It seems like almost every utility and power producer in America is jumping on the renewable energy bandwagon.

NRG Energy Inc. said in February it was investing $10 million in closely held eSolar Inc., which designs modular power plants using solar-tower technology. NRG has the rights to build three plants with eSolar technology in the southwestern U.S., including a 240-megawatt development for Edison International's Southern California Edison unit.

Last summer, Duke Energy Corp. bought wind project developer Catamount Energy Corp. from Diamond Castle Holdings LLC for $240 million in cash and $80 million in assumed debt -- a year after buying Austin, Texas, wind developer Tierra Energy LLC for an undisclosed sum. Catamount generates 300 megawatts of wind and has a pipeline of nearly 2,000 megawatts under development in the U.S. and U.K., including the Sweetwater project in Nolan County, Texas, one of the largest wind projects in the world.

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PacifiCorp, controlled by MidAmerican Energy Holdings Co., a unit of Warren Buffett's Berkshire Hathaway Inc., is also expanding into renewable energy. Last September it began generating electricity from the 100-megawatt Leaning Juniper 1 wind project it bought from PPM Energy in 2006. And in August it acquired the 140-megawatt Marengo wind project under construction near Dayton, Wash., from Renewable Energy Systems Americas Inc., with plans to expand it by more than 70 megawatts.

Other power producers are also investing. Arlington, Va., power producer AES Corp. participated in a $50 million funding round in Nanosolar Inc., a maker of solar panels for utility-­scale plants, along with Carlyle Group, French electric utility Electricité de France SA and Energy Capital Partners. NV Energy Inc., parent of Nevada Power Co., recently signed a joint venture with Solar Millennium LLC to develop solar power plants in southern Nevada. And Public Service Enterprise Group Inc. in New Jersey has said that it's interested in investing more in the renewable sector, particularly in solar energy, and its CEO Ralph Izzo has gone to Capitol Hill to push for a national renewable portfolio standard.

"We see tremendous potential M&A activity in the alternative energy space," says Peter Gray, a managing director at KPMG Corporate Finance LLC in New York.

So is all this investing in renewable energy on the part of utilities and power producers the best of good intentions? Or is it just window dressing in an age of energy conservation?

Maybe a little of both. U.S. utilities and power producers are investing in renewable energy companies to create tax shelters to help offset profits as well as boost the renewable component of their portfolios to hopefully mask the dirtier parts, such as coal plants.

Some of them are also being mandated to do so by the states they live in, most notably California, whose utilities are up against a tough deadline to obtain 20% of their power from renewable sources by 2010.

The Obama administration has made no bones about introducing environmental legislation on carbon dioxide, which will hit the U.S. electric utility sector with material risks and could lead to 15% to 30% higher power prices if Congress passes it, said a March report by Moody's Investors Service.

"There's a lot of policy spurring development," says Richard Kanoff, a clean technology attorney with Mintz, Levin, Cohn, Ferris, Glovsky & Popeo PC in Boston who used to be regional counsel at power generator Calpine Corp. "I look at it as a major opportunity for utilities to expand in renewable energy in a way they wouldn't in the past, outside their normal sweet spot."

FPL Group Inc., the parent company of Florida Power & Light Co., has been a leader of the pack.

Through its unit NextEra Energy Resources LLC, FPL has become the country's top producer of renewable energy from wind, with 65 projects in 16 states with a capacity of nearly 6,400 megawatts of electricity, or enough to power more than 1.5 million homes and businesses. It's also the country's top producer of solar energy, with the largest solar thermal plant in the world in California's Mojave Desert, the 310-megawatt Solar Electric Generating Systems. In February, it broke ground on its DeSoto Next Generation Solar Energy Center, which will bring commercial-scale solar photovoltaic power to Florida for the very first time at the end of this year.

There's no arguing that it's a good time to invest in alternative energy. Many renewable energy companies can't borrow money to expand, given the credit situation in the U.S., and in some cases are running out of cash. The ethanol and biodiesel sector is already littered with bankruptcies, most notably VeraSun Energy Corp., which in mid-March agreed to sell seven of its plants to Valero Energy Corp. for $477 million, and Northeast Biofuels LP, which is up for sale. Wind and solar companies face credit restraints in moving forward and may look to larger entities to help fund them.

Meanwhile, as renewable energy companies are distressed, the U.S. government is giving companies that invest in them more tax breaks.

Last year, Congress loosened the eligibility requirements at which companies could qualify for a 30% investment tax credit.

The $780 billion stimulus package offers even more goodies, with $94.1 billion worth of programs targeting renewable energy over 10 years. They include a 30% manufacturing tax credit for companies building renewable energy production facilities in the U.S., $8 billion in loan guarantees for renewable energy projects, $4.5 billion in grants for smart-grid electric transmission systems and $2 billion for carbon-capture and -storage technology.

There are plenty of assets to pick up. Spanish turbine maker Gamesa Corp. Tecnológica SA is auctioning off its portfolio of wind power projects, with Citigroup Inc. advising it. It has three projects with signed interconnection agreements that have completed the permitting process, 11 others in medium to advanced stages of development and 45 in early-stage development.

