The following are three reports covering some of the hottest cleantech sectors: wind, solar, and algae biofuels.In each section, you’ll find growth targets for the respective industries, policy guidance, and a few investment recommendations.This report is your gateway to what will be a $45 trillion profit machine by 2050.

Investing in Solar Technology

Solar energy is big business these days. What started as a niche market is quickly transforming into a go green worldwide movement.And just as in other industries, the solar sector is evolving. And the best panels these days are considerably different from the panels being produced even just one year ago.

They use less (if any) silicon, and are more efficient, thinner and, in some cases, even flexible. But it hasn’t always been that way. . .

Investing in Next Generation Solar Technology

The solar industry started with bulky, rigid panels that had to be installed after a building’s construction. These are the photovoltaic systems most people think of whenever solar is mentioned; clunky panels that are clearly visible on a building’s roof.Those first generation solar cells were either monocrystalline or polycrystalline. . . the latter is what we normally see on roofs today.After those cumbersome cells came the second-generation thin-film models. The most successful of this generation has been the cadmium telluride (CdTe) series of cells.

These cells are much thinner, use less material, and are easier to produce — but they’re still rigid.The main company that produces these cells, First Solar (NASDAQ: FSLR), has been the darling of Wall Street for the past two years, soaring from $23.50 in 2006 to as high as $317.00.That’s a gain of about 1,250% for the green investors who got in on this IPO. Of course, this stock has sold off with the broader market during recent economic turmoil.  Take a look:

But First Solar isn’t the only company turning a pretty penny in the solar market. Here is an overview of the industry along with relevant companies.

The Solar Value Chain

At the very beginning of the value chain we have polysilicon producers, of which there are a few big players and a few hope-to-be big players. The product at this level is a commodity, so the low-cost provider wins as long as the product is pure and consistent.

Companies here include the Norwegian REC Silicon, a division of Renewable Energy Corporation (OSL: REC), the German Wacker Chemie (Frankfurt: WCH), and the private Hemlock Semiconductor Corp.Advantages in the poly industry stem from adjustments to levels of purity, using recycled or scrap materials, and vertically integrating (more on that in a bit), to reduce operational costs and improve margins. Remember, poly is a raw material and a commodity, so any saved cost creates a competitive advantage.

There are now several companies in the wafer space, but only a few operate as pure or near-pure plays. MEMC Electronic Materials (NYSE: WFR), whose ticker indicates its business, is a big player here and is also a participant upstream in the poly business. Renesola (NYSE: SOL) is also gaining traction.
These first two links in the solar chain have fallen victim to declining silicon prices, which have gone from over $400 per kilogram to $100 per kilogram in just the past few quarters, with $60 per kilogram likely soon. The sharp decline was induced by a sudden oversupply as companies rushed to build new factories to meet rising demand. Just as a glut of supply came online, the future demand picture was muddied by the global recession. . . and prices plummeted.

You’ll want to wait until demand visibility returns before dabbling in this sector.The cell stage is where we begin to see a great deal of participants. It’s also where we see the most diversity in business models.Some companies, like JA Solar (NASDAQ: JASO), focus exclusively on producing cells. The more common approach is to vertically integrate, which means participating in the upstream and downstream segments of the solar market.

Here we have companies like Solarfun (NASDAQ: SOLF), Yingli (NYSE: YGE), SunPower (NASDAQ: SPWRA), Q-Cells (XETRA: QCE), and a number of other major players. The idea is to control the silicon process from ingot to module, cutting costs by not having to purchase individual materials or parts at the spot price or via contract. It also ensures consistent quality and the protection of intellectual property.

The only problem is, it’s highly capital-intensive to vertically integrate because you have to build factories that produce all the materials involved. The tightening of credit markets has led to companies not being able to secure financing, forcing them to stall or cancel expansion plans.Not being able to expand means not being able to increase capacity, leading to no new sales growth and reduced stock valuations, which we’ve recently seen.

The last step is the production of a solar panel or module by arranging cells together, binding them, and adding the electronic components. This is what companies get most noticed for, like Suntech (NYSE: STP) and First Solar (NASDAQ: FSLR), though the latter doesn’t use silicon at all.But as we’ve seen in the other segments of the solar chain, prices are falling for cells and modules too. This excerpt from a recent Reuters article sums it up:

Analysts at HSBC forecast average selling prices for solar systems will drop by about a fifth in 2009 given oversupply and a tighter credit environment, but prices for cells and modules have so far fallen much faster than those for silicon and wafer. Several industry bellwethers, such as cell producers Q-Cells and Sharp as well as module maker Solon have had to revise outlooks.

