The solar energy sector is heating up today after an announcement from one of its leaders. First Solar (NASDAQ:FSLR) has confirmed plans to take its domestic manufacturing to a new level. The sector leader has announced it will invest “up to $1.2 billion in scaling production of American-made, responsibly-produced photovoltaic (PV) solar modules.” This investment could “expand the company’s ability to produce American-made solar modules for the US solar market to over 10 gigawatts (GW) by 2025.” With growth prospects of that magnitude, it’s not hard to see why FSLR stock rose steadily all morning.
This news boosted solar energy producers across the board. While FSLR stock is now down slightly, it spiked more than 6% earlier in the day. Its peers followed suit. Sunrun (NASDAQ:RUN) was up more than 3%, and Enphase Energy (NASDAQ:ENPH) jumped about 2.5% earlier in the day.
When we take a macro look at the day’s events, it’s clear that this growth is being driven by the bigger picture. First Solar’s news is proof that the effects of the recent Inflation Reduction Act (IRA) are already setting in.
What This Means for FSLR Stock
Before we dive into the bigger picture, let’s take a closer look at First Solar’s plans. The company’s plan includes both spurring domestic production and decarbonization efforts on a national scale. As the only U.S. firm to rank among the world’s top solar energy producers, it is uniquely positioned to help lead to transition to a decarbonized America.
On top of that, First Solar is planning an $185 million investment to upgrade and expand its northwest Ohio manufacturing complex. And the company has cited the Inflation Reduction Act’s passing as a primary catalyst behind this transformation. As CEO Mark Widmar stated:
“In passing the Inflation Reduction Act of 2022, Congress and the Biden-Harris Administration has entrusted our industry with the responsibility of enabling America’s clean energy future and we must meet the moment in a manner that is both timely and sustainable. This investment is an important step towards achieving self-sufficiency in solar technology.”
If First Solar has recognized the growth opportunities that stem from the $369 billion climate reform investment, its peers will do the same. And the true opportunities are for the companies that produce the technology that helps the U.S. combat climate change. Slate conducted an in-depth analysis of the bill’s positive effects on climate tech, naming “electric vehicle charging stations, sustainable batteries, solar energy, and direct air carbon removal” as likely beneficiaries.
As InvestorPlace contributor Tezcan Gecgil notes, “many analysts regard it as a gamechanger for the domestic manufacturing of solar panels.” She predicted that “the $37 billion in clean manufacturing tax credits should accelerate First Solar’s continued expansion stateside.” Less than one week later, the company is already making plans to do exactly that.
What Comes Next
First Solar isn’t just one of the largest U.S. companies in its space. It’s also the first to launch a large-scale expansion effort to meet the news of a rapidly expanding field. The demand for solar energy will only grow as the U.S. moves toward a decarbonized future. First Solar’s expansion efforts will put the company in an excellent position to supply both private and public sector clients with the technology that they need. All this points toward a future of fairly slow but very steady growth for FSLR stock. Investors should be watching it closely.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
