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In Kansas: Wind power is key to Obama's green push Bob Stefko

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It's probably wise to view these stocks as a long-term play. Oversupply of polysilicon, the raw material for solar cells, together with tighter credit markets and soft demand, may depress solar company earnings for the next year or so, reckons Sanjay Shrestha, alternative energy analyst at Lazard Capital Markets (LAZ). But slowly, he says, the industry is inching toward "grid parity," when alternative energy costs the same as electricity from coal and other conventional sources.

Wind power offers less risk than solar. It is one of the most mature sources of green electricity and is also among the least expensive. As such, wind is the key to a plan Obama favors to raise America's use of renewable electricity to 25% by 2025, from 8.4% today.

After years of tight supplies, the number of windmills being produced around the world is finally catching up with global demand. The result is price erosion, which may pinch profits at manufacturers such as Denmark's Vestas Wind Systems (VWDRY). On the other hand, falling windmill prices benefit utilities and project developers that hope to profit from Obama's green stimulus program. In recent months some have slowed plans to build multibillion-dollar wind farms because of tight capital. But inexpensive equipment could fan their enthusiasm. HSBC (HBC) analyst James Magness is bullish about Spain's Iberdrola Renovables, which has the financial wherewithal to expand its U.S.-based wind farms.

One mission most U.S. utilities eagerly endorse is building "smart grids." The term refers to a batch of digital technologies that improve the distribution and monitoring of electricity. For example, through the use of intelligent controllers on industrial machines and home appliances, power companies can compensate customers who ratchet down their consumption during peak periods. Shrestha likes an East Hanover (N.J.) company called Comverge (COMV), which sells gear that helps customers cut power use during high-cost periods.

In biofuels, all eyes are on a new generation of ethanol makers that use everything from algae to plant waste to generate fuel. Cambridge (Mass.)-based Verenium (VRNM) is a front-runner thanks to a joint venture with BP (BP) and a steady business selling enzymes, a key ingredient in the conversion of plant matter to alcohol. The winner in this race? The company that proves ethanol is viable without using food crops such as corn.

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Aston is Energy & Environment editor for BusinessWeek in New York.