Smart Grid Investments

Written By Nick Hodge

Posted October 28, 2009

As you may know, the smart grid made big news yesterday.

But you may not know that I’ve been covering the topic of smart grid — and all its investment angles — in these pages for years.

I’ll get to yesterday’s major announcement below. . .

First, I’ve compiled a fictional interview to help you get acquainted with the smart grid — and its huge investment potential. The interview answers are all taken directly from articles I’ve previously written on the topic.

When was the first time you told Energy & Capital readers about the smart grid?

I first wrote about the smart grid back in May 2007 — well over two years ago. It had come to my attention that venture funding — the early, smart money — for the smart grid had grown 150% between 2004 and 2006. . . so I knew public equities in the sector would be hot soon.

Here’s what I had to say then:

We’re now at a critical point in the short history of sustainably-produced electricity. As it stands, we have the technology to produce electricity from wind, solar, geothermal, marine, and other well-known sources. And Green Chip investors have been profiting from them for quite some time now.

But what we’re lacking are solutions for storing that electricity, for converting it, and for seamlessly introducing it to local grids—all without power interruptions and failures during peak load hours.

Of course there’s money to be made on the transmission side of this issue. But I think the efficiency side will bring even greater returns.

You see, one proposed solution is the development of a "smart grid", which would enable energy-draining appliances to adjust their power consumption based on the daily fluctuations of electricity prices.

And what is the simplest way to describe the smart grid?

I’ve often described the smart grid as "the Internet for energy." A network of smart devices — meters, appliances, thermostats — all communicating with each other and with the utility in an effort to optimize efficiency and reduce costs.

This summer I told readers it was like the future they’ve been waiting for. . .

. . . Home thermostats and individual appliances that adjust automatically based on the cost of power, and water heaters that can draw power from a neighbor’s rooftop solar panel. They see a time when, on a scorching hot day, a plug-in hybrid electric car charges one minute and a few moments later sends electricity back into the grid to help avert a brownout.
Also coming are utilities that get instant feedback on a transformer outage or shift easily among energy sources from wind turbines to coal-burning power plants and back to the turbines when the wind begins to blow again.

And, from miles away, power companies will peer into homes and businesses, then automatically lower thermostats or adjust power use, depending on demand and prearranged agreements.

What is the investment/market potential of the smart grid?

Earlier this year I passed along an AP article that stated:

$700 billion in new electricity generation will be needed over the next 20 years.

Overall transmission modernization, including new higher capacity lines along with the communications technology, could cost as much as $1 trillion. A promise of $4.5 billion in economic recovery money for smart grid development, much of it going to help pay for installing new meters, has produced a rush by utilities and technology companies to start or accelerate projects.

And it’s all starting to come together right now.

What are the latest developments?

You probably heard the big news yesterday. Here’s how I described it:

Today is the day the Department of Energy announced $3.4 billion worth of federal funding to "speed deployment of advanced technology designed to cut energy use and make the electric-power grid more robust."

In laymen’s terms: the Federal government is paying for about 18 million new smart meters to be installed in homes and offices around the country.

The grants are part of the stimulus. . . and will be paid out to 100 utilities across the country in spurts ranging from $400,000 to $200 million.

For investors and consumers alike, this is the equivalent of receiving free money.

Where can investors learn more about the smart grid?

First of all, there are plenty of events coming up to learn more about the smart grid.

I’m heading to GreenBeat next month, self-described as the seminal conference on the Smart Grid, bringing together leading entrepreneurs, investors, utilities, technology executives, and policymakers to accelerate the development of a leaner, more efficient electrical grid.

I’ve also compiled a new report detailing how investors can profit from the smart grid. . . and the billions of dollars being poured into its development by public and private entities.

Remember, just yesterday the federal government dropped $3.4 billion to buy millions of new smart meters. All that money will be paid to companies operating within the smart grid realm, which means easy profits for investors.

This new report has all the details about smart grid investing.

Of course, I’ll be covering the smart grid — as I have been for years — in these pages, and in the pages of our sister publications, Wealth Daily and Green Chip Stocks.

Call it like you see it,

Nick Hodge


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