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Tickers in this Article: ASTI, CSIQ, FSLR, SPWR, STP, TSL, SOLF, JASO, ESLR, ENER
As the world's population increases, there will be an equal (or greater) increase in depletion of natural resources and the ability to meet energy demands. Perhaps not surprisingly these concerns have stoked interest in the development of solar power and the harvesting of this "free energy".

Solar power/energy is not a new concept. For many centuries individuals have been trying to utilize the power of the sun for various purposes, including heat and food production. Other developments have hit closer to home - literally. Over time homebuilders purposely have constructed and positioned houses to take in sunlight and to warm the occupants.

And now, whole homes can be outfitted with panels, cells and other gadgets so that the power of the sun can be converted into electricity, which in turn can operate everyday items such as attic or ventilation fans, lights, radios and hot water heaters. (Before you buy into this sector, learn how the industry works and how to spot the winners in Spotlight On The Solar Industry.)

The good news is that investors have the ability to get in on this technology as well. The following is a list of companies that provide various types of solar power goods or services:

Company
Market Capitalization
Ascent Solar Technologies(Nasdaq:ASTI)
$185.5 million
Canadian Solar(Nasdaq:CSIQ)
$1.1 billion
Energy Conversion Devices (Nasdaq:ENER)
$2.7 billion
Evergreen Solar(Nasdaq:ESLR)
$1.2 billion
First Solar(Nadsaq:FSLR)
$21.3 billion
JA Solar Holdings(Nasdaq:JASO)
$3.23 billion
Solarfun Power Holdings (Nasdaq:SOLF)
$890.8 million
SunPower Corporation(Nasdaq:SPWR)
$6.3 billion
Suntech Power Holdings (NYSE:STP)
$5.9 billion
Trina Solar Limited(NYSE:TSL)
$930.2 million

Rising Oil Prices A Catalyst For Investment?
Oil prices have been hitting record levels consistently in 2008, with very little sign of it slowing anytime soon. As the price of oil rises, the interest in greener (and often considered "cheaper" energy) companies rises as well. And, solar power is getting its share of the green energy popularity too. (Learn more in our related article Clean Or Green Technology Investing.)

I think investors should keep in mind that if oil trends higher there could be a greater demand for shares of various alternative energy companies including those in the solar space.

The Risks
With all of the above in mind, it is important to realize that there are risks to investing in solar power. First of all, it's unlikely that individuals are going to make a shift to this technology en masse in the very near future. After all, switching to solar energy can run up a bill for homeowners in the thousands of dollars range, and in this tight economy people don't seem flush with disposable cash. In addition, although there are some environmental concerns, nuclear power is considered a popular alternative for power generation and the technology is unlikely to go away anytime soon.

My Picks
Obviously it's hard to guess what will happen in the future, however, I do have my favorites among the aforementioned companies. They includes:

1. Energy Conversion Devices
As per the company's website, Energy Conversion "manufactures and sells thin-film solar laminates that convert sunlight to energy using proprietary technology." The Michigan-based company is expected to report earnings of just a penny this year. However, next year Wall Street analysts are expecting it to earn $1.53 a share. And in the next five years Energy Conversion is expected to grow at a 35% clip per annum. (For more on analyst expectations, read Analyst Recommendations: Do Sell Ratings Exist?)

On the downside, it trades at a pretty hefty 43.6-times the 2009 estimate.

2. Evergreen Solar
Evergreen manufactures solar panels, and I think that makes it pretty well positioned to reap the benefits if solar technology does take off. This year, the Massachusetts-based company is expected to lose 22 cents a share. In 2009, however, Evergreen is expected to generate a 46 cent a share profit. If it does manage to meet or beat the consensus number this year and next year I think it could cause analysts and investors to flock to the stock.

On the downside, it's important to note that these expected profits are not guaranteed, and if profitability is pushed back I think it could have an adverse impact on the share price.

Bottom Line
Alternative energy companies are likely to be in greater demand in the future. And as a result, I think that solar stocks have the potential to do quite well over time. It is important that you are aware many of these stocks, at least right now, are trading at a very high multiple of earnings.

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