There are times when savvy investors simply can't help but make money from certain stocks.

At the turn of the 19th century it was railroads. In the 1920s, it was radio. In the 1950s, a few shares of AT&T could have left you wealthy. In the 1980s, banking deregulation led to riches for savvy investors. In the 1990s, it was the Internet...

Now, it's 2011. And most investors are simply fighting to hold onto what they have. But, right now, there are a select few stocks that will inevitably make forward-thinking investors very wealthy.

I'm talking about alternative energy stocks...

Middle East turmoil recently pushed up the price of crude oil, as I wrote in Friday's edition of Small Cap Investor Daily, Why Unrest in Libya Could Be a BOON to Europe's Natural Gas Market.

It is also a stark reminder that the world remains addicted to fossil fuels. In the years ahead, you’ll hear about a growing roster of countries turning to nuclear energy to meet their electricity generating needs.

Technology can fix anything: even the Federal government's deficit. At least, that's what the Technology CEO Council told White House officials yesterday. The council, headed by IBM (NYSE:IBM) CEO Sam Palmisano said investments in efficiency technology could save the U.S. government $1 trillion over the next 10 years.

Of course, the meeting was basically just a sales call. And seeing how much loot the government's been doling out, I wonder what took them so long.

I’m generally suspicious of “green” energy investments - mostly because they seem to be political constructs rather than actually good opportunities. To differentiate: a good investment doesn’t require huge subsidies from the government in order to succeed. Right now, there are precious few alternative energy companies that can turn a dime of profit without massive subsidies from governments around the world.

For me, the investment implication of green energy has been to leave it out of my portfolio entirely.

But then yesterday, I received a very good question from reader Bill M. who brought up an interesting idea about actually shorting such companies:

“I have a question for you. Governments are spending a ton of tax dollars supporting all manner of "green" initiatives: wind, solar, ethanol, electric cars, curly-cue light bulbs, green roofs, LEED certifications, housing insulation, etc. etc. Governments have passed all sorts of quotas for renewable energy. All sorts of companies, from start-ups to GE (NYSE: GE), have attracted billions in government dollars and private investment to capitalize on this green wave. How does a cut-throat, uncaring, capitalist monster (like me) make money off what I expect to be the balloon popping on these over-inflated green companies who, when forced to compete on their own without their government sugar daddies, are going to sink like a rock? Are there funds out there making contrarian bets?”

While I would love to tell you that I’m bullish on stocks, the fact is that we remain in a secular bear market. For this reason, investors should heed caution, avoid speculation, and focus their investments on great companies in the commodity sector at cheap valuations.

Why? It’s very simple: commodities tend to do well during a bear market for stocks.

So what are the big certainties as far as I can tell? Sovereign debt problems aren’t going away, and the world’s politicians and central bankers are dedicated to the idea that they’d rather inflate their currency than default on that debt. They’re staking their currencies on the reputation that their currencies are still sound money. It’s a losing bet for central bankers and a boon for folks who trade in paper currency for real money: gold and silver.

But I’ve talked about gold and silver plenty over the past few weeks, and I’ve been neglecting a commodity that my father-in-law Ron Blackwell calls “the king of all resources.”

I have to say right out of the gate that I am extremely skeptical of investments in general. That’s the only way to be if you value your investment capital and hope to make it work for you in the markets. Being generous and trusting are good qualities in a boy scout, but not an investor. We need to be skeptical misers.

So when it comes to an industry that’s largely unprofitable, filled with failure, buoyed only by government grants and lots of hopeful talk from environmentalists, I’m wont to be even more skeptical, if that’s possible.

It’s been said before, but it bears repeating: wind and solar only work when it’s windy or sunny. You simply can’t rely on these two technologies as they are and get anything close to the electricity generation that’s required to power today’s infrastructure.

I’m confident that solar power will one day come into viability on a large scale, but there’s still the problem of what to do if the sun doesn’t shine. You hear environmentalists throw around the word “sustainability” a lot. It’s actually kind of humorous, because there’s NOTHING sustainable about getting our electricity generation from ANY of the current green alternatives.

Let me back up and define sustainability from an environmentalist’s perspective.

Investors were too busy watching stocks get pounded yesterday to notice a bit of good news. Factory orders rose 1.3%. That was more than twice what economists were expecting.   

 

That prompted Pierpont Securities chief economist Stephen Stanley to say “Manufacturing is unambiguously the strongest part of the economy…” He’s not kidding.   

 

 Weed out the 67% decline in domestic aircraft orders and you get a 3.1% jump in factory orders. That’s the biggest gain since 2005.

You probably remember when gasoline cost 48 cents a gallon. It was in 1974 – not so long ago, really.

Inflation adjusted for 2009 dollars, gas was never that cheap though. It bottomed in 1999 at about $1.40.

So I realize it sounds too good to be true to suggest that you can buy gas for 48 cents today. With most of us paying close to $3/gallon it’s just a ridiculous claim.

And of course, there is a catch. Consider it a small April Fools day hoax.

It's quite a conundrum. America spent around $475 billion for foreign oil in 2008 (2009 numbers are not complete yet, although the total is certainly projected to be lower). It's clear that electric powered battery technology for cars would allow us to keep more U.S. dollars at home, improve the trade deficit and provide manufacturing and other jobs, too.

