With President Obama’s climate-change plan now before the U.S. Senate, a number of investors have been wondering if now is a good time to “green” their portfolios with environmentally friendly companies.

Regardless of the Senate’s decision, we still think there are a number of green stocks with investment appeal. But you’ll want to use caution when looking for opportunities in this area. Many green stocks may need a long time to move from the research or concept stage to profitability. As well, the recession has cast doubt on the future of some government subsidies for green stocks.

However, we continue to recommend a number of companies that are now involved in, or are planning to expand into, green technology and green power production. We focus on those that have a sound base of other operations to offset these added risks.

In a recent Hotline that we sent to subscribers of The Successful Investor, we updated our advice on TransAlta Corp. (Toronto symbol TA), one of our long-time favourite energy producers.

TransAlta’s strong foundation sets it apart from other green stocks

TransAlta uses coal to generate 60% of its electricity. Its reliance on coal means the company is facing tougher environmental regulations; it is taking steps to limit their impact, and this is where green energy comes in.

The company is testing a new carbon-dioxide-capture system that it can attach to its existing plants. This would be millions of dollars cheaper than similar systems that need separate facilities. TransAlta feels that it can recover 90% of its carbon emissions using this method. It would then sell its carbon to oil producers, who would pump it into underground deposits to extract more oil.

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Moving ahead with wind farms despite the recession

Separately, TransAlta is building new wind farms in Alberta, despite the fact that the recession has hurt electricity demand and prices. These should increase its wind-power capacity by 204 megawatts, or 82%, over the next two years.

Expanding its wind-power business also helps TransAlta win favour with regulators and environmentalists, and enhances its reputation among green stocks.

Successful takeover would add to green power assets

TransAlta has made news recently by launching a hostile takeover bid for Canadian Hydro Developers Inc. (symbol KHD on Toronto). Canadian Hydro is unique among green stocks because it develops and generates power from three different renewable-energy sources: hydro, wind and biomass (burning plant materials and waste).

The company owns and operates 21 power-generating facilities, including 12 “run-of-river” hydroelectric plants, eight wind farms and one biomass plant.

“Run-of-river” hydro plants rely on a river’s natural flow to guide water through pipes to a generating station. These projects have a low environmental impact compared to hydroelectric dams, which have large storage reservoirs. Five of the company’s hydro plants are in Ontario, four are in Alberta and three are in B.C.

You can follow the progress of TransAlta’s takeover bid for Canadian Hydro Developers, and get our latest advice on other green stocks, in The Successful Investor. Click here to subscribe today.