After I sold SunPower (Nasdaq: SPWRA) in June, I always intended to buy a replacement alternative energy play for my Rising Star portfolio. And while I usually avoid soaring IPO stocks until the preliminary investor euphoria has worn off, I'm willing to make exceptions to that rule. This month, I'm purchasing shares of newly public Solazyme (Nasdaq: SZYM).

The business
San Francisco-based Solazyme may be located in Silicon Valley, but it has nothing to do with the Internet. This biofuels company spearheads novel ways to turn cheap, plant-based sugars into affordable oil products by harnessing microalgae's oil-producing powers.

Solazyme isn't the only company making friends with miracle microalgae. Gevo (Nasdaq: GEVO) and Amyris (Nasdaq: AMRS) are other relatively new IPO companies at work in the same biofuel niche. Monsanto's (NYSE: MON) recent investment in another company, Sapphire Energy, suggests that big-money businesses also covet such technology.

Solazyme stands out from the pack by using "indirect photosynthesis" instead of open-pond techniques, slashing microalgae's production timing to a mere few days -- without the need for sunlight.

Why I'm buying
Alternative energy is fascinating, exciting stuff. Many of us would love more viable clean energy options to replace fossil fuels. More importantly, successful alternatives could translate into big money. Solazyme's IPO filing notes last year's $3.1 trillion market for conventional oils. Tapping into black gold's stranglehold on a gigantic market could help Solazyme and its early investors strike it rich.

Even better, Solazyme's nascent business already boasts sales from an impressive list of major customers. Chevron's (NYSE: CVX) Chevron U.S.A., Dow Chemical (NYSE: DOW), Unilever (NYSE: UL), and Qantas Airways are all either in development with Solazyme, or hammering out potential customer agreements.

The company has also sealed deals with the Department of Energy and the U.S. Navy. On June 20, Solazyme announced that the Navy had conducted a successful test flight of its Seahawk helicopter using a 50/50 blend of its algal-derived Solajet jet fuel.

Bloomberg BusinessWeek also recently reported that ASTM International (the entity that creates technical standards for airlines) approved commercial airlines' usage of biofuels derived from substances like wood chips and, yes, algae. In response, Solazyme said it's prepared for this important potential market, with plans to produce "large commercial quantities" of oils for jets by 2013 or 2014.

In an added bonus, Solazyme's products reach beyond fuel. They're already used in nutritional and skincare products available from major retailers like General Nutrition Centers (GNC), Sephora, and Whole Foods Market (NYSE: WFM). That means this company's got some diversification built into its product line, coupled with powerful distribution platforms.

Sometimes start-ups in new, experimental fields like biotechs pile on the debt to finance their grand ideas. Solazyme lacks that blemish; it has $67 million in cash and just $220,000 in debt.

And now, the risks
IPOs can be difficult to value, since many often haven't turned a profit. Despite its sales, Solazyme still lands in that woeful category. In the last 12 months, the company lost $19.6 million, or $0.37 per share, despite generating about $40 million in revenue. It may not achieve profitability for years to come, and if its products ultimately fail in the marketplace... well, ouch.

Solazyme faces steep, scary competition. It rivals not only entrenched, well-capitalized Big Oil companies (many of which dabble in alternative energy), but also competing clean energy technologies, along with peers like KiOR (Nasdaq: KIOR), another recently public company that transforms wood chips into biofuel.

The commodity costs plaguing consumers and businesses could hurt Solazyme badly, too. Should the price of the cheap feedstocks it uses in its processes spike, Solazyme's technology will no longer look like such a profitable route to cleaner, cheaper oil.

More intriguingly, the company could face a backlash against genetically modified organisms. Its "targeted recombinant technology" is just a fancy term for genetic engineering. (Why else would notorious DNA-tinkerer Monsanto be interested in Sapphire Energy, after all?) I'm personally not a big fan of the policies and tactics that have pushed genetic engineering into our food supply, but I'm willing to feel more positive about the practice with regard to Solazyme's efforts to create cleaner, cheaper fuel.

The Foolish bottom line
Solazyme adds a more speculative bent to my Rising Star portfolio, since IPOs are always a bit riskier than many more established companies' stocks. However, I can't resist its exceptional promise of cleaner energy -- and potentially huge sales and profits.

Better yet, success for Solazyme's products could change the world for the better. I believe that risk's worth taking.

This article is part of our Rising Star Portfolios series, where we give some of our most promising stock analysts cold, hard cash to manage on the Fool's behalf. We'd like you to track our performance and benefit from these real-money, real-time free stock picks. See all of our Rising Star analysts (and their portfolios).

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.