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What’s Going on With the Infrastructure Bill?

If you’re ever frustrated with how slow your company seems at times, just be glad you don’t work for the U.S. government.

Because, as this week has shown in crystal-clear detail, the U.S. government moves at a snail’s pace, and almost never gets things done “on time.”

I’m sure you’ve followed or at least heard about all the drama in Washington D.C. this week surrounding the $1 trillion infrastructure bill and $3.5 trillion budget reconciliation package.

Source: mark reinstein /
Source: Mark Reinstein /

Long story short, the Senate has already passed the $1 trillion infrastructure bill. The House was supposed to hold a vote for (and pass) that bill on Thursday, sending it off to President Joe Biden’s office to be signed into law.

But, of course, that didn’t happen. Instead, progressive Democrats rebelled against their party, saying they would vote “no” for the infrastructure bill unless House Democrats first won unanimous approval for and passed the $3.5 trillion budget reconciliation package.

So, House Speaker Nancy Pelosi shelved the infrastructure bill vote on Thursday, and negotiations began Friday to try to work out a deal there. Net net, both the infrastructure and budget reconciliation packages remain in limbo as of this writing.

OK… but does any of this actually matter for your investments?

If you’re invested in any clean energy stocks — like Tesla (TSLA), or Lucid Group (LCID), or First Solar (FSLR) — it matters a ton!

That’s because the fate of the infrastructure bill and budget reconciliation package seems to be intertwined, and the latter contains a ton of clean energy spending that — if passed — could overhaul the U.S. electricity industry and create enormous tailwinds for clean energy stocks.

In short, the budget reconciliation package contains something called the Clean Electricity Payment Program, which is essentially the cornerstone of the Democratic party’s plan to tackle climate change.

This program proposes creating a federal clean electricity standard for utilities, rewarding those companies that exceed this standard, and penalizing companies that fail to meet it. In numbers, the U.S. government would pay a federal grant annually to utility companies that increase their clean energy output by 4% each year, and penalize those that don’t hit that increase.

If enacted, this would be the first-ever federal program that creates a meaningful financial incentive network for utility companies to go “all in” with the switch from fossil fuels to solar, wind, and hydrogen — and, because financial incentives are the most powerful type of incentive, we predict that this program alone would dramatically increase utility-scale deployment of clean energy.

Obviously, that would be a huge “win” for solar stocks, wind stocks, and hydrogen stocks.

But the budget reconciliation package also includes the extension of production and investment tax credits for wind, solar, and hydrogen. It also proposes to expand investment tax credits to include energy storage technology and linear generators.

In other words, the $3.5 trillion budget reconciliation package could fundamentally alter the U.S. electricity landscape — and turn all this “talk” of combatting climate change with clean energy deployments into actual “walk.”

We predict that, if the current clean energy initiatives in the budget reconciliation package pass, the clean energy industry will grow at unprecedentedly fast rates for the balance of the 2020s, and that by 2030, the U.S. will be powered by 80%-plus clean energy.

In investment terms, it’ll be green shoots for clean energy stocks.

So… will the budget reconciliation package pass?

In its current form, the answer is probably no. Over in Washington, they’re all negotiators — and that’s what they’re doing now. In those negotiations, moderate Democrats will ask progressive Democrats to cut back on the size of the spending package. We think both sides will compromise some, and that at the end of the day, the total package will look like $2 trillion — not $3.5 trillion. We suspect that package will win majority support and be enacted into law.

Our best guess is that some of the $1.5 trillion excess removed will be from the clean energy initiatives, but that most will come from social safety net spending. Thus, we do believe that the modified budget reconciliation package that eventually does pass will still be overwhelmingly positive for the clean energy industry.

The investment implication? Clean energy stocks have traded with significant volatility as the drama in D.C. surrounding these bills has unfolded over the past two weeks. We say ignore the volatility, buy the dip, and hold on for what may be the best decade yet for these stocks.

That’s why, in our flagship investment research product Innovation Investor, we’re doubling down on our clean energy investments. We believe we own the cream-of-the-crop in the clean energy sector, including the world’s leading hydrogen technology company, the world’s most technologically advanced solar firm, and the world’s smartest and fastest-growing energy storage supplier.

We think these stocks will be big long-term winners, and that their gains will be accelerated by the passage of the infrastructure bill and budget reconciliation packages.

In other words, there’s never been a better time to be invested in these stocks than right now.

Interested in the names? Click here to find out more.

On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.

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