It can be a gamble to invest in alternative energy

You've experimented, but so far, your attempts to replace the gas engine have failed. The duck-powered glider had potential, sure, except for all the unplanned pond landings. Big Slingshot One simply left a series of man-shaped holes in your house. And let's just say that mankind isn't ready to commute by cannon yet.

Nevertheless, as oil prices hover above $110 a barrel, it's a safe bet that people will be thinking much harder about how to replace the gas-powered engine, or at least how to make it use less fuel. Are there investment plays for that? Sure. But only with money you're willing to see go up in smoke.

Although oil prices are down from their peak of nearly $120 just a few weeks ago, a barrel of light, sweet crude closed at $112.52 Thursday, up from $63.19 a year ago. The average price of a gallon of regular gasoline hit an all-time record high of $3.603 this week, according to the government.

Back when gasoline was less than $1 a gallon, there was no real urgency to explore alternatives. But the prospect of $4-a-gallon gas has focused Wall Street's collective mind wonderfully on alternative energy. "When gas gets dear, it doesn't take long for people to say, 'What else is available?' " says Robert Wilder, CEO of WilderShares, which created the WilderHill Clean Energy index.

What else is available? Plenty. But stocks of companies that deal in emerging technologies often have several problems. Consider First Solar FSLR, for example. Wall Street currently values the company's outstanding stock at $21 billion, more than General Motors or Ford.

First Solar's stock fell $28.64 Thursday, or 9.8%, despite a spectacular earnings report on Wednesday. Analysts fretted that other companies would give First Solar more competition in the next few years.

Normally, such pronouncements wouldn't clock a stock. But even after Thursday's drubbing, First Solar sells for 116 times its past 12 months' earnings. That's nosebleed territory. "That may be a right price if everything goes right," says Kevin Landis, manager of Firsthand Alternative Energy fund. If everything doesn't? Then you get more days like Thursday.

But there are plenty of other ways to invest in alternative energy, including:

•Wind power. One of the leaders in the field is Vestas, which has installed 35,000 wind turbines worldwide. The Danish company is listed on the Copenhagen, Denmark, exchange, which means it can be a bit tricky for U.S. investors to buy.

A more pedestrian way to buy into wind power is to buy shares of General Electric ge, which has a large wind turbine division. The stock sells for 15.3 times its past 12 months' earnings, which is respectably cheap. But it's hardly a pure play: General Electric is a sprawling conglomerate that has its hands in everything from health care to finance to media.

Another wind play: FPL Group fpl, a Florida-based utility that has wind projects in Texas, Minnesota and North Dakota. The company owns 4,016 megawatts of wind capacity. FPL's stock sells for 18.9 times its past 12 months' earnings — on the high side for a utility. Nevertheless, the company pays a 2.7% dividend, and its 2009 earnings are expected to grow 9.8% from 2008 earnings.

•Conservation. One of the first things people do after getting their utility bill — after fainting, that is — is to swear to reduce energy consumption. And you can choose among several reasonably priced companies that will help you reduce your power usage.

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