We have enough sunlight, wind, natural gas, and coal to generate the power it would take to transition to domestically supported power generation. The long-term benefits are obvious. Wind and solar installations have an upfront cost, but pay for themselves over time. Natural gas and even coal are domestic resources that can and should be leveraged to allow us to be more energy independent.

But getting to the point of energy independence is a difficult path.

It's easy to look at that $475 billion figure and say if we invested that into the power generation economy, we'd have efficient battery technology for electric cars and plenty of new manufacturing jobs.

However,...

With both political parties promising further development of alternative energy sources, the future looks bright for solar energy companies Canadian Solar, Inc. (Nasdaq:CSIQ) and Solarfun Power Holdings Co. (Nasdaq:SOLF). 

Canadian Solar is a leading global supplier of solar modules. The company, which incorporated in Canada but manufactures in China, serves a global customer base of tier one suppliers, solar farm project developers/installers and OEMs.

Canadian Solar is growing through capacity additions, vertical integration and new products. A new manufacturing facility opened in February increases solar module production to 400 MW. A further increase to 620 MW is planned by year-end 2008. The company began deliveries of its high-tech e-Modules in May and has secured a 9 MW e-Module sales contract. With two differentiated product lines (regular and e-Modules), Canadian Solar is able to sell at different price points. The company maintains a strong foothold in Germany and Spain and has diversified its markets to include Italy, the Czech Republic, North America and Asia. 

Silicon supplies and prices are a major issue for solar module manufacturers. Canadian Solar has addressed this issue through supply agreements covering 70% of its 2009 silicon requirements. A new supply agreement signed with GCL Silicon Technology in July further strengthens company feedstocks.

Canadian Solar recorded its fifth-consecutive quarter of sequential growth in the 2008 second quarter. Quarterly revenues rose 250% year over year to $212.6 million from $60.4 million in the 2007 second quarter, and earnings jumped to $10.5 million, or $0.36 per share, from a net loss of $2.9 million, or $0.11 per share, last year. The company also increased 2008 revenue guidance to $850 million to $979 million from $750 million to $870 million. Analysts predict this company will produce 31% . . .

www.gtsolar.com
(Nasdaq:SOLR)
Scheduled for week of July 21
$500 million estimated proceeds
$2432 million estimated post-money valuation

I’m starting to think that solar power deals are on par with special-purpose acquisition companies (or SPACs) and dry bulk shipping this year. After all, there have been two others to date: Real Goods Solar (Nasdaq:RSOL), which raised $55 million in May, and ReneSola (NYSE:SOL), which brought in $130 million in January. In a year with only 35 IPOs, that makes solar power a bona fide hot spot.

GT Solar makes equipment used to fabricate photovoltaic cells, which collect sunlight and convert it into electricity. These are big machines needed to produce solar cells but sold to only a handful of buyers worldwide. For the fiscal year ended March 31, 2008, 62% of the company’s revenue came from just one customer. In years past, the customer base has been more diversified, but just barely. In fiscal 2007, for example, three customers contributed 70% of revenue. No matter how big the solar power industry becomes, GT Solar will always face a concentrated customer base. A good analogy is semiconductors, which are in everything these days but are fabricated by just a few companies.

The company made $36.1 million in net income on $244.1 million in revenue for the March 31, 2008 fiscal year, its first profit ever. The year before, it had a net loss of $18.4 million on revenue of $60.1 million. The outlook for fiscal 2009 is good; the company has an order backlog of about $1.3 billion and deferred revenue from equipment shipped but not yet billed of $164.2 million. Profits should stay . . .

If you think the market for hybrid and electric vehicles will explode in the near future and you want to be on board for the ride, or you’re convinced that we’ll still need to rely on hydrocarbon fuels for the foreseeable future and want a stock that gets you into offshore drilling, look no further than Capstone Turbine Corp. (Nasdaq:CPST).

Founded in 1988, Capstone makes microturbines that help in the stationary power distribution generation needed for combined heat and power (CHP) applications, which can be used as primary or backup power sources and a number of Class A office buildings are ordering them.

Because the microturbines require little maintenance, two of Capstone’s biggest customers are Brazilian and Mexican national oil companies Petrobras and Pemex, who use the microturbines for CHP applications on their unmanned offshore drilling platforms.

Other key markets for Capstone’s microturbines include hybrid electric buses and multiple biogas applications. New markets beckoning for microturbine product, according to the company, are the Class A truck market, which is currently squeezed by high diesel prices and stringent emission standards, and the solar energy market, where the microturbines could be powered by solar energy during the day and other fuels at night.

The company’s air cushion technology, which eliminates the need for lubrication and reduces maintenance to near zero, has proven so successful that the turbines are getting to be less micro. Capstone will begin delivering a new 200-kilowatt system in September, adding to the current 30 and 65-kilowatt systems. The Chatsworth, Calif.-based company has already taken its first order for a 1,000-kilowatt system, which can be linked together to form systems as big as 10 megawatts.

For Sanjay Shrestha at Lazard Capital, this means the company’s order backlog is more significant at the moment than earnings. Skyrocketing raw material costs widened the loss for the fiscal fourth quarter ended March 31, to $0.07 . . .

With oil prices skyrocketing and the global economy in a slowdown, it might not seem like an auspicious time to invest in a chemicals company. But Ferro Corp. (NYSE:FOE) is a specialty chemicals company where the operative word is “specialty.”

