.

As of 11:38 a.m. ET today, shares of fuel cell stock Bloom Energy (BE -5.88%) are up 4.7%, while solar panel manufacturer First Solar (FSLR -0.59%) and electric vehicle (EV) manufacturer Nikola (NKLA 0.88%) are up 6.3% and 3.2%, respectively.

So what

Providing the tie-breaking vote, Vice President Kamala Harris secured approval of the Inflation Reduction Act in the U.S. Senate yesterday to the delight of many renewable energy advocates. The Democrats' victory had seemed significantly more doubtful just a few weeks ago before Democratic Sen. Joe Manchin had offered his support, and it seemed increasingly likely with the recent approval of another Democratic senator, Kyrsten Sinema.

While the bill is not singularly focused on climate funding -- it includes a $64 billion extension of the Affordable Care Act -- renewable energy investors have been keenly following the legislation that includes $369 billion in investments for addressing energy security and climate change.

Specializing in the manufacturing of fuel cells, which can be used to power microgrids, Bloom Energy is one company that investors are focused on today. The legislation provides $9.7 billion in funding for shoring up the resiliency of rural electric systems -- an application well suited for microgrids. Providing a small-scale independent power system that remains in operation even if power is cut from the grid, microgrids are a valuable way to support customers' electric needs.

Besides supporting the needs of rural customers, the climate legislation includes $60 billion in funding to support manufacturing of clean energy infrastructure manufacturing in the United States -- something from which Bloom Energy can also benefit. Solar companies such as First Solar also stand to prosper from the increase in funding. Pioneering the use of thin-film technology for solar panels, First Solar primarily provides its solar panels to utility-scale projects, which will likely be growing in demand as a result of the Inflation Reduction Act.

Having recently begun delivery of its battery-electric trucks last quarter, Nikola will also benefit from the bill, which includes a $7,500 rebate for new EVs, as well as other funding to support solutions that will help the country to achieve a 40% reduction (based on 2005 levels) in greenhouse gas emissions by 2030.

Analysts are also helping to galvanize the bulls' enthusiasm today:

  • J.P. Morgan lifted its price target on Bloom Energy to $31 from $29.
  • Joseph Osha, an analyst at Guggenheim, upgraded First Solar to buy from neutral.
  • Mark Strouse, an analyst at J.P. Morgan, upgraded First Solar to overweight from neutral, hiking the price target to $126 from $83.
  • After the market closed on Friday, Deutsche Bank raised its price target on Nikola to $8 from $7.

Now what

Although the passage of the Inflation Reduction Act cleared a major hurdle yesterday by moving through the Senate, it still has to receive approval from the House of Representatives, where it's expected to be voted on by the end of the week. Passage of the bill seems likely, but it's not a done deal until it receives the president's signature.

For more conservative investors with a bent for powering their portfolios with renewable energy stocks, picking up shares of Bloom Energy and First Solar based on the momentum that the legislation is experiencing seems reasonable. Nikola, on the other hand, has a lot more to prove in showing that it can successfully ramp up production of its battery-electric trucks and regain the confidence of investors who have had their confidence shaken by the company's previous missteps.