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Canadian Solar Inc. saw its share price increase almost eightfold in 2013.canadian solar

Some of the world's biggest solar energy companies staged a spectacular rebound in 2013, a year that was disappointing for many other renewable energy producers' stocks. This year should prove far luckier, particularly for those with new projects in the works.

The big solar panel makers that survived a disastrous market decline between 2010 and 2012 – when overproduction coincided with decreased demand and falling prices – saw massive gains the past year as the business environment improved.

U.S. based companies such as SunPower Corp., First Solar Inc. and SunEdison Inc. saw their shares rise between 60 per cent and 250 per cent in 2013. Chinese companies that trade on U.S. exchanges, including Yingli Green Energy, Trina Solar and JinkoSolar also had big increases of up to 340 per cent.

One of the biggest gainers was Canadian Solar Inc., whose headquarters are in Guelph, Ont., but which makes most of its panels in China. Its stock moved up from about $3.80 at the start of 2013 to just under $30 at year end, close to an eight-fold increase. Since the start of 2014, it has jumped another 30 per cent.

Canadian Solar and SunEdison, among others, benefit from the fact that they install solar panels as well as manufacturing them, giving them a boost even when panel prices are soft.

Still, for investors looking at broad-based clean-technology Canadian companies, the year was not stellar.

The largest and most stable sub-sector is renewable energy utilities, which includes companies that own operating hydroelectric plants, wind farms, solar parks and other clean sources of power.

Brookfield Renewable Energy Partners, the biggest of the group, slipped about 6 per cent over the year. Atlantic Power Corp. fell 68 per cent, mainly due to a dividend cut early in the year. Northland Power Inc. was down 18 per cent and Innergex Renewable Energy Inc. was about even on the year, despite a rebound from its summertime lows and its recent inclusion on the S&P/TSX Composite Index.

Algonquin Power and Utilities also managed just a small gain, while Boralex Inc., which doesn't yet pay a dividend but which is expected to soon, was up 22 per cent.

As for 2014, "the companies that have the greatest growth opportunities will outperform," said Rupert Merer, an analyst at National Bank Financial who covers the renewable energy sector.

He is particularly keen on Innergex, Boralex and Algonquin, all companies with several new projects in the pipeline. "They should see rising cash flow per share in the coming year," he said.

The mediocre showing by some of these firms in 2013 was partly due to concerns about possible interest-rate increases, which tend to dent dividend-paying stocks, Mr. Merer said. But he thinks those worries over higher rates are now baked in.

"They look like they are priced for another half per cent rise in rates, which is where our economists see things going over the next year or two."

Among the big gainers in the Canadian clean-tech space in 2013 were the two hydrogen fuel cell companies that have had a rough time in past years. Vancouver-based Ballard Power Systems Inc., which was a stock market darling more than a decade ago, shifted its focus to commercial markets and has seen investors respond. Its stock almost tripled in price in 2013 and it has spiked upwards in the first few days of 2014. Hydrogenics Corp., of Mississauga, Ont., has also seen a huge recovery, with its stock more than doubling in 2013.

Khurram Malik, a clean tech analyst at Jacob Securities Inc. in Toronto, said he is now particularly keen on companies in water-related businesses, which is now considered part of the clean-tech sector.

"We like them because [for] retail investors, water is a safer place to be than anywhere else," he said. "There is nothing more defensive than a water utility."

He likes Calgary-based Pure Technologies Ltd., which uses high-tech devices to detect leaks in water pipes, and GLV Inc., which sells industrial water treatment systems. Another favourite is H2O Innovation, a rapidly expanding Quebec City-based firm that makes membrane-based water filtration systems.

Over all, "it is hard to play clean tech in Canada," Mr. Malik said. "We have a lot of companies but [most] are young and immature." The New York Stock Exchange and Nasdaq, by contrast, have far more choices and in a much wider range of sizes.

But there are several small private Canadian firms in interesting clean-tech businesses that may go public in the next few months, Mr. Malik said, and that will add more choice for those investors willing to take on significant risks.

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The big solar panel makers that survived a disastrous market decline between 2010 and 2012 – when overproduction coincided with decreased demand and falling prices – saw massive gains the past year as the business environment improved.

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