Investing in the Future of Energy with National Grid (NYSE: NGG)

Jeff Siegel

Written By Jeff Siegel

Posted September 22, 2015

For the past four years, it’s a been a slow and steady rise.

Buying shares back in 2011, energy behemoth National Grid (NYSE: NGG) has since climbed about 35%.


Certainly I’ve enjoyed much bigger and much faster rides along the way, but there’s definitely something to be said about a company that delivers steady growth along with an attractive dividend – currently around 6 percent.

Of course, as a socially-responsible investor, I’ve also found National Grid to be less at odds with my desire to give a crap about the planet. After all, National Grid is on slouch when it comes to embracing clean energy.

In fact, CEO Steve Holliday recently sounded off about the future of clean energy – and what he said further validates NGG’s credibility as a forward-thinking company that understands how to both embrace and profit from the transition of our global energy economy.

Holliday told reporters that the idea of baseload power is outdated. This is actually something Jon Wellinghoff, the former chairman of the Federal Energy Regulatory Commission commented on back in 2009, noting that if we can shape our renewables, we don’t need fossil fuels or nuclear plants to run all the time. He also said that most plants running all the time in the system are an impediment because they’re very inflexible …

You can ramp up and ramp down a nuclear plant. And if you have instead the ability to ramp up or ramp down loads in ways that can shape the entire system, then the old concept of baseload becomes an anachronism.

Holliday seems to be somewhat in the same boat, telling reporters …

The idea of baseload power is already outdated. From a consumer’s point of view, baseload is what I am producing myself. The solar on my rooftop, my heat pump – that’s the baseload. Those are the electrons that are free at the margin. The point is: this is an industry that was based on meeting demand. An extraordinary amount of capital was tied up for an unusual set of circumstances: to ensure supply at any moment. This is now turned on its head. The future will be much more driven by availability of supply: by demand side response and management which will enable the market to balance price of supply and of demand. It’s how we balance these things that will determine the future shape of our business.


Baseload, Schmaseload!

Those who oppose clean energy opportunities often use the baseload power argument as a reason to trivialize things like solar and wind. But such an argument is irrational and has no basis in reality.

The truth is, clean energy resources combined with new energy technologies is absolutely going to put the old baseload model out of business.

In an interview featured in World Energy Focus, Holliday actually talks about this very thing. In regards to energy storage, for instance, he notes that it’s simplistic to just look at storage, saying that the company will have the intelligence available in the system to ensure power is consumed when it’s there and n0t when it’s not there.

This is what software companies are working on at the moment, says Holliday. “We have a partnership with New York University where we support a programme for startups. Of the 30 startups we are supporting, 25 are software companies. And this is called an energy incubator!”

These companies, says Holliday, “are building the apps that will transform the energy world, aggregating data, marrying supply and demand. It is a really exciting space to be in.” As an example he notes that “there will be massive amounts of data available from vehicle charging stations in the future. Intelligence is going to decide how this will be used.”

Although we write quite a bit about the production of electricity, much of the world’s energy transition will be facilitated and brought to life by advances in technology. And as an investor, it’s reassuring to see National Grid embracing this reality.

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