Clean fuel technology stocks, such as solar energy and biofuels, are attracting more and more investors. There has also been an unprecedented rise in venture capital investments in clean fuel stocks in recent times. Moreover, there has been an unparalleled rise the number of alternate energy companies over the past few years. Given these favorable trends, the time seems ripe for playing the alternative energy sector.

Renewable energy stocks are not the only option today. One can choose from stocks, renewable energy mutual funds and exchange traded funds, or ETFs. The dip in renewable energy stocks in the recent past, however, has created some concern among investors. The fact is that the recent subprime crisis in the US and the consequent market correction had a major role to play in the declining stock prices. The markets continue to be uncertain, given the current economic environment in the US. But this is a temporary phase. In the long run, alternative energy will be the way forward for the world, not just the US. But before jumping into investing, one needs to ensure that he/she understands the target company’s business model, fundamentals and technology employed before one puts his/her hard-earned money into it. Companies that have global exposure could also be a good bet, especially those that spend in dollars but earn in foreign currencies would gain from the present decline in the US dollar.

While investing in mutual funds, it is always useful to consider the expense ratio. A higher expense ratio fund will not be as rewarding for the investor. For this reason, ETFs might be better investment options because their expense ratio is capped at 0.60%. ETFs also offer the choice of investing in those that have international diversification and those that don’t. Again, those with international exposure would be a better bet than ETFs that only track US indices.

One of the companies doing extremely well in the alternative energy sector is China’s Suntech Power Holdings Co. Being based in China, this company incurs costs that are significantly lower than companies in the Western world. Suntech manufactures photovoltaic cells that have the highest conversion rate in the industry. Analysts are optimistic about the future earning prospects of Suntech Power.

One can also invest in the geothermal sector, which has attractive options like Ormat Technologies Inc. Ormat is one of the world’s largest geothermal power plant builders. This company has erected huge power plants across the globe, from the Philippines to Hawai. Ormat Technologies’ proven track record should put at rest any concerns regarding the future of this company.

Another fast growing renewable energy source is the carbon fiber. Zoltek Companies Inc. is possibly the largest and fastest growing company in the wind sector. The company is ramping up its manufacturing capabilities to meet the growing demand for carbon fibers across the world. Zoltek currently has long-term contracts with some of the largest wind power companies in Western Europe.

This is, however, only the tip of the iceberg:

• Clear Skies Solar, Inc. provides renewable energy solutions for commercial and residential use
• Essential Innovation Technology Corp does the same through geothermal solutions
• ZAP, which provides renewable energy solutions for the transport sector, is a good option. With customers from across 75 countries, ZAP has been a forerunner in providing fuel efficient transportation solutions since 1994
• XsunX, Inc. expects to be able to have a manufacturing capacity of over 100 megawatts by 2010, with its TFPV solar modules
• The mantra for success for Mantra Venture Group Ltd. is the search for innovative solutions for clean fuel and a greener Earth.

The list is endless. The important thing to remember about any new industry is that not all companies make it. Just like in the dot.com boom, some companies grew while others collapsed over time. It is important, therefore, to conduct thorough research before placing hard earned money in any company.

The best investment policy is to keep your alternative energy portfolio as diversified as possible. One should consider stocks across various energy companies, such as solar, wind, geothermal, biofuel, water, hydroelectric, etc. It is advisable to invest with a long-term horizon. Today, the government might need to provide subsidies and incentives for alternative energy sources but in the long run, with the need to reduce greenhouse gas emissions and the finite nature of fossil fuels, there will be only one way for the world to go – alternative energy.

What is true of all investments holds true for alternative energy investments – timing is key. The current global trends indicate that the time to invest in this sector may be right now.