By Avi Salzman

Clean-energy stocks were some of the few winners as the broader market saw one of its worst selloffs in months.

The S&P 500 was down 2.8% in a broad selloff related to rising fears of a recession. But AES, a utility that is building out renewable-energy projects, was up 5.9%, the top gainer in the index. Enphase Energy, which makes equipment for solar panels, rallied 5%. Nextera Energy, the country's largest renewables developer, gained 3.9%.

Two factors appear to be behind the shift for an industry that has lagged behind the market for the past two years. There appear to be two causes: political support for some kinds of clean energy, and falling interest rates that make it easier to fund projects.

One investor who buys renewable energy names told Barron's that the rally was sparked by a letter sent by 21 Republican members of Congress to House Ways and Means Committee Chair Jason Smith, urging him not to make broad-based cuts to subsidies for renewable energy. It asked that "any proposed changes to the tax code be conducted in a targeted and pragmatic fashion."

The investor, Shawn Kravetz, who is president and chief investment officer of Esplanade Capital, said that the letter is an important sign that Republicans are likely to back certain parts of the Inflation Reduction Act, which offered $370 billion in tax credits to various energy sources, from renewables to nuclear.

"For months, some in the investment community had pinned some degree of hope that parts of the IRA would be preserved" because it helps many Republican districts, he wrote in an email. "This new letter rekindles some of that hope, I think appropriately."

At an energy conference in Houston, Nextera CEO John Ketchum also mentioned the letter as an important sign of broad support for the kinds of energy his company produces. The letter shows that things like clean- energy tax credits are "super important to meeting the power demand in a cost effective way in this country," he said.

The renewable stocks may also be benefiting from the fact that long-term interest rates have been falling as the economy teeters. High interest rates have been an impediment to adding new clean-energy projects because most are debt-financed.

Write to Avi Salzman at avi.salzman@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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March 10, 2025 15:48 ET (19:48 GMT)

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