Founded in 1919 to manufacture frit, the substance used in making porcelain enamel, Cleveland-based Ferro is still a global leader in the field. But, lest your eyes begin to glaze over about such a mundane product, note that Ferro is also geared up for the 21st century as it builds a 177,000-square-foot factory in China to make aluminum paste for the production of solar cells in Asia. It doesn’t get much trendier than that.

In fact, while Ferro has moved decisively since Jim Kirsch took over as chief executive in 2005 to divest non-core businesses, slash fixed costs, close old factories and consolidate production into new state-of-the-art plants, continuity is a key element of Ferro’s success.

Last year, Ferro opened a new tile glaze and stain-making factory in Castellon, Spain to supply growing European tile markets as it closed older tile color facilities in Italy and the Netherlands, and transferred production to Spain. Ferro, which set up its first foreign plant in 1927, has been producing tile color products in Castellon for 42 years.

The establishment of a porcelain enamel and tile coating factor in Suzhou, China in 2001 created a platform for Ferro to get into the solar energy business in the country and break ground last year for its new aluminum paste factory. However, Ferro first got into solar energy 25 years ago and is now the leading supplier of conductive pastes to the worldwide solar industry.

But it’s not history that has investors excited about Ferro now. The company beat analysts’ earnings estimates for the quarter ended March 31, 2008 by 20%, . . .

After what seemed to be an ephemeral spring rally, stocks were pummeled last week with oil’s skyward climb, the Fed’s bleak outlook and unwelcoming economic data. However, once the credit kinks are worked out and the dust clears, small caps may be the place to park your money, according to Bill Greiner, chief investment officer for UMB Asset Management and UMB Bank, and chief economist for Scout Investment Advisors.

“There are a number of factors that have led me to believe that small-cap equities will probably do well going forward — and those factors center on how bad things are right now,” Greiner said in an interview with SmallCapInvestor.com.

Greiner points to economic indicators for signs of probable future success for small caps. First he examines consumer sentiment. According to the veteran investor, when you analyze the consumer sentiment data, you look at the trend over the last 30-year period. When the read on consumer sentiment has been below a level of 96, the following 12-month period of time small-cap companies have outperformed large cap companies by close to 1,000 basis points, Greiner said. The latest read on the consumer confidence index was below 76.

“When the consumer’s been this negative before, it’s been a great time to buy small-cap companies,” he said.

Next, Greiner looks at economic coincident indicators, a coincident economic indicator is one that moves at the same time the economy does. The latest read for coincident economic indicators overall was 0.56%. 

“The last time we were in this environment was back in the early 2000’s, right before the start of the big rally in stocks in general,” said Greiner. “That leads me to believe that small-cap companies are probably positioned relatively well.” 

According to Greiner, when coincident indicators have been at this stage historically, small-cap stocks on average generated returns of 25.6% for the next 12-month . . .

China is one of the world's fastest-growing but most polluted economies, second only to the United States in harmful greenhouse gas emissions. In the face of record crude prices, its ever-growing demand for energy, and domestic and international pressure to clean up its environmental act, Beijing's plan to reduce foreign oil imports, increase alternative energy production and curb pollution is in full swing.

One company with plans to capitalize on the country's efforts to harness the power of the sun and diversify its energy mix is Nanjing photovoltaic (PV) solar cell maker China Sunergy Co., Ltd. (Nasdaq:CSUN). 

Government officials have pledged to have renewable energy make up a tenth of China's total energy consumption by 2010. And this isn't just political posturing. On the solar front, the country has emerged as a global hotspot for the industry, eclipsing the United States in solar electricity production in 2007 and becoming the second-largest solar cell-producing nation after Japan. Over the past two years, China's PV solar cell production — a process that uses silicon wafers to convert sunlight directly into electricity — has increased more than six fold.
 
Indeed, China's solar energy industry has been on a tear, and it is not difficult to find examples of the national push toward sun power. One need only look at the roof of the newly erected National Indoor Stadium (for the 2008 Olympics) in Beijing that is home to 1,124 solar panels. Look further and one will see panels on roofs, walls, traffic signals and street lights in Rizhao, a coastal city on the Shandong Peninsula in northeastern China, and on new construction in the city of Shenzhen, across the border from Hong Kong, which has mandated that all new buildings 12 stories . . .

Although solar power is a developing area with commensurate risk, triple-digit oil prices (as well as increased attention by politicians and the media) have helped move alternative energy to the forefront of investor attention.

Today, we examine a pair of small-cap firms that are involved in developing solar technologies. (For those seeking more conservative, larger-cap plays on the sector, I’ve compiled a 35-page report on alternative energy, available for free to all SmallCapInvestor.com readers.)

First up, The Real Nanotech Investor editor Gregg Early chooses Spire Corporation (Nasdaq:SPIR), which specializes equipment in the production of terrestrial photovoltaic modules from solar cells, as his favorite pick.

Despite its small market cap of $114 million, it is a well-diversified firm with additional operations in biomedical and biophotonic research as well as semiconductor and opto-electronic technologies.

Early says that Spire has received a purchase order for its solar cell modules from U.S. Dept of Energy's National Renewable Energy Laboratory.

"Spire continues to credentialize its solar division and expand operations," he says. Indeed, after building its first solar panel production in Portugal, Early says that in recent weeks the firm also announced an order for a turnkey solar panel production line from its Spanish client Fluitecnik SA. The firm also announced a . . .

