Last December in Paris, almost every country on Earth agreed to substantially reduce carbon emissions over the next decade, and to meet regularly to report on progress. Cynics can argue that the climate conference’s goals will never be met. But scientists are in lockstep about the urgency of action — and for the first time, a practical framework is in place, with everyone on board.

#-ad_banner-#One of the major beneficiaries of government policies to reduce carbon emissions will be solar power. Electricity generation accounts for a huge chunk of carbon emissions, due to the prevalence of power plants that burn coal and natural gas. Generating power from solar, wind, nuclear, hydro and geothermal sources produces little or no carbon emissions — so shifting from fossil fuels to alternatives is the easiest way to effect change. And even with natural gas at historically low prices, the relative cost of solar power is — for the first time — affordable for power plants to at least increase their mix of solar. And in large global economies still building out their power grid, such as India, solar will now be the power source of choice. 

Solar received more good news in the budget deal struck between President Obama and new U.S. House Speaker Paul Ryan. The agreement extended an investment tax credit for solar companies for five years (it was going to expire at the end of 2016), further reducing the after-tax cost of building out solar infrastructure. Combined with other regulatory and legal victories, it’s now plausible that solar power could actually be the least expensive power source in some U.S. states in the coming years — even if pro-coal forces in the U.S. Congress, who have a lot of clout (note that Senate Majority Leader Mitch McConnell hails from Kentucky), work hard to keep coal viable.

The bottom line: this trend is already strong and growing. If you don’t have solar stocks in your portfolio, here are two to consider:

China-based Trina Solar (NYSE: TSL), which I recommended in December, is the world’s largest solar panel maker. An integrated producer, Trina handles every stage of production after purchasing the polysilicon used to make panels: it produces so-called solar ingots, cuts them into ultra-thin wafers, then puts them together to form solar cells in various configurations for residential or commercial applications. As a low-cost producer, Trina has captured strong market shares and is moving aggressively to capture a major chunk of the fast-growing Indian market.

Trina got caught up in the steep selloff in Chinese stocks, but has rebounded nicely. I’m somewhat concerned about the company’s balance sheet, but also believe its leverage makes sense given the fast growth of the solar panel market. This is a great play on global solar, as well as a contrarian play on China’s economy at a time when sentiment is extremely gloomy.

SunPower (Nasdaq: SPWR), based in Silicon Valley, is another leading producer of high-quality, low-cost solar panels. Its products are sold globally, from the United States and Europe to Australia and South Korea, and serve a range of applications, from residential to commercial to satellites to utility-level installations. With technology based on a Stanford-developed solar cell, the company is the provider of choice to the U.S. technology sector, which has helped provide strong growth and profitability.

Known for its research & development muscle, SunPower announced this week that it has developed a solar cell that can convert 22.8% of the sunlight hitting it into energy — a new world record. The company also is betting big on a new lower-cost solar cell that will give it opportunities among less affluent commercial customers and developing nations. SunPower’s sales to residential customers are growing rapidly, with unit shipments up 60% in 2015.
 
SunPower is 65% owned by French energy giant Total S.A. (NYSE: TOT), lending the company financial and ownership stability. SunPower has a clean balance sheet and generates solid cash flow; unlike many of its peers, it’s actually profitable and doesn’t have to borrow as much to invest in production capacity and R&D.

The company announced surprisingly good earnings on February 19, leading to a slew of positive reports from analysts. Credit Suisse has a $32 target price for the stock (a 40% rise from current prices), which seems plausible within the next six to 12 months.

Risks To Consider: A global recession could temporarily reduce demand for solar panels, reducing sales and earnings projections for these companies. And while government regulations and legal decisions have mostly gone solar’s way of late, setbacks in these areas also could hurt the stocks.
    
Action to Take: Buy Trina Solar below $11 and SunPower below $24.

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