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Sprott Power Corp., which operates wind farms in Ontario and Nova Scotia, jumped 50 per cent in 2011. Sprott Power Corporation Technician Zack Fisher stands on top one of the fifteen new wind turbines which were officially opened in Amherst, Nova Scotia, June 25, 2012.

PAUL DARROW/REUTERS

It was another discouraging year for Canadians investing in clean technology companies – but the companies that survived are giving the industry a glimmer of hope within the gloom.

After a dismal 2011, the past year was supposed to see some of the beaten down public firms in the sector showing their stuff and gaining momentum. Instead, several players collapsed, and many of those that remain have seen their stock fall dramatically. Only a handful have managed strong returns over the course of the year.

Two companies that were once considered Canadian high fliers – solar panel makers Arise Technologies Corp. and Day4 Energy Inc. – are now gone. Arise went bankrupt and Day4 was delisted and sold off to its managers. Meanwhile, stocks of Canadian-traded geothermal companies are now at a fraction of the prices they changed hands for a couple of years ago, and several wind energy players – such as Finavera Wind Energy Inc. and Western Wind Energy Corp. – are selling off assets to bigger players.

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And this is not just a Canadian phenomenon. A struggling economy and lower government subsidies in Europe, slowing tax breaks in the United States, and the commoditization of solar cells and panels have hammered companies across the global green technology sector. Once formidable players such as Denmark's huge wind turbine maker Vestas Wind Systems A/S have had another poor year after a disasterous 2011. Q-Cells, one of Germany's key solar cell makers, restructured to stave off bankruptcy and then was taken over by South Korea's Hanwha Group. And U.S. battery maker A123 Systems, Inc. filed for bankruptcy protection.

Still, there are reasons for optimism. In mid-December, California-based SolarCity Corp., a company that leases solar panels to consumers and

businesses, had a very successful initial public offering of shares. The stock jumped about 50 per cent on the first day of trading, and is still well above its launch price.

One key to SolarCity's success is that it is positioned to take advantage of dropping panel prices – which have severely dented margins at the companies that manufacture them. SolarCity installs panels, rather than making them, so it helps if they get cheaper.

The successful clean technology companies will be the ones that can take advantage of the shift in the market to commodity pricing, or can show they have proven technology that works on a commercial scale, said James Chepyha, vice-president of investments at Chrysalix, a venture capital firms based in Vancouver that specializes in energy. Essentially, investors should look for companies that "are addressing real market needs on a sustainable basis," he said.

In Canada, only a handful of clean technology companies have shown significant gains in 2012, and many are down sharply – including some of the longer-term players in the sector. Carmanah Technologies Corp., the Victoria, B.C.-maker of solar-powered lighting, saw its stock fall by more than one-third in 2012. Ballard Power Systems Inc., the Vancouver fuel cell maker, is trading at about half the level it was at at the start of 2011.

As was the case in 2011, the most stable companies have tended to be dividend-paying utility-type firms that have portfolios of renewable power projects with long-term contracts. Some of these, such as Algonquin Power & Utilities Corp. and Northland Power Inc. have eked out small gains in 2012. Boralex Inc. – although it doesn't yet pay a dividend – has jumped around 25 per cent over the course of the year, while Sprott Power Corp. is up by about 50 per cent.

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But being a utility does not make a firm immune to precipitous drops, however. Shares in Atlantic Power Corporation stock plunged about 20 per cent in November after worries arose that it might cut its dividend. Many of these utility-type renewable energy firms appeal to investors primarily because of their yield, and if that is under threat, there can be a major retreat.

Still, said Rupert Merer, an analyst at National Bank Financial, these kinds of firms are "the cautious and safe bet" for more conservative investors who want to be in the renewable space.

Mr. Merer said says he particularly likes Sprott Power, which operates wind farms in Ontario and Nova Scotia and is undervalued because of its small size and illiquid shares. He also like hydro, wind and solar operator Innergex Renewable Energy Inc., which, he says, has excellent hydro, wind and solar assets and some very long-term power contracts.

Mr. Merer said in the coming year he will be watching companies with mature industrial scale technology in water treatment and energy efficiency, but he advises small investors to stay away from early-stage speculative clean-tech stocks.

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