The price of crude oil futures once again pushed into record high territory on Tuesday, reaching $119.48 a barrel on the weaker U.S. dollar and supply concerns stemming from militant attacks on Nigerian pipelines, reports that Russia will cut oil output this year, and the possibility of a worker strike at a 200,000 barrel-a-day refinery in Scotland.

Rising energy costs have consumers, businesses and entire sectors from New York City to Beijing feeling the pinch. In China, a combination of high energy prices amid spiraling demand and increasing concern over the environmental fallout from its breakneck growth has focused attention on energy alternatives like never before.

In the wake of legislation passed in 2005 mandating that renewable energy resources account for 10% of China's energy consumption by the year 2020, investment and R&D in the country's wind, solar, biomass and biofuel industries has driven companies to step up development efforts to create viable alternatives to conventional carbon-heavy energy sources.

A relatively new player in China's alternative energy arena is A-Power Energy Generation Systems, Ltd. (Nasdaq:APWR). Formerly China Energy Technology Limited, A-Power is principally engaged in providing distributed power generation systems. The company is also focused on developing and commercializing other renewable energy technologies, including wind power, and works closely with researchers at China Sciences Academy in Guangzhou and Tsinghua University.

Lately, the company has been busy. In January 2008, A-Power acquired Head Dragon Holdings, Ltd., a Hong Kong company that owns a controlling interest . . .

Crude recently hit a new high, topping $114 a barrel, a rise of more than 80% since April 2007. Thanks to a combination of high energy prices — fueled in part by turmoil in the Middle East — and oil supply instability amid ballooning energy demand from within its shores and other emerging economies, China has placed alternative energy at the top of its national agenda.

One company that has positioned itself to take advantage of a shifting pro-alternative energy political climate in Beijing is China Solar & Clean Energy Solutions, Inc. (OTC:CSOL). Formerly  Beijing Deli Solar Technology Development Co., Ltd., China solar is a Connecticut-based company that designs, manufactures and distributes solar hot water heaters, coal-fired space heating systems (boilers, furnaces and stoves), and biomass (waste heat recovery) products for residential, industrial and public works uses in China. It also sells related components and parts, and provides after-sale services for their product lines. The solar hot water business accounts for about 45% of revenues, biomass operations make up 30%, and the coal-fired space heater side of the business pulls in the remaining 25%. 

According to the China Solar Energy Society, solar heaters are 75% cheaper to operate than their gas and electric counterparts, have a 20% to 30% longer life span and are three times as efficient as electronic heaters (and nearly twice as efficient as gas-fueled models). China Solar is rapidly expanding its line of solar water heaters to capitalize on what it sees as a $2.7 billion market

Don’t be fooled by the name: even though Canadian Solar Inc. (Nasdaq:CSIQ) technically incorporated in Canada, all of its manufacturing operations (along with its corporate headquarters) are in China — a profitable niche to be in, especially speaking in energy terms.

The solar energy market has grown exponentially over the last several years, as nearly $2 billion of venture capital flooded the marketplace worldwide. The stock market value of solar energy companies ballooned 4,750% globally between 2003 and 2007, proving that Canadian Solar is in the right panel.

The company designs, manufactures and sells a range of standard solar modules for use in a variety of residential, commercial and industrial solar power generation applications. The company also designs and produces custom solar modules and products built to its customers' specifications.

The solar energy market is booming in all the places where the company has customers. Germany, for example, is the world's largest market for solar panels; Spain, which provides generous government subsidies for energy alternatives, ranks just behind Germany and is building Europe's largest solar energy plant. Japan is the third largest solar market and the world's largest net exporter of photovoltaic solar cells and modules. The United States is a distant fourth, but the domestic solar market grew 57% in 2007. In China, companies are pouring millions into solar power operations across the country to capitalize on Beijing's goal of having renewables make up 10% of all energy use by 2010.

Although solar power may account for less than 0.01% of the world's total energy production today, the demand for solar has grown about 30% annually over the past 15 years, according to SolarBuzz, a solar energy research and consulting firm (comparatively, the demand for fossil fuel-based energy sources has grown between 0% to 2% per year). And some experts predict solar energy has the potential to make up 10% of total energy production within the next 20 years.

Even so, the solar industry faces some formidable obstacles, including worldwide polysilicon shortages, inadequate government incentives, compatibility issues with . . .

In late January and the first half of February, China's worst snowstorms and most severe winter weather since the government began keeping records in 1950 wreaked havoc on the country's energy infrastructure. Heavy snowfall, sleet and freezing temperatures disrupted coal shipments, crippled mainland transportation networks near oil and gas production facilities, snapped power lines, froze pipelines and even caused a number of power plants to shut down.
 
Outages left millions without power. Coal, which fuels 80% of China’s electricity supply, soared to record prices. Inflation in the country surged to an 11-year high in February. And electricity shortages, spikes in energy prices and the Chinese government's freezing of oil, natural gas, electricity and water prices for individual consumers are squeezing energy company profits.
 
The good news is the unusually rough weather that caused $3 billion in damages, according to the Civil Affairs Ministry, has blown over. And while it promises to be a tough year for China's battered energy industry, Chinese power companies and their suppliers remain good long-term bets, since the country's energy demand will continue to be robust (many industry analysts say Chinese power companies can expect double-digit consumption growth).
 
