But now that their darkest days are behind them, solar stocks represent a big play opportunity for any investor savvy enough to buy in while valuations are still low.

At Money Morning, we’ve said repeatedly that alternative energy isn’t an alternative anymore. Indeed, soaring energy costs and heightened awareness about global climate change have ushered solar power into the mainstream over the past year.

On Friday, light, sweet crude for May delivery rose 20 cents to $110.31 a barrel in afternoon trading on the New York Mercantile Exchange – just below the record price of $112.21 a barrel set Wednesday. Notwithstanding a much-criticized Energy Department projection that the escalation in petroleum prices will stop by June, there have been few – if any – real indications that oil and gasoline prices will retreat heading into the summer driving season.

That’s particularly bad news for consumers who are already feeling the pinch from the credit crunch and sinking home values. But it’s another round of good news for solar energy, which will almost certainly receive more attention – from the public, and from elected officials who feel compelled to extend, and even broaden, tax subsidies for renewable energy.

Reuters recently reported that a new bipartisan proposal by U.S. senators Maria Cantwell (D-Wash.) and John Ensign (R-Nev.) would extend existing tax credits for the clean energy sector. Many Wall Street analysts have said the measure has a good chance of passing because it is not linked to a tax hike or to “Big Oil.”

In addition to offering an alternative to costly and politically contentious foreign oil, solar power is also popular with environmentalists. That’s because solar power emits, per unit of energy, about one-tenth the amount of carbon dioxide emissions given off by more-conventional power sources.

Also, advances in technology have made solar cell production even more eco-friendly. A recent study by the Brookhaven National Laboratory in Upton, N.Y., found that for each unit of energy produced by solar cells, the pollution that’s emitted during the cells’ manufacture is only 2% to 11% the amount produced by power plants in the United States and Europe.

In fact, newly developed solar cells can “pay back” the energy required for their production in just one to three years. And improvements in manufacturing efficiency could reduce emissions from solar power by another 50% in five to 10 years.

There have been tremendous advances in the production and efficiency of solar technologies. And those advances couldn’t have come at a better time. Political support for the industry is at an all-time high as oil prices and environmental awareness both continue to rise.

The “First” Option in the Solar Sector

The shares of First Solar Inc. (FSLR) were badly battered during the first quarter. After climbing as high as $280.91 a share in December 2007, First Solar shares tumbled to $165.60 in February. Since then, they’ve battled back and are currently trading near their 52-week high.
And there’s good reason for all the company’s forward momentum.

First Solar’s reliance on low cost thin-film cells helped the company avert a silicon shortage that has savaged the bottom lines of countless other solar companies. As a result, the Phoenix-based solar module manufacturer has been able to produce solar cells for a lower cost than its rivals.

“First Solar’s new technology that uses cadmium telluride is much cheaper,” Matthew Patsky, portfolio manager of Winslow Green Mutual Funds (WGGFX), told FOXBusiness. “The cost of their solar cells is much less than the cost of the traditional [silicon-based] cells, so if you’re doing an installation on any scale, they are the best alternative right now.”

First Solar’s ability to undercut the competition helped it to rake in a $62.9 million profit last year. That’s a 686.3% improvement from the $8 million posted in 2006. Revenue nearly quadrupled to $200.8 million.

First Solar expects revenue to rise again this year, to between $900 million and $950 million.

To fuel that surge in revenue, the company will rely heavily on its globally diversified production base. Company officials said last year’s earnings were boosted by the full increased efficiency at their factory in Germany. This year they expect additional savings from a brand new plant in Malaysia.

“As we’re moving to Malaysia, I think our models imply a 20 cent cost-per-watt reduction,” Jens Meyerhoff, First Solar’s chief financial officer, told a Piper Jaffray investment conference.

The company expects its first Malaysian production line to start running this year, followed by three fully operational lines in 2009.

First Solar is also in talks with several U.S. utilities to build renewable energy projects. Chief Executive Michael Ahearn told Reuters the company was “having multiple discussions” with U.S. utilities.

“What we are trying to get to this year is some initial relationships and pilot projects,” he added.

Impressed with the company’s prospects, Winslow Green’s Patsky took advantage of First Solar’s turbulent first quarter.

“In January, the stock dropped to around $160 and we re-established a strong position,” Patsky said. “If it hits $300 in the near term, we might trim our position again; but our target is really for it to be trading at $380 over the next 12 months – the estimates are too low and I don’t think the street is as aggressive as what we expect.”

Canaccord Adams recently reiterated its “Buy” rating on the stock and added First Solar to its “Best Ideas” list.