In early March, infrastructure group Babcock & Brown Ltd. put up for sale its entire six-gigawatt wind development pipeline, hiring Marathon Capital LLC to advise it. The pipeline consists mostly of North American wind projects but includes a few international ones. The auction didn't come soon enough: In mid-March, the group filed for bankruptcy.

Noble Environmental Power Inc. and First Wind Holdings Inc. also have individual projects up for sale. NRG is shopping its Padoma Wind Power LLC unit in La Jolla, Calif., which it bought in 2006 for an undisclosed sum, and AES might sell some of its wind plants -- most of which are in the U.S. but also in China and France -- if the price were right.

Ed Feo, co-chair of the global power, energy and utilities group at Milbank, Tweed, Hadley & McCloy LLP in Los Angeles, who specializes in renewable energy, says there's a broad group looking at acquiring renewable assets, including utilities, utility affiliates and private equity groups looking to buy into the sector at a reasonable price. He's not sure how reasonable prices will be, however.

"Lenders that are the beneficiaries of these assets are not letting go for cheap," he says. "Prices will be down from their peaks, but I don't expect to see fire-sale prices."

Feo sees most of the consolidation happening around projects. "Technology players and companies are positioning themselves to get their hands on project entities, which are looking for ways to monetize their projects," he says.

George Bilicic, chairman of the power, utilities and infrastructure sector at Lazard, isn't so bullish. He thinks utilities will invest in renewable energy through their capital expenditure budgets, such as new wind projects or power purchase agreements, but he doesn't see it becoming an area of big deal activity.

"We observe a general openness to the topic and interest from regulated utilities to figure it out and find out where it makes sense," he says.

"This may be part of the new business paradigm."

Contracts seem to be the way some of the larger utilities are going. One example is Chicago utility giant Exelon Corp. Through power purchase agreements for three wind farms in Pennsylvania and one in West Virginia, Exelon has become the largest provider of wind power east of the Mississippi River. And last October, it bought the rights to purchase 198 megawatts of output from the 396-megawatt Twin Groves Wind Farm near Bloomington, Ill., from Constellation Energy Commodities Group Inc. Horizon Wind Energy LLC, owned by EDP Renovaveis SA, will continue to own and operate the plant.

American Electric Power Co. has mixed contracts with ownership. It has signed long-term power purchase agreements with wind-power-plant developers, including Majestic Wind Power LLC, a unit of Babcock & Brown, this past January. But it also owns 310 megawatts of wind generation in Texas, including the Trent Mesa Wind Farm, which sells its output to TXU Corp., and the Desert Sky Wind Farm, which sells its output to CPS Energy of San Antonio. Around 3% of its generating capacity comes from renewable sources. Its plan is to add 1,000 megawatts of new wind energy by 2011.

Dan Rogers, a partner in the global transactions practice group at King & Spalding LLP in Houston, says he "wouldn't be surprised" if larger utilities "didn't expand their holdings."

Entergy Corp., a New Orleans utility and big nuclear power producer, might be another buyer. It has acquired 50% stakes in two 80-megawatt wind farms in Texas and Iowa. But the company may be more interested in developing clean coal technology, having partnered with researchers at the Massachusetts Institute of Technology on several demonstration projects.

Entergy CEO Wayne Leonard also wrote an op-ed piece in The New York Times in January, arguing for a carbon cap-and-trade program and against a renewable portfolio standard, which would force his company to invest in solar, wind and geothermal energy "with no incentive to continue our pursuit of carbon-capture technology."

There are plenty of critics of utilities and power producers incorporating renewable energy into their portfolios. Karl Miller, a former power plant executive and now a consultant in New York, is among them. He says the worst offenders are Sempra Energy, PG&E Corp. and Southern California Edison, which he claims are window dressing their renewable portfolio standards mandate as an excuse to jam through major transmission pork projects. He notes Sempra's Sunrise Powerlink, a $2 billion, 123-mile high-voltage line in Southern California's Sonoran desert, and Socal's major transmission projects to the Arizona border.

"Utilities are signing checks they can't cash, which means that utilities are signing contracts with every Tom, Dick and Harry developer for wind, solar and biomass projects to meet their renewable standards mandates," he says. "The problem is almost all of the 'contracts' are for projects that are not constructed, have no firm transmission or have other major flaws and challenges. While there are legitimate efforts to make advancements towards green/renewable generation strategies, I'm afraid the majority of it is simply window dressing. I truly believe it is going to be the next boom and bust industry in the U.S. economy."

Miller thinks utilities and power generators should instead be investing in clean-burning, natural gas-fired power generation that can be brought on line as soon as the "green/renewable bust occurs" and the country panics due to lack of sufficient baseload generation.

"Renewable technology and infrastructure support are simply not there yet and will take many years and hundreds of billions of dollars in venture capital to advance," he says. "Government handouts won't work -- never have and never will, in any industry."

Feo says it's too early to identify which utilities and power producers are going after the right strategy in the renewable energy game.

"There will be a period where it will enjoy a bubble, and then there will be a fallback," he says. "Then we'll see who is smart."