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Summary:

The failed passage of a financial bailout bill has taken a harsh toll on most corners of the stock market, but few sectors saw steeper one-day declines Monday than solar stocks. That’s largely because there was a second piece of bad news coming from Congress that […]

The failed passage of a financial bailout bill has taken a harsh toll on most corners of the stock market, but few sectors saw steeper one-day declines Monday than solar stocks. That’s largely because there was a second piece of bad news coming from Congress that had special meaning for the solar industry.

Much like the bailout debacle, the House of Representatives and the Senate can’t find agreement on how to extend energy tax credits that are key to a more mainstream embracing of solar panels among businesses and homeowners. Incentives such as tax credits and subsidies are crucial to lowering the costs of solar power to make it competitive enough to reach a large scale.

The perception that Congress had been dragging its feet was a big factor in driving down solar-stock prices this year. Now legislators are taking action, but the arguing and sniping from both houses is threatening to delay a bill possibly into early 2009. More details on the political deadlock can be found at Congressional Quarterly and Bloomberg.

All of the political talk boils down to one word hated by investors: uncertainty. The uncertainty of inaction that plagued the solar sector for months has been replaced by a new uncertainty of unproductive action.

So you’re seeing broad based selling in one of the market’s darkest days in decades coupled with a compelling reason for bulls to stay out of the market for now. The result is stocks losing more than a third of their market value over the two trading days since Friday, when the impasse became clear.

First Solar, a stock that has shown some resilience this year, has lost 19 percent since Thursday’s close. FSLR closed at $180, its lowest finish since March. And it was one of the luckier ones.

Trina Solar (TSL) slid 24 percent over the same period, while JA Solar (JASO) lost 27 percent over the same period, and SunPower (SPWR) dropped 36 percent.

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