The Inflation Reduction Act signed into law by President Joe Biden includes a host of provisions designed to cut U.S. carbon emissions by about 40% by 2030. These initiatives include a major push to increase renewable energy production through tax incentives and other government investments. 

The law provides $369 billion in funding for climate change initiatives such as cutting emissions, manufacturing clean energy products, and advancing environmental justice initiatives, CNBC reported. Notable clean energy provisions enacted under the law include:

• $9 billion in consumer home energy rebate programs
• $9 billion for federal procurement of American-made clean technology
• $30 billion in tax credits to accelerate solar panel, wind turbine, and battery production
• $30 billion in target grants and loans to accelerate utility transitions to clean electricity
• $60 billion for clean onshore energy production

This has all been good news for clean energy stocks, including solar panel makers, fuel cell manufacturers, and energy storage companies.

As Yahoo Finance reported, renewable energy stocks began rallying in late July, when it became clear that the Inflation Reduction Act had enough support to pass Congress. Many of those stocks have risen in double-digit percentages since the beginning of the year, putting them far ahead of the broader equity markets.

Solar stocks were among the biggest beneficiaries of the bill, as First Solar, Enphase Energy, Sunrun, SunPower, and Sunnova Energy all saw their shares pop. Many clean energy stocks received analyst upgrades on the news. These stocks maintained their momentum through the end of August or at least stayed close to the prices they rose to in late July. 

Among the companies expected to receive tax credits are a pair of Arizona-based firms: solar panel maker First Solar, and wind turbine blade manufacturer TPI Composites. Both received upgrades from JPMorgan.

First Solar is also among a trio of stocks Morningstar considers especially poised to benefit from the Inflation Reduction Act, with the others being SunPower and Plug Power, a supplier of hydrogen fuel cell systems.

Dave Sekera, Morningstar’s chief U.S. market strategist, said in a recent interview that he expects to see a “significant increase” in the amount of spending on clean energy in coming years. He pointed to a 10-year extension for solar power credits included in the bill, which should “end up adding a lot of value” to stocks tied to solar power.

The bill also includes incentives to develop new technologies in clean energy, which should benefit companies involved in hydrogen and energy storage. In addition, the bill offers incentives for U.S. manufacturing to help the country lessen its reliance on foreign-made solar panels and equipment. This will give a further boost to solar stocks. 

But while clean energy stocks have been on the rise, some analysts urge caution when it comes to assessing their valuations. That’s partly because the actual business impact of the Inflation Reduction Act might take a long time to translate into higher sales and profits.

“It is going to provide a demand boost for a lot of technologies, but none of it is overnight,” Bloomberg Intelligence’s Rob Barnett said in an interview with Yahoo Finance. “This bill is going to unfold over the course of five to 10 years.”

The wild card is how long solar and other clean energy stocks can keep running higher, given that rising demand was already priced into their valuations even before the Inflation Reduction Act.

“I would encourage investors to make sure that you are careful in your stock selection because the market has certainly been running up on this news,” Sekera said.