In the long term, price reduction is good for the industry because it allows solar to compete with the going rate for retail electricity. But the rapid decline has left most producers holding the bag, sometimes having to sell panels at less than cost or with a negative margin. The industry, however, isn’t going away by any stretch of the imagination. Global installed capacity is still forecast to grow about 33% this year and about 22% in 2010.

Free Stock Pick #1: The Only Solar Stock for the Next Two Years

Buy Yingli Green Energy (NYSE: YGE) under $12.50. This is one of the most undervalued solar stocks on the market. One of the best among all Chinese producers, Yingli is establishing a global footprint as a low-cost solar leader. Getting in now will certainly lead to handsome gains down the line.

Wind Energy Stocks

Investing in Wind Energy: Returns that Will Blow You Away

Most don’t know that the domestic wind energy market is currently being dominated by overseas players.With the exception of General Electric, foreign competitors — mostly European — have taken a strong position as wind market leaders.Because of their early aggression in tackling environmental issues, it’s no secret that European firms have led the way in many renewable technologies. Their cavalierness has led Germany to be the cradle of the solar revolution; the Scots have taken the lead on wave power; a Portuguese/Spanish/Danish tandem leads on wind.Last year, Energias de Portugal, the national utility, bought Horizon Wind Energy from Goldman Sachs for $2.15 billion — the highest price ever paid for a wind-only company.

For its part, Spanish company Acciona acquired rights to about 1,300 MW of wind farms in the Midwest.But the U.S wind market isn’t the only one that’s booming. Europe still has billions to claim as well.In a recent report, the European Wind Energy Association (EWEA) said that wind became the leader in terms of new installed energy capacity.

Through 2020, wind is expected to account for 34% of new generating capacity. It’ll account for 46% from 2020-2030.And the goal of attaining 12-14% of Europe’s power from wind by 2020 is well within reach.By 2020, it’s expected that 180 gigawatts (GW) of electricity will be supplied by the wind. That’s enough for about 107 million European households.

For that to happen, wind-based capacity needs to increase 9.5 GW per year through 2020. That shouldn’t be too hard, considering the EU installed 8.5 gigawatts worth of wind capacity last year.The U.S. wind market and domestic wind energy stocks are ready to boom as well. . .

Domestic Wind Energy

Twenty years from now, wind energy could produce 20% of America’s electricity.

An Energy Department study found that wind energy could generate 20% of U.S. electricity by 2030, as compared to today’s one percent.The good news is found in the following Energy Department report.  The report finds that achieving a 20% wind contribution to U.S. electricity supply would:

• Reduce carbon dioxide emissions from electricity generation by 25 percent in 2030;
• Reduce natural gas use by 11%;
• Reduce water consumption associated with electricity generation by 4 trillion gallons by 2030;
• Increase annual revenues to local communities to more than $1.5 billion by 2030; and
• Support roughly 500,000 jobs in the U.S., with an average of more than 150,000 workers directly employed by the wind industry.

To achieve 20%, wind turbines would have to produce 300,000 megawatts of power, compared to today’s generated 16,000 megawatts.It’s doable.And it should come as no surprise that billionaire investors are lining up for a piece of the coming wind energy boom, including T. Boone Pickens.”When I go into these markets, I expect to make money on them. I don’t expect to lose,” says Pickens.

With plans to spend some $10 billion to build the world’s biggest wind farm, the billionaire has gone green.And it’s a brilliant move, as we deal with incessantly rising oil prices.

The Bottom Line on Wind Energy

Between 2006 and 2008, both Germany and Spain’s wind power capacity experienced impressive growth (about 16% and 44%, respectively).But U.S. capacity catapulted nearly 120% in the same time.

Don’t think for a second that wind energy is about slow down. . .Since 2000, wind power production has increased fivefold. Remember that during that period, oil prices have grown nearly the same amount. Now that peak oil is starting to edge itself under the global spotlight, we can expect to see a massive interest in renewables like wind energy.Reports from the U.S. Department of Energy state that wind energy supplied in just three U.S. states could potentially power the entire nation!

Think about it for a minute. . .

We’re talking about a source of energy that is a renewable, clean, has a low operating cost, and has technology that’s been around for over a century (the first power producing windmill was created back in 1887).But it isn’t just the past growth that we’re impressed with. Over the next two years, the Global Wind Energy Council (GWEC) predicts that the world’s installed wind power capacity will practically double to 158.3 GW.With that kind of growth, the investment opportunities will certainly be lucrative.

