'Geothermal energy, or heat generated from the earth, is largely non-polluting, and is renewable and reliable," says Ashley Winters and John Parke.

In Stephen Leeb's The Complete Investor, the contributing editors look at a trio of geothermal ideas: Chevron (NYSE: CVX), Calpine (NYSE: CPN), and Ormat Technologies (NYSE: ORA).

"Throughout the globe, heat is continually produced in a layer far below the earth’s crust. Large power plants can capture and use this steam to provide electricity on a fairly large scale.

"In Iceland, by some estimates, 50% of all energy needs are met through an alternative energy source that has been known for a long time,

"Geothermal is used in many other places as well. The largest system in operation is in California just north of San Francisco, in an area known as the Geysers.

"Efforts are also underway to use geothermal heat via 'hot dry rock' technology. Rocks are broken up by pumping water through them at high pressure; water is then pumped through the broken rocks so that it can be heated by the earth’s energy.

"Finally, geothermal energy also can be tapped through ground-source heat pumps, effective in heating and cooling individual buildings. This approach takes advantage of the fact that just five to 10 feet below the ground there is a constant temperature of around 50 degrees F.

"Right now the U.S. has nearly 3,000 megawatts (MW) of installed geothermal energy capacity and is the global leader in total geothermal electric power production.

"Over the next five to 10 years, capacity should grow by at least 20% a year. Three companies are particularly well positioned to lead this growth, starting with Chevron.

"While oil, of course, is its main focus, Chevron is the world’s largest geothermal energy producer, with facilities that include two plants in Indonesia and two in the Philippines. The company’s huge capital base gives it the wherewithal to fund continued research and installations.

"With 2007 representing Chevron’s fourth consecutive year of record earnings, the company is a strong pick for many reasons, making it a safe way to get in on geothermal’s expected expansion.

"A riskier play is Calpine Corp., the primary producer of geothermal energy in North America. It’s the operator of the huge geothermal facilities at the Geysers, which meet nearly 70% of the average electrical demand for California’s North Coast region.

"Calpine, created in 1984, grew rapidly in its first two decades, aggressively purchasing natural gas fields and gas turbine plants as well as moving into geothermal energy, and by 2001 it was the world’s ninth-largest producer of electricity.

"In 2005, however, it filed for bankruptcy as its aggressive leveraged expansion efforts foundered in the wake of California’s energy crisis of the early 2000s and Enron’s collapse. Early this year the company emerged from bankruptcy with its old shares canceled and new stock issued.

"Finally, the pure-play geothermal company with the best-defined growth prospects is Ormat Technologies. It’s the second-largest producer of geothermal electricity in the U.S., which accounts for around 75% of the company’s revenues.

"Its 11 geothermal power plants produce an average of 32 MW per year per plant, and it has a further 270 MW of capacity in various stages of development.

"Ormat is a leader not only in geothermal energy but also in 'recovered energy power generation', which refers to the capturing of waste heat generated from industrial processes and converting it into electricity.

"The company’s growth will become more visible as interest in geothermal power generation increases.

"Ormat’s reputation is built on its pioneering work (the company owns more than 75 patents and has the sector’s leading technology) and on the fact that it designs and makes most of the equipment it uses, further boosting its importance within the sector.

"Revenues grew 12.4% in the most recent quarter vs. the like year-earlier period, while earnings per share of 24 cents were above expectations. And while the P/E at 30 is relatively high, the company’s expected rapid growth gives it a PEG of just 1.2."