The solar industry is now reaching legitimacy in the energy industry, something that's evident to even the most stringent proponents of fossil fuels. Electricity from the sun is now less expensive than from fossil fuels in the southwestern U.S., parts of the Northeast, and some of the South. Globally, solar energy is competitive with fossil fuels in South America, Europe, the Middle East, Africa, and more locations every year. 

This economic viability creates an incredible opportunity for investors who bet on the solar stocks that are able to capture market share as the industry grows. The challenge is finding companies with a durable competitive advantage in an industry where differentiation is hard to come by. Below I'll outline three companies with exactly the competitive advantage investors should be looking for and who should profit for years to come.

Spwr California Valley Solar Ranch

SunPower employees installing solar panels in the 250 MW California Valley Solar Ranch project. Source: SunPower.

The high efficiency solar stock
Solar energy doesn't often get credit for being the technological innovation that it is. It's not a trivial task creating a solar panel that can efficiently convert the sun's energy into electricity, and there's no one that does that better than SunPower (NASDAQ:SPWR). The solar panel manufacturer makes the most efficient solar panels in the industry -- up to 21.5% efficient -- and even builds solar plants from the size of a rooftop to the largest solar plant in the world.

As the market has evolved over the past decade, the one constant has been the need for solar panels that efficiently convert sunlight to electricity. Whether it's a small rooftop solar system or a massive utility-scale project, the more energy you can generate from the same amount of space, the lower non-panel costs can go. That efficiency is how SunPower has stayed competitive despite the ups and downs of the market in recent years.

For investors, what they're getting in SunPower is a company with a durable edge over competitors in efficiency as well as one of the world's largest and most diverse project builders. 

Solarcity Rooftop Solar Installers

SolarCity workers install a residential solar system. Source: SunPower.

The dominant residential solar stock
The solar stock getting a vast majority of the publicity today is SolarCity (NASDAQ:SCTY), and for good reason. The company is expecting to install a million solar projects by mid-2018 and has already cut installation and sales costs to near $3 per watt, what huge utility-scale projects were built for as recently as early 2012.  

SolarCity now has $3.3 billion in payments and an estimated $1.25 billion in retained value under contract, and both are growing rapidly. The advantage SolarCity has in the solar market is that it has built scale and low costs into the residential market, giving consumers a choice about energy. As it grows, it'll expand further into commercial installations, where it can add value to even larger solar projects. 

There are still many questions to be answered about how the solar energy industry plays out and what financing models will last long term, particularly in the residential market, but SolarCity has built the scale and cost structure to play a role no matter how the industry looks.

A quietly dominant solar stock
If I asked you what company is the most profitable in solar, would you know who it was?

The answer is First Solar (NASDAQ:FSLR), the thin film solar manufacturer that specializes in building large-scale solar plants.

FSLR Net Income (TTM) Chart

FSLR Net Income (TTM) data by YCharts.

The company has in many ways been passed by in terms of technology by companies like SunPower, who make far more efficient panels, and has therefore been pushed out of the residential solar market. First Solar's panel efficiency was just 14% in the second quarter of 2014, compared to 21.5% for SunPower's best product.

First Solar is able to stay competitive because it efficiently builds utility-scale solar plants and is also working to increase efficiency dramatically. The company's technology plans show an expected increase in efficiency to over 17% by the end of 2017. If it can do that, it'll generate even more profit from each project it builds.

Even if First Solar's panels prove not to be competitive long term, there's still immense value in efficiently building solar plants. Long term, that's where First Solar's value lies, and it has a durable lead over competitors.

A durable competitive is key in solar
These three stocks are the best picks for investors looking into solar stocks, and they give exposure to everything from residential to utility-scale solar. Most importantly, they hold an advantage over competitors in their respective markets.

This is a booming industry, and investors who can get in now will be riding a growth wave for decades to come.

Travis Hoium manages an account that owns shares of SunPower and is personally long shares and options of SunPower. The Motley Fool recommends SolarCity. The Motley Fool owns shares of SolarCity. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.