Renewable energy may be one of the highest potential industries in the world today, but it's been a land mine for investors over the past decade. Very few companies have outperformed the market, and dozens of big names have gone out of business. 

We asked three of our energy contributors to navigate the renewable energy waters and find their top stocks in the industry, today and SolarEdge (NASDAQ:SEDG), Brookfield Renewable Partners (NYSE:BEP), and First Solar (NASDAQ:FSLR) made the list -- and for good reason. 

Wind and solar farm at dusk.

Image source: Getty Images.

A government mandate could help this profitable solar stock earn even more money

Rich Smith (SolarEdge): Solar stocks got a boost earlier this week when Goldman Sachs issued a trio of upgrades, pushing Sunrun and SunPower to "buy," and removing its sell rating on SolarEdge, upping it to neutral.

Goldman cited California's (relatively) new mandate that requires that all new homes built in the state incorporate solar panels beginning in 2020, in support of its upgrades. (As Travis has previously noted, this mandate is likely to generate $2 billion in additional revenues for the solar industry in its first four years.) Goldman seemed to prefer Sunrun and SunPower as the best ways to play this development, but as for me, I prefer SolarEdge.

Why? As suppliers of solar power systems, Sunrun and SolarEdge are the obvious choices to benefit from a mandate that homebuilders buy solar systems. But in order to turn sunlight, collected by solar panels, into usable electric power, you also need inverters -- which are what SolarEdge sells and how SolarEdge will also benefit from California's mandate.

Moreover, even without the mandate, SolarEdge is already profitable and free-cash-flow positive. Sunrun and SunPower aren't. Now, maybe the mandate will fix that or maybe it won't. I don't know. What I'm fairly certain of, though, is that if SolarEdge were able to make money even before the mandate, it's almost certainly going to be able to make even more money after it.

At a valuation of less than 20 times free cash flow, and with analysts predicting 22% annual growth ahead of it, SolarEdge gets my vote for the top renewable energy stock to buy right now.

High yield and healthy growth

Matt DiLallo (Brookfield Renewable Partners): Brookfield Renewable Partners offers investors the best of both worlds. The hydroelectric-focused company generates very stable cash flow backed by long-term, fixed-priced contracts. That allows the company to pay a sustainable dividend that currently yields a well above-average 5.8%.

On top of that, the company has attractive growth prospects. In Brookfield's estimation, it can increase the cash flows of its existing portfolio of renewable energy assets at a 3%-5% annual rate over the next five years. Powering that growth will be its ability to capture higher power prices as existing contracts expire while at the same time reducing costs. Also, the company aims to build 1,000 MW of new renewable energy-generating capacity over the next five years. These investments should grow its earnings at another 3% to 5% annual pace over that time frame.

Added up, Brookfield Renewable Partners estimates that it can expand cash flow per share at a 6% to 11% annual pace over the next five years. That should enable the company to increase its cash distributions to investors at a 5% to 9% yearly pace. Meanwhile, there's lots of additional upside to that base plan if the company continues making acquisitions.

Brookfield Renewable's strategic plan has it on track to generate total annual returns in the 12% to 15% range. That should enable the company to continue delivering market-beating results -- which it has done since its formation -- making it an ideal renewable energy stock to buy right now. 

The U.S. solar leader

Travis Hoium (First Solar): The U.S. solar industry has seen a number of positive data points in the past few weeks, highlighted by Wood Mackenzie and the SEIA reporting record first-quarter installations to start the year and predictions of higher-than-expected demand for the next five years. There are a lot of companies that will benefit but a big one will be First Solar, the thin-film solar manufacturer. 

First Solar isn't just any solar manufacturer -- it has more U.S. solar capacity than any other company and its technology is excluded from tariffs. It also develops about 1 gigawatt (GW) of solar projects each year, creating a flow of captive demand for some of that product. If the U.S. solar industry is doing well, there will be a pull for both solar panels as well as solar projects the company has developed. 

FSLR Free Cash Flow (TTM) Chart

FSLR free cash flow (TTM). Data by YCharts.

What makes First Solar unique among solar companies is its strong operating performance. Until the past year, when it was investing heavily in upgrading production equipment, the company was generating positive free cash flow, which few competitors can claim. 

First Solar won't be a huge growth stock, but it'll be a moneymaker in an improving industry, which is right where investors want to be in renewable energy. 

Opportunities with risks ahead

All three of these companies are leaders in their portion of the industry, but they have risks as well. SolarEdge could lose market share to installers and panel manufacturers that are vertically integrating, Brookfield Renewable Partners may see borrowing costs or interest rates rise, and First Solar's technology may not hold a lead over competitors. This is a fast-changing industry that investors will want to stay on top of, but that's why these three best-in-class companies are our picks today. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.