Hanwei Energy Services Corp. (TSE: HE.TO) serves major energy companies by providing products for the oil, coal, and wind power industries. The company manufactures and sells high-pressure, FRP (fiberglass reinforced plastic) pipes to the oil industry, develops pollution control products for the coal industry, and also engages in wind blade and other wind power product production.
 
Last December, Hanwei entered into an agreement with Daqing Deta Electric Co. Ltd., a provider of wind power turbines, blades, towers and control systems, to supply $232 million of wind power equipment over a three-year period. The initial order called for Hanwei to engineer, build and provide Deta with various wind power products, including 20 FRP wind blade sets, 20 turbines and 30 towers.

SmallCapInvestor.com reporter Jennifer Schonberger is reporting from the 20th Roth Capital Partners Annual OC Growth Stock Conference this week in Dana Point, Calif. The conference features presentations from more than 300 small-cap companies.

Akeena Solar, Inc. (Nasdaq: AKNS), manufacturer of solar power systems, said in an information session at the Roth OC Growth Stock Conference in Dana Point, Calif. Thursday that it expects to achieve GAAP profitability next year and expects earnings before interest, taxes, depreciation and amortization to break even by the fourth quarter of this year.

“We have a plan to profitability,” said Steve Daniel, executive vice president of sales and marketing for Akeena Solar. “As supply of silicon outstrips demand, we believe we’ll be able to drive more profit downstream. We’re seeing this already with Andalay in the last few months and we believe the overabundance will help the market place [for solar systems].”

Andalay, is what Akeena Solar calls its premier line of solar panels. The company says these panels improve on conventional solar panels by including built-in wiring, grounding and racking designed to provide better rooftop performance for consumers.

Akeena Solar has simplified the input, installation and labor costs associated with selling and installing solar systems, according to Daniel— driving down its cost of goods sold by lowering manufacturing and production costs of Andalay solar panels.

On an industry level, Daniel says according to financial services group Collin Stewart, the industry will be break-even for capacity and that in the future, capacity will exceed demand, helping to drive prices down in the module area.

Daniel said he thinks the price of a module will go down to $2, from $3.75 for 2008, which coupled with the abundance of silicon, will create a low price module for Akeena that will be able to drive the same kind of profit margin at $5 per watt from currently $8.40 per watt. The executive also noted that lower prices for modules will most likely enable Akeena to sell in every state in the country and Europe because the prices are very competitive.

A decline in polysilicon prices could also help the Los Gatos, Calif.-based company’s path to profitability. Daniel said Akeena thinks there will be a decrease and that that decrease in polysilicon prices could be soon.

“We get a sense that could be coming pretty soon,” said Daniel. “We think that by 2010, we’ll be down toward the $2 per watt range, but we don’t really feel we have to get the $2 per watt to get to that break-even point. We have a path to profitability that assumes some decrease in polysilicon prices, but it’s not that sharp. If we go down to $2 per watt we actually think we can become profitable earlier.”

As oil prices rise, alternative energy sources such as wind and solar power are becoming increasingly affordable, which spells potential success for Canadian Solar Inc. (Nasdaq: CSIQ) and EMCORE Corporation (Nasdaq: EMKR), two small caps rooted in the solar energy sector.

Canadian Solar, together with its subsidiaries, designs, develops, manufactures and markets solar modules for converting sunlight into electricity. It produces standard solar modules for residential, commercial and industrial solar power generation applications, as well as customized products incorporated into customer designs such as solar-powered bus stop lighting and solar-powered car battery chargers. In addition, the company works with government agencies to implement solar power development projects and is already providing solar-powered electricity to rural areas of China.

Canadian Solar markets its standard solar modules through distributors and system integrators worldwide. Specialty products are sold directly to manufacturers. The company is headquartered in Canada and manufactures its solar modules in China.

In mid-November, Canadian Solar announced a major new contract in Spain to deliver solar panels representing 60 megawatts of annual generating capacity. Deliveries have already commenced and the company expects to complete the installation this summer. In addition, Canadian Solar recently delivered 11.7 megawatts of solar module generating capacity to Germany for three large solar power projects. Spain and Germany are emerging as important solar markets because of new government incentives driving demand.

Hoku Materials, Inc., a subsidiary of Hoku Scientific, Inc. (Nasdaq: HOKU), said this morning that it will amend its polysilicon supply agreement with SANYO Electric Co., Ltd. (OTC: SANYY) to extend the date for Hoku to complete the financing for its planned polysilicon plant.

Under the terms of the amendment, Hoku or SANYO may now terminate the supply agreement if Hoku has not secured financing for its polysilicon plant by Feb. 15, 2008, a six week extension from the previous deadline of Dec. 31, 2007.

In December, Hoku Scientific announced that it had signed a non-binding term sheet with Merrill Lynch Pierce Fenner & Smith Inc. for Hoku Materials to borrow up to approximately $185 million for the construction, procurement and start-up of its planned polysilicon production plant in Pocatello, Idaho.

Hoku manufactures and sells polysilicon for the solar market.

Shares of Hoku Scientific (HOKU) gained $0.35, or 3.07%, to $11.75 in pre-market trading. Shares of Hoku Scientific have been trading in the range of $2.52 to $14.55 for the past 52 weeks.

