For a brief moment in 2006, the hallways at Ballard Power (Nasdaq: BLDP) were filled with good cheer.

President George W. Bush had just touted the promise of hydrogen power in his State of the Union address, and Ballard’s shares tripled nearly overnight.

Yet those high hopes for the company — and its investors — were soon dashed. Ballard didn’t see any bump in revenues, and shares eventually crashed to fresh all-time lows.

#-ad_banner-#Ballard’s not alone. Key rivals in the emerging field of alternate power generation also went into hibernation after that bout of euphoria in 2006.

Hopes for this industry rose anew after the election of President Barack Obama. He had been expected to be a supporter of such companies, but their revenue bases failed to get any sort of traction in the first years of his presidency. (Recently, the Obama administration has thrown renewed support for hydrogen power and fuel cell technologies, though at much more modest levels than had once been expected.)

Despite the lack of massive government support, these alternative energy stocks are back — in a big way.

Ballard Power, along with its peers, is in the midst of a sales revival that few people saw coming. From 2010 to 2013, sales for this group nearly doubled, and analysts are expecting at least 20% sales growth in 2014 and 2015 as well. (Note that only Capstone Turbine (Nasdaq: CPST), which focuses on natural gas-fueled power plants, is not focused on hydrogen and fuel cells.)

Though these stocks now trade for just a fraction of their all-time highs, they have also moved up sharply from their recent lows. So investors need to approach these stocks with a bit of caution. The key question: Even after the recent rebounds, which of these stocks holds the greatest upside for the next few years?

In the next of this two-part look at alternative power generation, I’ll be focusing on the two stocks with the best combination of upside and downside support. For the rest of this column, I’ll take a closer look at the other two firms that also hold a great deal of promise in this niche but carry too much risk or too little reward at current price levels.

1. FuelCell Energy (Nasdaq: FCEL ) Earnings release date: mid-March

This company, which sells onsite power plants, had a breakout year in fiscal 2013, when sales surged more than 50% to $188 million. A key virtue of this company’s systems is that they produce power chemically rather than through combustion, which means they operate quietly and efficiently, with almost zero emissions. Much of the revenue spike is attributed to increasingly large installations. For example, a recently built facility in South Korea can generate 59 megawatts (MWs) of power and another one in Bridgeport, CT can generate 15MWs, helping to make FuelCell Energy the leader in this emerging niche. Trouble is, it’s becoming a crowded niche. According to Navigant Research, there are more than 40 companies building such systems around the world. That level of competition explains why this company had just 4% gross margins in fiscal 2013, and operating margins of around minus 15%. Customer concentration is also a concern. FuelCell Energy derives a large amount of sales from just one customer: South Korea’s POSCO Energy. Lastly, although gross margins should trend up into the low teens later this year, that’s still not enough for this company to generate operating profits. FuelCell has plenty of cash, but it needs to prove that it can generate profits before shares can move much higher.

2. Plug Power (Nasdaq: PLUG ) Earnings release date: uncertain

This has been a very hot stock, rising more than 600% since last summer. Plug Power builds hydrogen fuel cells for small-scale applications such as forklifts. A recent spree of new customer wins should help sales double in 2014, to around $60 million, and has led to talk of a long-awaited break-even quarter in 2014, perhaps as soon as the second quarter. Yet this is a company with a horrendous gross margin profile, and talk of sustainable break-even results seems quite premature. Gross margins would likely climb back to zero when quarterly sales exceed $12 million, and general overhead pushes the total quarterly break-even mark in the $16 million to $18 million range. Plug Power may recognize that level of revenues in any given quarter, thanks to the recent contract wins, but the company doesn’t yet look poised to maintain that level of quarterly sales on a consistent basis. Indeed, a key relationship with FedEx (NYSE: FDX) is only happening because of a U.S. Department of Energy grant, and there’s no assurance FedEx will remain committed to hydrogen power over the long term. This stock would be a lot more intriguing if it hadn’t already risen 141% in just the first six weeks of 2014. Expectations that the company is on the cusp of explosive long-term growth still seem premature, and investors may as well track this stock in hopes of a pullback — if it ever arrives.

Risks to Consider: Despite recent revenue gains, these companies have still not reached break-even, which makes them risky investments, especially if the market slumps and investors make a flight to quality.

Action to Take –> Watch for Part 2 of this series, where I’ll focus on the two stocks in this group that look most appealing. In the meantime, avoid FuelCell and Plug Power until they appear ready to generate profits consistently.

P.S. If the potential of these clean energy stocks has you excited, wait until you see what StreetAuthority’s Andy Obermueller has been working on. Andy has identified five “game-changing” trends — including the possible obsolescence of the gasoline engine — with the potential to revolutionize the way we live our lives… and make early investors a killing. To learn more about these developing technologies and the companies behind them, follow this link.