Canadian Solar Inc. (NASDAQ: CSIQ) saw its stock surge 6.69% in pre-market trading on Monday, as investors reacted positively to new federal tax subsidy rules for solar and wind projects unveiled by the US Treasury on Friday. The new guidelines are seen as more favorable than initially feared by the solar industry.

The Treasury's announcement provided clarity on how solar and wind projects can qualify for federal tax credits. For utility projects, "substantial and continuous" work is required to be eligible for credits, while smaller projects under 1.5MW will maintain the 5% "safe harbor" provision. According to Raymond James analysts, these changes were "milder than what many in the wind and solar industries had feared," leading to a relief rally in solar stocks.

Jefferies analysts noted that the new rules effectively extend the runway on tax credits for most wind and solar developers through 2030. This regulatory clarity is expected to provide a significant boost to solar equities, with Canadian Solar among the beneficiaries. Other solar companies, including SunRun, First Solar, Enphase, and Complete Solaria, also saw gains in pre-market trading, ranging from 1% to 3%.