Shares of Akeena Solar, Inc. (Nasdaq: AKNS) are rocketing in pre-market after the designer and installer of solar power systems said this morning that it will distribute its solar panel technology through a licensing agreement with Suntech Power Holdings Co., Ltd. (NYSE: STP) in Europe, Japan and Australia.

Andalay, as the technology is called, improves on conventional solar panels by including built-in wiring, grounding and racking designed to provide better rooftop performance for consumers.

This licensing agreement, which is effective this month, is in addition to Suntech’s previous agreement to manufacture Andalay solar panels.

Shares of Akeena (AKNS) rocketed 43.84%, or $3.49, to $11.45 in pre-market trading. Solar Shares of Akeena Solar have been trading in the range of $2.97 to $10.05 for the past 52 weeks.

Editor’s note: This week we’re revisiting some of the companies that were profiled in this space earlier this year. This update is based on a Nov. 20 article by Paul Rolfes, “Solarfun Power Holdings: Partly cloudy.” At the time, Solarfun was showing signs of strength but analysts were divided. Then came the release of third-quarter earnings.

When SmallCapInvesor.com profiled Solarfun Power Holdings Co., Ltd. (Nasdaq: SOLF) on Nov. 20, the Chinese manufacturer of photovoltaic (PV) cells and modules used to convert light into electricity was just emerging from a slump.

Its first quarter had been bleak, as the company recorded a $0.01 loss per share accompanied by a 23% drop off in stock price. Solarfun’s second quarter, ended June 30, marked the start of the company’s turnaround, when it reported revenue spiked 358% to $61.78 million from $13.48 million in the same quarter last year. PV module shipments jumped 193% to 16.4 megawatts (MW) from 5.6 MW in the second quarter last year. Net income surged 25% to $2.59 million from $2.07 million in the 2006 quarter.

Nonetheless, many analysts were still on the fence. As we noted in our report, “Investors looking to jump into China or into solar are left wondering if Solarfun is a potential sleeping giant that could shine brightly, or if the company is something of a poorly lit bulb in their investment strategy.”

It didn’t take long to flip the switch.

When third-quarter results were reported nine days later, shares bolted 30% in one day. Revenue in the three months ended Sept. 30 surged 312% to $100.6 million, from $24.4 million in the third quarter of 2006, while net income soared 146% to $8 million, from approximately $3.23 million a year ago.

Akeena Solar, Inc. (Nasdaq: AKNS) shares are soaring after the designer of solar power systems said its lender is increasing its credit line 233% to $25 million from $7.5 million. The Los Gatos, Calif.-based firm’s lender, Comerica Bank, said the increased credit is subject to execution of loan documentation.

"With this additional borrowing capacity, coupled with our recent $26.1 million equity raise, Akeena will have the financial flexibility and resources to fund our working capital needs and ambitious growth plans for the intermediate future," CFO Gary Effren said in a statement. "We have a strong working relationship with Comerica and are pleased by their recognition of the growing strength of the company's balance sheet and financial condition."

In afternoon trading, AKNS shares are up 17.82%, or $1.18, at $7.80. Over the last 52 weeks, shares have ranged from $1.90 to $10.05.

Akeena Solar, Inc. (Nasdaq: AKNS), designer and installer of solar power systems, said it will increase its existing credit line with Comerica Bank to $25 million from $7.5 million. 

Under the increased $25 million facility, $17.5 million will be available for borrowing on a non-formula basis, with up to an additional $7.5 million available for borrowing against accounts receivable and inventory levels.

“With this additional borrowing capacity, coupled with our recent $26.1 million equity raise, Akeena will have the financial flexibility and resources to fund our working capital needs and ambitious growth plans for the intermediate future,” Gary Effren, Akeena Solar chief financial officer, said in a press release.

Shares of Akeena Solar (AKNS) jumped 8.31%, or $0.55, to $7.17 out of the gate. Shares of Akeena Solar have been trading in the range of $2.97 to $10.05 for the past 52 weeks.

Ocean Power Technologies, Inc. (Nasdaq: OPTT) CEO George Taylor said calendar 2008 will be an “exciting” year for the Pennington, N.J.-based company. The firm makes buoys that generate electricity by harnessing the energy of ocean waves. Taylor made the comments during a midday conference call.

“We believe that we are very well positioned to build on the strong foundations that are being established this year and continue to enjoy great success,” Taylor said.

Before the opening, Ocean Power reported second-quarter revenue of $1.7 million, up 204% from $0.6 million a year earlier. CFO Chuck Dunleavy said the increase in revenue was primarily attributable to an increase in ongoing work on a Hawaii project for the U.S. Navy, work on construction of a 1.3-megawatt station off the coast of Spain, work on the design, manufacture and installation of a buoy in Scotland and work on a contract with the U.S. Navy to provide PowerBuoy technology to a program for ocean data gathering.

The firm incurred a quarterly loss of $1.9 million, or $0.18 per share, compared with a loss of $2.3 million, or $0.45 per share, during the same period of 2006. Analysts were expecting a loss of $0.34 per share.

For the three months ended Oct. 31, the company’s cost of revenues grew to $1.9 million, from $1.2 million a year earlier.

“This increase in cost of revenues primarily reflected the higher level of activity on revenue-bearing contracts,” Dunleavy said.

The company’s selling, general and administrative costs increased 133% to $1.4 million, from $0.6 million in the year-ago quarter.

