When Will Renewable Energy Companies Overtake Traditional Energy Companies?

From an investor perspective, what matters most isn't a company's market cap or energy output, but the potential returns — or growth in share price — which depends, in part, on anticipated future revenue and profit. As Lynch pointed out, "Investors could care less which company is bigger, but care instead which company is going to grow the most," he said.

"Solar companies are going to grow a heck of a lot faster [than conventional energy companies]. They have potentially far greater room to grow; therefore, their stocks probably have equally greater potential to grow."

It's easier to invest in solar than in wind because the sector has far more pure play companies, or "more items on the menu," he said. For example, GE is a big player in wind power, but has so many other businesses that the wind part of the company doesn't drive the stock. "You don't buy GE because they have a good wind turbine," Lynch said.

Solar stocks dramatically outperformed the market in 2005, 2006 and 2007, although they fell way down in 2008, he said (see chart on returns, below). Lynch predicts that solar will be the fastest-growing segment of the energy industry, with returns exceeding those in oil and gas, but doesn't expect solar companies' market caps will overtake those of the oil and gas giants. Not all renewable-energy sectors perform similarly, though. He pointed out that biofuel stocks are down 50 to 80 percent over the last three years.

Short Answer: In a Long Time

From all of these different angles, it's obvious that renewable energy companies are a long way from catching up with fossil-fuel energy industry giants. In addition to all the above-noted variables, David Jones, editor of the Platts Renewable Energy Report, said he doesn't expect to see a renewable-energy company on the Fortune 500 until governments set a market price on carbon emissions. "Until that takes place, companies and other organizations will naturally release carbon because it doesn't cost anything," he said. "Once a price gets put on those emissions, renewables will be much more competitive." Europe already has a carbon emissions trading program, and the United States also is considering one in several proposed climate bills.

In addition, Jones said prices need to keep coming down to make renewable energy affordable for the majority of customers, and the industry needs to grow large enough so that renewable energy is accessible as an everyday option for most people. "I think there will be a time when utilities automatically add [a green power] option on their bills."

Consumer awareness and marketing is another big factor. "What you're going to need is some sort of consumer revolution in which renewable energy becomes a standard feature of energy generation," he said. "It's got to be in the consumers' interest beyond trying to make a difference. … It has to be really attractive to people as a product."

Overall, with a worldwide market, Jones said its always possible renewables could see explosive growth — and in fact solar is already becoming mainstream in some markets — but added that he'd be very hard pressed to predict a year — or even a decade – when a renewable company will reach that size. "In a nutshell, it's going to take a while," he said. Manufacturers of smaller-scale systems that are mass-produced and sold in large volumes to consumers are most likely to get to the Fortune 500, he predicts.

Still, keep in mind that looking at the state of pure play renewable companies hardly tells the whole story of the success and growth of clean energy. After all, many existing energy companies, including oil companies and major utilities, are getting involved in renewable energy, and Gartner’s Velosa said he expects that trend to keep growing. BP Solar, for example, has some advantages — such as experience in the energy industry, a familiarity of the market dynamics involved, the relationships and the ability to get financing — from its parent company, he said. And even though wind may make up a small part GE, the company is a major player in the sector.

Velosa expects to see large energy-generation and –distribution companies get more involved in renewables, leading to more mergers and acquisitions and other impacts. "Global companies are very interested in this because they see a market segment that has higher growth than the overall energy industry does," he said.  In other words, the next BP of renewables could be BP.

And of course, a spot on the Fortune 500 isn't the only measure of success. Dan Adler, director of the California Clean Energy Fund, said while he wants the renewable industry to be huge and profitable, his gut reaction to the question of when renewable-energy companies would catch up to conventional energy players was "hopefully never." He would like to see the renewable industry retain a larger number of players rather than the few energy giants that exist in oil, gas and coal today.

While oil companies, for example, have to be big because oil's so expensive to produce and oil resources are more centralized, one of the goals — and strengths — of renewable energy is its diversity and the ability to distribute its production, Adler said. "The nature of the technology doesn't require the kind of scale and vertical integration [of oil companies]," he said. "If we start to see a lot of consolidation, we may be moving away from that strength."