Image source: Getty Images.

The global solar industry is expected to install around 65 GW of new electricity production in 2016 -- a record year for the industry, and enough to power 10.7 million homes. But solar stocks can't seem to gain much ground.  

Chinese solar stocks, in particular, have struggled due to their high debt levels and very low margins, which have kept profits small or nonexistent. But as the industry grows, its power is being consolidated into a smaller and smaller list of companies. Here are three that investors should keep an eye on for the rest of 2016.

JA Solar

For most of its history, JA Solar (NASDAQ: JASO) has been a solar cell manufacturer, supplying that key component to other module assemblers. But the company has moved up the supply chain, selling 919.4 MW of modules in the first quarter compared to 118.9 MW of cells. And it's moving into building projects, anticipating it will complete 250 MW to 300 MW worth of projects this year.

What JA Solar has going for it now is a profitable business. In the first quarter, it reported $24.3 million in net income, which doesn't include 90 MW of modules it shipped to projects it is building. If demand remains strong throughout the year, JA Solar could remain profitable, bolstering a balance sheet that's already among the best among its peers. And if competitors falter, it is in position to consolidate its position as one of the largest solar manufacturers in the world. 

Image source: Getty Images.

Trina Solar

Trina Solar (NYSE: TSL) has long been one of the largest solar panel manufacturers in the world, aiming to produce 5.6 GW of panels in 2016  alone. And with $26.6 million in net income in the first quarter it's solidly profitable as well.

But what makes this company a potentially big winner in the solar industry is its focus on increasing solar panel efficiency. The company recently said it has created a multi-crystalline solar cell that's 20.2% efficient, which could help differentiate the company from commodity suppliers in China.  

The company was also one of the first Chinese solar manufacturers to move into project development. At the end of the first quarter, it had 967.3 MW of project assets on its balance sheet with 400 MW to 500 MW expected to be completed this year. The combination of a differentiated solar product and a large development business could mean big upside for a company currently worth just $715 million.

Hanwha Q Cells

The third company investors should watch in the solar industry is Hanwha Q Cells (HQCL). The company produced 912 MW of solar modules in the first quarter and reported net income of $27.5 million.  

Hanwha Q Cells expects to have 5,200 MW of cell and module capacity to end the year, making it a powerful player in the industry. And management said it is focused on improving the balance sheet, selling a Korean module fab plant and instituting an asset light model of manufacturing.

The company is still fairly new to the systems business, but that could give it upside from its current level of income. At the very least, this is a company with high leverage to the price of solar panels in 2016 and beyond.

Solar questions have kept investors away

These major solar manufacturers are solidly profitable right now, but one of the reasons investors have fled from their stocks is that there's uncertainty about module demand going into 2017. China and the U.S. could see weakness due to policy changes, and shorter lead times in projects have led to less visibility in the industry.

But long term, solar will grow because it's cost effective versus fossil fuels, and that should create upside for the companies who take market share. As three of the biggest solar manufacturers in the world, JA Solar, Trina Solar, and Hanwha Q Cells have a lot of potential in this emerging industry.