Renewable energy is (arguably) the biggest financial opportunity of our lifetimes, potentially worth many trillions of dollars. Solar energy could have the biggest chunk of that opportunity, simply because the sun is the most abundant source of energy on Earth. 

That should lead to some tremendous opportunities for investors. First Solar (NASDAQ:FSLR), SunPower (NASDAQ:SPWR), and SolarEdge (NASDAQ:SEDG) are the three companies I think have a bright future ahead in solar energy. 

Utility scale solar installation in a field.

Image source: SunPower.

First Solar

The most stable company in solar today is First Solar, whose thin-film solar panels likely won't be subject to tariffs if President Trump implements them on solar imports. On top of that, its $2.4 billion in net cash is a balance sheet no other solar manufacturer can compete with. 

What First Solar has been able to do is leverage its scale and technology to build one of the rare profitable businesses in solar energy. Thin-film solar panels aren't as efficient as traditional silicon based panels, but they perform better in hot conditions, like deserts, which makes them ideal for a lot of solar installations. A low-cost structure has allowed First Solar to sell these panels at a profit for over a decade. 

To build a more competitive business in the future, First Solar is currently upgrading is solar panel technology from what it calls Series 4 to Series 6, which is a larger, more efficient panel. The result should be lower cost per installation and more energy output. Staying ahead of the game in solar technology is a key for all solar companies, and First Solar combines technical leadership with financial results no other solar company can match. 

SunPower

A much higher-risk bet on solar is SunPower, the high-efficiency solar manufacturer. SunPower's specialty is what's known as back contact solar cells, which are significantly more efficient than traditional solar cells or thin film. For perspective, First Solar's average panel efficiency was 17% last quarter, and SunPower is making cells that are over 25% efficient and panels that are over 24% efficient. 

That efficiency comes at a cost, which means they're most cost effective for space-constrained environments where non-panel costs are high. More efficient panels can leverage those added costs, squeezing more energy out of each square foot. 

SunPower has faced challenges in the last year as solar panel prices dropped and returns on power plants plummeted, but it reported non-GAAP gross margins of 16.2% and 21.5% for commercial and residential sales respectively last quarter, which is where investors should expect its best results to come from. On the utility scale side of the business, management hopes that a partnership in China that could produce 5 GW of solar panels in 2021 and a new plant in Mexico will make the company competitive on utility scale projects. If all three market segments are successful, this could be the home run solar stock investors are looking for. 

SolarEdge

One of the critical components in solar systems is the inverter, which turns direct current from a solar panel to the alternating current we use in electric devices today. SolarEdge is one of the market leaders in inverters and other power-level electronics, like power optimizers, that maximize the power coming from each solar panel. 

Its position as a hardware provider has allowed SolarEdge to sell to a wide array of installers in residential and commercial solar, giving it a more expansive market than any individual panel manufacturer or installer. It's also been one of the more profitable companies in solar over the past couple of years. 

The SolarEdge brand isn't as visible to consumers than most of its industry peers because it doesn't make the solar panels that people see in solar power systems, but it provides critical components and is often the interface customers use to monitor their solar power systems. That position has created a lot of value for SolarEdge and makes it one of the top three solar stocks on the market today. 

Solar still faces risks

There's no question that solar companies have a lot of potential to disrupt the energy industry, but they face a lot of competition within the industry as well. Oversupply in China has led to plunging solar panel prices, which expands the market but pressures profitability. That's why solar stocks haven't been big winners over the past decade. I think that trend will change over the next decade as a handful of companies capture most of the industry's market share, but there will be ups and downs along the way. That volatility needs to be taken into account when buying solar stocks today. 

Travis Hoium owns shares of First Solar and SunPower. The Motley Fool recommends First Solar. The Motley Fool has a disclosure policy.