I've written several times about investing in energy efficiency, and how doing more with the same amount of energy is cleaner, greener and cheaper than generating more power--no matter the source.
We've seen some good investment opportunities coming out of this space lately, and I'll get to those in a moment. First, I'd like to illustrate why energy efficiency makes so much sense, as well as describe some of the technologies being developed to use energy more wisely.
According to a recent report from the McKinsey Global Institute (MGI), using energy more efficiently is the most economical way to stifle rising energy demand and curb the emission of harmful greenhouse gases (GHG).
Diana Farrell, director of MGI, stated the institute has "identified huge opportunities to reduce energy demand and carbon emissions through improved efficiency."
The report, entitled, "The Case for Investing in Energy Productivity," claims that reducing energy waste at industries like pulp and paper, oil refining and steel and in energy users like homes and cars could reduce global energy demand growth by 50%.
To do that, global investment in energy efficiency would have to total $170 billion annually. All that money, however, would be recouped through energy savings, with an annual return rate of 17%.
And some attempts at energy efficiency are going on all around you. Surely you're familiar with the Energy Star program. And more than a few of you have probably purchased compact fluorescent light bulbs (CFLs).
But those are what are known as low-hanging fruit--the easy ways to conserve energy. Now, we have to start reaching a little higher. And that's where there's some money to be made.
Energy Intelligence
One way to use less energy is to make it smarter, hence ‘energy intelligence'. This is done through things like smart thermostats that regulate buildings' HVAC units to use the least amount of energy; or from smart meters that pull energy from one part of the grid to power another part in need. These techniques are known as demand response.
Companies operating in this space include Comverge, Inc. (NASDAQ: COMV), EnerNOC, Inc. (NASDAQ: ENOC) and Echelon Corporation (NASDAQ: ELON).
All three of these are good plays, with Echelon being the most undervalued at the moment. But there are other ways to play the energy efficiency trend as well.
One of the technologies gaining more traction is heat transfer. This is the same technology used in your car's radiator. But in this case, the heat is not wasted; it is used for another purpose, such as heating buildings or heating water.
Many operations lend themselves easily to this type of energy productivity. Paper and pulp mills are a prime example. They use energy to create heat for their day-to-day operations, but oftentimes, that heat is wasted.
Universities, schools and airports are also good test beds for this technology. Really, any place that has a boiler room or produces its own electricity via steam can use heat exchange.
There are some big players already in this game, like Ormat Technologies (NYSE: ORA), which also specializes in geothermal energy.
But some small companies with great technology are cropping up as well.
One such operation is Sofame Technologies Inc (CVE: SDW), which manufactures and sells direct-contact heat recovery and hot water heating systems for use in the industries and locations mentioned above.
They have a variety of products that help maximize the BTUs generated from the combustion of natural gas. This results in the conservation of energy, as well as in the reduction of emissions.
Sofame holds the patent for their direct contact heat transfer systems, which were developed, in part, by Gaz de France. In some remodeling applications, buildings were able to use 50% less gas, even while building space doubled.
As industries start to realize the potential in this type of technology, you can bet there will be high demand. When that happens, Sofame will be there to reap the benefits.
They've already installed over 380 units. Plus, they're under new leadership that is strictly focused on growing sales, both in North America and abroad--including in Asia.
Surely there is a demand to be met for energy efficiency there.
Until next time,
Nick
www.energyandcapital.com
Subscribe to
Part of the problem is just plain "speculators" driving up energy prices but as time passes and those other "alternative" sources really come on line, the price of oil will come down. Without any doubt, we will always have a need for oil; for lubricant's, plastics, etc. but we will not be so terribly oil dependent as we are now. And when it comes to high tech., no one even comes close to the inventiveness of Americans. Yes, we will suffer thru those high oil prices for a while but sooner or later there will be a glut of it on the market. One last interesting thought,...I have also been watching the massive building of water front communities, condos and hotels in the Mid-east, and the hundreds of billions of dollars the Kingdoms have spent trying to out-do each other and if things really got nasty between the mid-east, and anyone else, those buildings could come down faster than the Twin towers in NYC. What I am saying is that those "kingdoms" now have as much to fear from war as we do, and that alone makes the world a safer place !And, hopefully a "Greener" place . LC