Neil George is well known as the senior editor of Personal Finance, one of the longest-running and most reputable newsletters in the advisor industry. In addition, he publishes a specialized service — Inner Circle — for sophisticated traders willing to buy lesser-known stocks that offer a combination of higher risk, but also higher potential rewards.

One sector he currently favors in Inner Circle is solar power, and here he looks at a pair of small-cap solar stocks that are currently on his “buy” list.

George says that AeroVironment, Inc. (Nasdaq: AVAV), with a market cap of $511 million, has been on the vanguard of wind, solar and electric conversion equipment for over three decades.

"Thirty years ago this year the company's Gossamer Condor became the first vehicle to achieve successful human-powered flight,” he says. “The company built the GM-backed winner of the first solar land race, the Sunnyracer. It set the world record for manned solar-powered flight in 1981.”

George says the company has been expanding our understanding of alternative technologies for a long time.

“After all these years it looks like it's now focusing on making some money — as opposed to headlines — as a visionary company,” he says. “Its product lines now have to do with micro unmanned aerial vehicles for combat forces in remote locations, its PosiCharge power system and its power management division."

Although he says that AeroVironment doesn't build solar cells, George points out that the company is a leading force in managing the electricity derived from wind and solar sources. 

Canadian Solar Inc. (Nasdaq: CSIQ) said it plans to make a private offer of approximately $75 million of its convertible senior notes, which are due in 2017.

The manufacturer and marketer of solar module products said it intends to use the net proceeds from the offering for working capital, general corporate purposes and potential future acquisitions.

The small cap will also grant the initial purchaser of the notes an option to purchase up to an additional $11.25 million in aggregate principal amount of the notes to cover overallotments.

Shares of Canadian Solar (CSIQ) edged down 2.15%, or $0.37, to $16.85 ahead of the opening. Shares of Canadian Solar have been trading in the range of $6.50 to $18.88 for the past 52 weeks.

Clean energy products provider Hoku Scientific, Inc. (Nasdaq: HOKU), said it will sell polysilicon to Solarfun Power Hong Kong Ltd., a subsidiary of Solarfun Power Holdings Co., Ltd. (Nasdaq: SOLF), over an eight-year period beginning in mid-2009.

News of the deal sent shares soaring 36.68%, or $2.17, to $8.09 in pre-market trading. Shares of Hoku Scientific have been trading in the range of $2.52 to $14.55 for the past 52 weeks.

Under the terms of the agreement, Solarfun will pay Hoku up to approximately $306 million during the eight-year period, subject to product deliveries and other conditions. The contract provides for the delivery of predetermined volumes of polysilicon each year, with the first shipment in the second half of 2009. Hoku said prices will decline throughout the term of the agreement.

Additioanlly, Hoku said it will grant Solarfun a security interest in its polysilicon assets to secure Hoku's (HOKU) obligation to repay $55 million to Solarfun as a credit against product shipments over time.

Solarfun (SOLF) manufactures of photovoltaic cells and modules in China. 

Concerns about global warming, soaring energy costs and dwindling natural resources are very much on everyone's mind these days. So it comes as no surprise that alternative energy companies are vying for investor dollars to develop cheap and clean solar, wind, hydrogen and biofuel technologies.
 
As the United States looks to reduce dependency on Big Oil and cut greenhouse gas emissions, small outfits focused on developing viable replacements for conventional energy sources are creating more excitement on Wall Street than any time in recent memory.
 
One well-positioned small cap is Hoku Scientific Inc. (Nasdaq: HOKU), a Hawaii-based maker of hydrogen-powered fuel cell components and polysilicon for solar panels for the generation of electricity. While none of Hoku's customers has yet to commercialize any products containing its technology, the company has formed strategic relationships with some impressive names: Nissan Motor Co. Ltd. (Nasdaq: NSANY), Sanyo Electric Co. Ltd. (OTC: SANYY) and the U.S. Navy.
 
Although Hoku posted first-quarter losses and is bracing for another hit when second-quarter numbers are released on Tuesday, analysts remain bullish. The company expects revenue of about $239,000 and a net loss of between $1 million and $1.2 million for the period ended Sept. 30; analysts project a loss of $1.3 million with revenue of $350,000.
 
Jon Kolb, a senior analyst with Zacks Equity Research, maintained his "buy" rating last week, saying, "Successful execution of existing contracts, including a new poly-silicon supply agreement with Suntech Power valued at up to $678 million over up to 10 years, as well as other significant contracts, large order bookings with potential customers, and higher revenue recognition, collectively make HOKU a compelling growth story.”
 
Kolb noted that HOKU has delivered strong stock-price performance with the stock trading up 60.39% over the last six months, up 158.57% over the last 12 months and up over 255.20% year-to-date, leaving the broader S&P500 and all other indices in the dust.

"To limit risks when investing in alternative energy,” Keith Fitz-Gerald says, "We look for companies that meet three specific criteria: an actionable business model, a strong financial position and an actual revenue stream.”

Fitz-Gerald—who works from homes in both the United States and Japan—is a 20-year veteran of the money management and newsletter world. He recently became a contributing editor to Money Morning, a daily global newswire service, and is also the editor of the New China Trader.

One small-cap company that he believes meets all of his aforementioned objectives is Idaho-based U.S. Geothermal Inc. (TSE: GTH).

