Anyone who's followed the alternative energy industry for any significant amount of time can count dozens, if not hundreds, of innovations that promised to forever end our dependence on fossil fuels. Nothing of the sort has occurred, of course.
So why my interest in solar power? Well, first, because alternative energy has the potential to create multibagger winners for investors. And second, because the history of tech proves that incremental innovations are often more important than the so-called Next Big Thing.
Need proof? Ask yourself who called Google (Nasdaq: GOOG ) the Next Big Thing (Google incidentally just announced that it too will be going solar). Answer: Nobody did, because it was an incremental -- though vitally important -- improvement on a platform that already existed.
Enter SunPower (Nasdaq: SPWR ) , which yesterday said that it has found a way to increase the efficiency of its photovoltaic cells (the cells that convert sunlight directly into electricity) by more than 40%. That alone is pretty impressive, but it also comes at a good time: On Thursday, Energy Secretary Samuel Bodman announced $13 million in new funding to research solar technologies.
What's more, News.com reports that a start-up called Fat Spaniel has found a way to measure the amount of energy solar panels generate. That may not sound like much, but the absence of such data has kept utilities from supplying equipment to customers who might have an interest in going green; they simply had no way of pricing a solar offering effectively. Fat Spaniel's technology could change that.
My point here is simple: Though solar is unlikely ever to become an overnight sensation, incremental improvements should keep expanding the solar market till it becomes impossible for institutional investors to ignore it as they (mostly) do now. When (not if) that occurs, today's seemingly expensive sun-drenched speculations -- including SunPower, Evergreen Solar (Nasdaq: ESLR ) , and Suntech Power (NYSE: STP ) -- won't trade for anywhere near as cheap as they do today.
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Fool contributor Tim Beyers only breaks the rules in his portfolio. Wimp. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. Get the skinny on everything Tim is invested in by checking his Fool profile. Suntech Power is aMotley Fool Rule Breakerspick. The Motley Fool's disclosure policy is a rebel with a cause.