Free Stock Pick #2: The Only Wind Stock for the Next Two Years

Buy First Trust Global Wind Energy ETF (NYSE: FAN) under $17.00. Seeing as how most of the wind growth in the next few years will come from foreign companies, the best way to profit is through and exchange traded fund (ETF). This one hold some of the biggest and best performing wind companies in the world. . . and will be a sure bet as this sector comes of age.

Bonus Report on Algae Biofuel

Investing in Algae Biofuel

Hundreds of millions of years ago, the earth was covered with shallow oceans filled with algae and other simple critters.As landmasses shifted and grew, water was displaced, leaving thick masses of algal residue that were eventually buried and compressed.Skip forward a few eons, throw in some heat and pressure, and. . . ta-da! Oil.Then, in 1859, Colonel Drake drilled the first oil well in Titusville, PA, unleashing not only oil. . . but an economic juggernaut that would dictate our way of life for years to come.

The world began to use oil for everything from fuel to waterproofing, and since then has consumed over a trillion barrels. With such furious consumption — and no way to make more — world oil reserves are set to dwindle.Essentially, we’re going to deplete in less than 300 years what took hundreds of millions of years to form. And with the depletion of oil, alternatives are destined to emerge.And, ironically, algae is one of them.

Biofuel Bliss

Research like that being done at the Colorado State University’s (CSU) Engines and Energy Conservation Laboratory and the University of New Hampshire (UNH), suggests that algae could supply enough fuel to meet all of America’s transportation needs in the form of biodiesel.

That’s right . . . all of it!

Whereas with our current biodiesel feedstocks, like soy and palm, there’s no way we could grow enough to supply all of our transportation needs.In fact, it would actually require twice the land area of the U.S. devoted to soybean production to meet current heating and transportation needs.That’s a lot of beans! Algae, on the other hand, could supply all U.S. diesel power using a mere 0.2% of the nation’s land.In fact, enough algae can be grown to replace all transportation fuels in the U.S. on only 15,000 square miles or 9.6 million acres of land.

That’s about the size of Maryland.Granted, that still may sound like a lot. But consider that we now use 938 million acres for farmland in the United States.I’d show you a pie chart of how much land would be required for algae growth, but the slice is so tiny, it wouldn’t even be visible.Of course, the question is how the heck can you make so much biodiesel from such a small amount of algae?

Well, let’s revert back to ninth grade science class for a moment.Biofuels are really a form of solar energy. Because crops convert solar energy into chemical energy in a process called. . . Anyone? Anyone? Photosynthesis!

It’s this chemical energy, in the form of oils, that we need to produce biofuels.According to the UNH report, the more efficient a particular plant is at converting solar energy into chemical energy, the better it is from a biofuels perspective.So in this area, algae’s the clear winner.

In fact, algae does this so well that up to 50% of its body weight can be fat, or the oil needed to make biodiesel.That makes algae the highest-yielding feedstock for biodiesel, producing 24 times more oil per acre, on average, than the next leading feedstock: palm oil at 635 gallons/acre/year. Take a look:

And some companies have far surpassed the 15,000 gallon-per-acre accepted benchmark.

In fact, one company can produce 180,000 gallons of biodiesel every year from just one acre of algae. That comes to about 4,000 barrels, at a cost of $25 per barrel, or $.59 per gallon.To put that in perspective, it takes 3,750 acres of soy to make the same amount of biodiesel at a cost of about $2.50 per gallon for 4,000 barrels.

So, how is this going to be done?

Algae Profits Bloom

It is possible to use human sewage and wastewater from agricultural endeavors to enhance the growth of algae.In fact, when done right, algae can double and even triple overnight with the addition of these fertilizers.Compare that to the five-month growing season for soy or canola! Plus, as algae grows it absorbs Co2 from the air. MIT has even fed emissions from their on-site power plant directly to algae being cultivated for biofuel production.

In addition, fertilizer for other food crops can be produced by using the leftover nutrients that aren’t used to make the biofuel. That’s like having your algae and eating it too. So let’s back up and look at the big picture. . .We have the technology right now to cultivate algae that can be used as fuel, using human and animal waste as fertilizer.

This is waste that would otherwise need to be treated or end up in our nation’s ground water.Not a bad deal at all!

Then, after the necessary oils have been extracted from the algae, we use the byproducts (phosphorus and nitrogen), as fertilizer for the food crops that feed the nation — all while extracting C02 from the air.That’s a beautiful thing.

And that’s why we’re currently looking at a number of companies . . . some public, some soon to go public . . . that we believe will capitalize in a big, big way on algae.Now don’t get me wrong. The last thing we want to do now is jump on every algae-based biodiesel producer that comes along.

Until we see validation on a commercial scale, this is a market that will have to remain under the microscope.