"The company has been in start-up mode for a few years now, but it's now set for the big time,” Fitz-Gerald says. "Since I started following this tiny dynamo, the stock price has risen 278%. Even so, we're just starting to experience this company's true power—pun  absolutely intended."

As its name implies, U.S. Geothermal is a renewable energy company focused on the production of electricity using geothermal energy. Fitz-Gerald says geothermal power utilizes naturally heated underground water springs to turn turbines above ground by injecting water into the ground and pulling out steam.

Because of this, he observes, geothermal plants are not immune to oil or natural gas prices. In fact, he says, geothermal plants are typically self-sustaining and can work uninterrupted for years once operational.

"Wall Street is hardly paying them any mind, with the result that the industry as a whole is relatively undervalued," he says.

Propelling forward the idea of alternative energy sources are wind turbines—machines that produce electricity from converted kinetic energy in wind.  

Wind energy is the world’s fastest-growing energy sector and is already well-established in Europe, where it accounts for over 40,000 megawatts of generating capacity. Although most of the large wind turbine providers are European companies, a few American companies also participate. Two in particular, American Superconductor Corporation (Nasdaq: AMSC) and Composite Technology Corporation (OTC: CPTC), have been benefiting from rapid growth in this alternative energy sector.

In 2005, wind energy installed globally reached nearly 60,000 megawatts, up nearly 12,000 megawatts from the prior year. By 2020, it has been estimated that as much as 1,250 gigawatts of wind power could be installed worldwide, a more than 20-fold increase compared to 2005. Wind turbines typically cost between $900,000 and $1,300,000 per megawatt; the turbine market in 2005 was valued at approximately $12 billion.

In the United States today, the renewable energy in wind provides enough electricity for approximately 2.4 million American households. A major growth driver for U.S. wind turbine installations results from the Federal Production Tax Credit, which guarantees a tax credit of 1.9 cents per kilowatt hour for U.S. wind projects over the first ten years of their life. At the state level, an additional incentive is provided by state tax credits similar to the Federal Production Tax Credit. Wind energy tax credits are available in 18 states, including the three most populated—California, Texas and New York.

Composite Technology manufactures and markets 1.25 megawatt and 2 megawatt wind energy turbines worldwide through its Dewind segment, which it acquired in July 2006. 

In August 2007, the company announced firm orders for $53 million in turbine and turbine parts; most of these turbines are scheduled for delivery in 2008. The company shipped its first large 2 megawatt turbine in September 2007.

When Mexico City, one of the most polluted cities in the world, a few years ago declared that vehicles using liquid fuels could be curbed during pollution alerts while those using clean-burning fuels like propane and natural gas would be exempt, Coca-Cola Mexico decided on a fuel change to keep its fleet of 6,000 delivery vehicles running uninterrupted.
 
Coca-Cola turned to California-based IMPCO Technologies, now an operating subsidiary of Fuel Systems Solutions Inc. (Nasdaq: FSYS), for the devices to convert its vehicles’ engines to propane use, saving money by using cheaper propane and contributing to the reduction of pollution in Mexico City.
 
Fuel Systems Solutions has not been what you could call a model company, but it is orders like these that keep investors interested in the world’s leading supplier of alternative fuel systems for internal combustion engines. Even now, as the company faces delisting for the second time in three years for late reporting of its financials, the stock has been treading water around the $17 level, down from its 52-week high of $25.11 in February, giving it a market cap of about $250 million.
 
The company has not yet filed financial statements for the fourth quarter and full year 2006 and the first two quarters of 2007 because of a voluntary investigation into its stock option grant practices between 1996 and 2006. After the close of trading on Friday, the company said that preliminary review from this investigation indicates that the company will probably need to restate its results for the years 2001 to 2005 to account for non-cash charges with regard to stock-based compensation.
 
The company also said Friday that it believes it has fulfilled the requirements set by Nasdaq to submit information by last Thursday (July 26) to keep the exchange from proceeding with delisting for the late filings of financials. Nasdaq also set a deadline of September 6 for Fuel Systems to submit the late filings.

Among the many ill effects of global warming are unusual and violent weather conditions. So there’s some poetic justice in the fact that many forces have combined to create a kind of perfect storm for Canadian Hydro Developers, Inc. (TSX: KDH), one of Canada’s leading renewable energy companies, and an undiluted, pure play on green energy.

The favorable conditions for Canadian Hydro Developers really began to find traction with the run-up in oil prices and electricity shortages following the lashing of New Orleans by Hurricane Katrina. Adding fuel to Canadian Hydro Developers’ fire has been former U.S. vice president Al Gore’s pushing of the global warming issue onto the world stage, along with the focus on the failure of the Kyoto Accord and the release of many books on climate change.

In turn, governments have stepped up support for alternative energy through subsidiaries, grants, and tax credits. Meanwhile, a system for trading emissions credits is rapidly evolving.

And sharing in the spotlight that has been focused in a surprisingly unrelenting way on global warming and the damage caused by fossil-fuel power production are green energy stocks like KHD.

Of course, as with most alternative energy companies, Canadian Hydro Developers comes with all the usual small-cap caveats and then some. Technology advances in fits and starts, and setbacks are inevitable. Government involvement and investment are still fairly integral, yet by definition often fickle and unfocused. And then there’s the long-term – and often delay-prone – nature of utilities.