3 Buys in This Year's Renewable Energy Rally

NEW YORK ( TheStreet) -- Over the last two decades, the U.S. has seen major moves forward in the renewable energy space. Subsidies and government mandates have created a supportive environment for everything from biofuels to wind and solar energy as potential alternatives to fossil fuels.

On a comparative basis, however, there is still significant room for growth -- and below I detail three companies to watch.

According to data from the Energy Information Administration, in 2011, renewable energy consumption was a quarter of what was seen in petroleum consumption, a third of yearly consumption in natural gas, and less than 10% of national energy consumption as a whole.

Nonetheless, the progress in transitioning to renewable energy has been impressive. Power generation in wind energy has more than tripled since 2000. Productivity levels in ethanol have more than quadrupled since 2003.

All of these factors point to positive trends with significant potential for growth. A recent report from the IEA supports these positive possibilities, suggesting that global renewable energy sources (such as wind, water, and solar energy) will eclipse both nuclear energy and natural gas by 2016.

Specifically, the IEA report shows that rising demand in emerging markets and lower production costs will allow for increased competition with fossil-fuel power generation. As this happens, power generation from renewables is expected to double that of nuclear energy in the next three years.

Longer term, the trend continues to build. The IEA report predicts renewable power will rise by 40% in the next five years, and make up nearly 25% of global energy consumption by 2018. This is a significant increase from similar projections released just a few years ago.

Even the White House has unveiled plans to reduce its reliance on fossil fuels, with President Obama articulating goals for the federal government to direct 20% of its energy needs to draw from renewable sources by 2020. The combination of these factors helps paint a brighter outlook for investors looking to gain exposure to the renewable energy space.

So, while it is unlikely any of us will live long enough to see a world that meets a majority of its energy needs using renewable sources, there are still many ambitious companies with solid fundamentals that present highly attractive investment opportunities for those with broad time horizons. Here, we will look at three stock choices with more upside potential in this year's bull market.

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