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As the world has become more interested in global warming and alternative energy, solar power has been one of the stars. While solar energy offers many promises, it has been generally inefficient and costly to use. Storing solar energy has also been a big obstacle.

The stimulus bill President Obama signed on Tuesday includes more than $42 billion in energy-related investments. One of the most exciting renewable energies that will be pursued more in depth with the funding is solar energy. In October, Popular Mechanics published an article titled “Inside Solar Power’s Top 5 Next Game-Changing Technologies” by Alex Hutchinson. The article outlined some innovative products in the solar industry and listed some true players in the market that we believe investors interested in alternative energy will find inspiring.

The article notes that SunPower Corporation (SPWRA) was chosen by the Department of Energy (DOE) to put a 205-kilowatt solar installation on the roof of its headquarters in D.C. SunPower has developed back-contact, silicon photovoltaic (PV) cells with an efficiency of 23.4 %, a record for large-scale, mass-produced cells.

What makes these PV cells so special is their design: the electrical contacts are on the back of the cell, allowing the front more exposure to the sun. On the momentum of that big project, SunPower recently agreed to build a 250-megawatt solar ranch in California, which is expected to begin delivering power in 2010.

A project of this size is not necessary for an individual consumer; a few PV panels on the rooftop of his/her home would do the trick.

However, a problem arises here in that these panels produce DC (direct current) power, when the average household appliance requires AC (alternating current) power. Most DC to AC converters lose power in the process and are too costly, except for the newest device called the microinverter, which allows these panels to directly output AC power, while each panel’s performance can be wirelessly monitored. This has prompted the DOE and venture capitalists to pump several million dollars into companies like SmartSpark Energy and Enphase Energy, which are pursuing this latest technology.

Concentrating PV panels, which use lenses and mirrors to help concentrate the sun’s light, have also become a popular development as they increase efficiency and lower costs. Emcore (NASDAQ:EMKR), a company who has surpassed previous efficiency records, says it has developed cells with up to 45% [greater] efficiency utilizing the company’s own concentrating PV ideas.

The cost of silicon has been a significant roadblock for solar power development as its price has increased by 10 times its previous levels. Alternatives to silicon-based solar cells are available but they are less efficient. First Solar (NASDAQ:FSLR) makes its PV cells from thin films of cadmium telluride, but their efficiency is only about 10% and cadmium is considered hazardous. To improve efficiency, the National Renewable Energy Laboratory built a thin film panel made of cadmium indium gallium selenide (CIGS) which boasts 19.9% efficiency, comparable to the efficiency of silicon panels.

While all these advances in efficiency and costs savings works great when the sun is up, what do we do when the sun goes down? That problem is being addressed by German company Solar Millenium AG, who built a solar power plant in Spain using concentrating solar thermal technology to allow it to run approximately 7.5 hours when the sun is down or behind a cloud. This technology is different from PV panels in that it uses “vast arrays of curved mirrors…to focus sunlight on a liquid, heating it to over 750 F and boiling water to power a steam turbine. Storing power simply requires the equivalent of a giant thermos to store the heated liquid until steam is desired.” The U.S. is expected to get a storage-enabled 280-megawatt plant in 2011.

All of these ideas seem to offer a few key takeaways:

1) Solar power is making many advances, becoming more efficient and less costly, and should soon become competitive to other forms of energy in terms of value while reducing the side-effects of fossil fuels such as pollution.

2) Solar power is already being delivered in several forms today, and many more vast projects are in store for the coming years.

3) Storage technology is being developed to help overcome solar power’s biggest obstacle: the absence of sunlight. These trends, coupled with the spending on renewable energy in the stimulus bill, are reasons for interest in the solar industry. Furthermore, according to the International Energy Outlook 2008 released in June of last year by the Energy Information Administration (NYSEMKT:EIA), “electricity is expected to remain the fastest-growing form of end-use energy worldwide through 2030, as it has been over the past several decades.”

Listed below are some companies mentioned in the article, as well as other players in solar power today. Accompanying each stock, are its respective market cap, P/B, forward P/E, P/4Q rolling sales, annualized sales growth since inception, and sales growth expectations priced into the stock utilizing AFG’s Value Expectation application (assuming 2008 EBITDA margins and asset turnover levels remain constant in the next 4 years). The big risk with companies based on new technology is whether the company will survive the current credit crunch in order to see their technology come to fruition profitably.

*Data is as of 02/17/2009