When it comes to green investing, the playbook is constantly being rewritten.

#-ad_banner-#Solar and wind stocks were all the rage in the past decade before getting hammered in 2011 and 2012. They rebounded smartly in 2013, especially solar stocks, even as falling natural gas prices led some to think that solar would remain uncompetitive. Even fuel cell stocks, which were once deeply out of favor, have surged higher lately (as I noted earlier this month).

To be sure, such dramatic slumps and rebounds mean that investors need to have a strong stomach for wind, solar and fuel cell stocks. These high-beta investments could quickly fall out of favor, especially if the market pulls back and investors avoid speculative stocks.

That’s why I also like to focus on clean energy stocks that have solid and sustainable business models. Such firms aren’t making a bet that their clean energy technology will prevail — instead, they are simply harnessing other firm’s technologies to build cost-saving solutions for enterprises.

Profiting By Playing It Safe
No firm better epitomizes the “play it safe” approach to clean energy than Spain’s Abengoa (Nasdaq: ABNG).

Back in December, I wrote that Abengoa is a world leader in the construction of clean energy power plants, and I suggested that shares had solid upside to my $18 price target. Shares have already powered past that level and now trade at $22 — a 75% gain in less than three months.

Abengoa is surging due to a pair of factors: 2013 results were quite good, with earnings before interest, taxes, depreciation and amortization (EBITDA) rising more than 40%. Also, recent contract wins have led investors to realize that current guidance for 2014 — which anticipates 8% revenue growth and 12% EBITDA growth this year — is looking too conservative. Abengoa continues to garner new contract wins, which should fuel solid growth in coming years.

	Abengoa
	Abengoa continues to garner new contract wins, which should fuel solid growth in coming years.

Even after the strong recent run, this stock still has more upside: Analysts at Cannacord Genuity recently bumped their price target to $28, representing 25% upside. That price equates to around 8 times 2015 EBITDA on an enterprise value basis.

I look at this stock in a slightly different context. Governments increasingly understand that massive clean energy power plant projects can deliver profitable returns, especially now that the cost of solar equipment is plunging. Abengoa’s capabilities in the field of water desalination are likely to be more appreciated, especially as some parts of the world appear to be entering long-term droughts that would require a major investment in desalination.

So you can see this stock in the context of Cannacord’s $28 price target or instead focus on it as a long-term holding with more significant upside as the company’s business trends play out in the coming decade.

Profiting By Saving
The sea change in clean energy is a shift from carbon-reduction goals and toward cost savings. Companies and governments want to act in a climate-friendly fashion, but they are even more interested in saving money by spending less on energy.

In that context, I still think Ameresco (Nasdaq: AMRC) is an underappreciated company by many investors. I profiled this company last May, and though shares have risen 20% since then, they’re still trading nearly 20% below the October 2010 IPO offering price of $12.

To be sure, Ameresco has lost some operational momentum since going public. Sales rose 50% from 2008 through 2010, to around $600 million — but they’re still stuck at around $600 million these days. The company had been a clear beneficiary of government stimulus investments around energy efficiency in the early years of President Barack Obama’s first term. But that support has petered out.

However, signs of an upturn are emerging. In November, Ameresco said contracted backlog rose 15% in the third quarter from the same period a year earlier, the first increase in eight quarters. In late February, Ameresco was awarded new contracts with the U.S. Army Corps of Engineers that could add hundreds of millions to backlog. Management will likely discuss this award, along with other recent contract wins, when fourth-quarter results are released in mid-March.

Risks to Consider: Both Abengoa and Ameresco count on governments and the private sector for contract wins. Though the private sector appears to be moving ahead with clean energy projects at a more rapid pace, government contracting remains erratic as budgets remain under stress. Further government fiscal pressures could lead to estimate reductions.

Action to Take –> These companies lack the sex appeal of leading-edge clean energy firms. But their backlog of long-term contracts helps them avoid the boom-and-bust quarters that many clean energy firms experience.

P.S. If you’re looking for more traditional investments, Dave Forest, StreetAuthority’s resident energy and resource expert, has you covered. To learn which rock-solid companies he has his eye on, click here now.