Solar Stock Winners: Tax Cut Now Official

NEW YORK (TheStreet) -- It's official. With the tax cut passed and President Obama expected to sign the package into law on Friday afternoon, solar stocks will get their biggest 2011 gift: the extension of the Section 1603 cash grants for solar project development.

It's been more or less a fait accompli ever since the renewable energy industry lobby groups won the battle to get the cash grant extender tacked onto the tax cut package. Spikes in solar trading were seen last week when the cash grant package came back from the dead. Now, though, with the measure being passed, the Street can begin the game of officially predicting who benefits the most from the solar incentive being extended.

Stifel says in a Friday report that the cash grant extension is a broad positive to the solar space, and given it is only a ONE-year extension, demand pull-in ahead of a 2012 expiration could provide upside to its 1.5GW U.S. estimate for 2011.

For one, wind benefits a lot more than solar. The wind project market benefits more than any renewable energy sector, and dominated the sheer total amount of dollars provided in Treasury cash grants.

In 2009 and 2010, wind dominated the cash grant awards with 84% of all dollars and a total cash grant award of $4.6 billion, according to Treasury data.

Solar projects were in second place -- excluding solar thermal -- representing 7.5% of the total cash grant market, or $413.5 million.

Among solar companies that stand to benefit, Stifel is out with a report on Friday arguing that the biggest winners will be SunPower(SPWRA) and MEMC Electronic Materials(WFR).

The Stifel call on SunPower dovetails with the trading activity at the end of last week, when it became clear that the cash grant would be extended upon passage of the tax-cut package, and SunPower shares shot up 8%.

>>Clean Energy Winners: Tax Cut Trades

MEMC, on the other hand, hasn't benefited at all from the cash grant extension in trading. MEMC shares are down 7% over the past five trading days, even despite bucking the solar trend on Friday and riding higher by roughly 2%. If there's good reason to think that MEMC should benefit from the solar project financing positive, there's also good reason why MEMC shares have not popped on the news.