Though Wall Street no longer considers renewable energy a hot investment, it remains one of the highest potential markets we have today. The energy business is a multitrillion-dollar business annually and the declining cost of wind, solar, and other renewable energy power sources have made them competitive with oil, natural gas, and coal. As much potential as there is, however, investing in the renewable energy industry isn't easy.

We asked three Motley Fool contributors for their favorite renewable energy stock today and Xcel Energy (XEL -0.04%), SunPower (SPWR -9.82%), and SolarEdge Technologies (SEDG -7.88%) were their top picks.

Large solar farm in the mountains.

Image source: Getty Images.

A bold plan for a cleaner future

Matt DiLallo (Xcel Energy): Most utilities are making at least some effort to invest in renewables. None, however, are being as bold as Xcel Energy, which has committed to generating all its power from carbon-free sources by 2050. That's a tectonic shift for a company that still relied on coal to produce 37% of its electricity in 2017, making it a name to watch in the renewables space.

Xcel Energy, which distributes power to roughly 3.6 million customers in eight states across the central U.S., unveiled its bold vision for the future late last year. The company aims to build on its recent success of boosting its renewable generating capacity from a mere 3% in 2005 up to 23% last year, enabling it to slash its carbon emissions 35% over that time frame. Xcel Energy plans to invest more than $20 billion over the next five years on this initiative, which will help reduce its carbon emissions 60% by 2030. Furthermore, this spending should help grow earnings per share at a 6.5% annual pace through at least 2023, a slight acceleration from the 5.9% compound annual growth rate Xcel has delivered since 2005.

That high-powered earnings growth should enable Xcel Energy to keep increasing its dividend at a healthy pace in the coming years. This mix of rising earnings and cash returns, when combined with the focus on renewables, makes Xcel Energy a compelling stock to put on your watchlist.

Check out the latest earnings call transcript for Xcel Energy, SunPower, and SolarEdge.

Solar energy's bellwether

Travis Hoium (SunPower): 2018 was an epically bad year for solar companies. The U.S. solar industry was hit with tariffs early in the year, which hurt the world's second-largest market, but incentive reductions in China, the world's largest solar market, cratered the market midyear. In 2019, the industry is expected to grow again, with IHS Markit expecting an 18% increase in installations to 123 gigawatts (GW).

SunPower is a company to watch because it makes the world's most efficient solar panels, indicating that there's demand in residential and commercial solar markets. But it also makes a product called P-Series, which takes commodity solar cells and assembles them in a way that produces a slightly more efficient solar panel at a low cost. In short, SunPower is a bellwether for all of the solar industry.

Where I think SunPower could differentiate itself this year is in the U.S. The company bought SolarWorld's Oregon manufacturing facility and is now the second-largest U.S. solar manufacturer behind First Solar. It also received an exemption from solar tariffs that could save it $100 million in 2019. If SunPower performs well in the first quarter, it could bode well for the company and the entire industry this year.

A key solar industry supplier that's expanding

Jason Hall (SolarEdge Technologies): 2018 was a tough year for many solar companies, particularly panel makers that felt the impact of 30% tariffs on most solar panels imported into the U.S. And while it's quite evident that the expectation that those tariffs would lead to a resurgence in domestic solar panel manufacturing simply isn't happening, they've certainly played a big role in helping set up residential and commercial solar for a good 2019 by killing global panel demand last year and causing panel prices to fall sharply.

A good 2019 should also be great for SolarEdge, one of the biggest makers of panel-level electronics and other components that connect solar panels to homes and businesses and to the power grid.

But it's not just expected growth in distributed solar installations in 2019 that has SolarEdge worth watching. The company has recently taken several steps to expand its offerings beyond just power inverters. It is also an energy storage system provider and is expanding the line of battery products it offers to take advantage of one of the fastest-growing parts of the residential and commercial solar market.

It also recently entered the electric-vehicle component business and plans to expand its capacity to help meet the burgeoning need for EV chargers and other components to support the fast-growing EV market.

Right now, investors can buy in on this fast-growing -- and expanding -- company for about 15 times 2018 earnings. That's a cheap price to pay for a high-quality leader in the solar industry that's expanding into related areas where its expertise should pay huge dividends.

High potential and high risk ahead

Renewable energy stocks aren't for the faint of heart. They have a lot of potential to disrupt a multitrillion-dollar industry, but they face falling costs and unreliable profitability. Though these three companies are better prepared for the future than most, investors should be aware of the risks the industry faces as it upends energy as we know it.