Among wide market instability, 2022 was a particularly challenging year for renewable energy stocks. With high project costs and limited revenue prospects, much of the renewable energy sector depended on cheap debt that fueled rising valuations throughout the past decade. The sector’s success depends on fluid supply chains and cohesive global trade policy. Slowdowns and snags in both disrupted companies in the industry further.

Still, renewable energy stocks have a bright outlook. A recent report from Deloitte highlighted key aspects of the renewable energy industry that should give investors hope, including the relative cheapness of wind and solar compared to legacy fuels, a surge in residential solar demand, and an increasing focus on clean energy policy. 

Although increased demand and an improving economic outlook may create further short-term difficulty for many renewable energy stocks, we may have turned a corner in the sector. These three renewable energy stocks remain undervalued, as measured by forward P/E, and represent an opportunity for investors bullish on sustainability.   

Edison International (EIX)

Edison International (NYSE:EIX), a Southern California utility company, is a rare stock for value hunters. Edison has increased its annual dividend yearly since 2004. The company boasts a respectable 4.2% trailing yield and a hefty payout ratio.

Utility companies tend to have limited growth prospects, often trading capital gain opportunities for reliable dividend yield and cash flow. But Edison’s growth prospects make it one of the most exciting amongst renewable energy stocks and set it apart from other utility companies. Furthermore, the decent dividend and potential opportunity combine to make Edison undervalued at its current 14.5 forward P/E.

As most know, California is the foremost American state leading the charge toward net zero carbon pollution. State legislation marks 2045 as the ambitious goal to cut air pollution by 71%, drop gas usage by 90%, and reduce greenhouse emissions by 85%. Edison is along for the ride and charging ahead to create a comprehensive electric grid infrastructure to support the goal. Californian regulators, among the strictest in the country, approved nearly all of Edison’s investment plan steps and goals through 2025. 

Between a captive market in Southern California and a spirit of forward-thinking innovation that will likely lead to broader market adoption and product development, Edison is one of the most stable renewable energy stocks on the market today – and it’s undervalued for the potential the company represents.

Livent Corp (LTHM)

Livent Corp (NYSE:LTHM) is unique among renewable energy stocks as the lithium producer company that supports nearly all developments across the electric vehicle industry. Because lithium is needed for almost all batteries that make these vehicles go, Livent is firmly entrenched in the sector as a critical piece to the renewable energy industry. Running a 12.5 forward P/E, it remains grossly undervalued today.

Much of Livent’s raw product comes from South America, yet it remains a truly global company by supporting electric vehicle development in China, North America, and elsewhere. This global attitude meant Livent struggled mightily in 2022 amid strained supply lines. Although still facing some delays as management catches up with rising demand, Livent is poised to flood hungry manufacturers with much-needed raw lithium to support growing consumer demand and national sustainability initiatives.

First Solar (FSLR)

Although First Solar Inc (NASDAQ:FSLR) trades closer to its fair value, it remains slightly on sale for investors able to deploy capital before the renewable energy stock spikes. A solar panel technology development company, First Solar stands apart from its peers with diversified offerings beyond residential solar solutions, a critical factor as residential demand dwindles.

Instead, First Solar increased its focus on US utility providers. Morningstar (NASDAQ:MORN) research indicates that First Solar holds a respectable 30% of the US utility market. This market share makes the company a leader in supporting statewide net zero initiatives like those in California. First Solar will likely see demand snowball as s more states and nations adopt these policies and their utility providers seek solar solutions.

Finally, we have yet to see the full ramifications of the 2022 Inflation Reduction Act bear fruit. Notably, the legislation provided significant incentives for solar adoption. Once the economy stabilizes and attention pivots towards solar innovation, First Solar will likely be one of the winners.

On the date of publication, Jeremy Flint held a long position in EIX. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.