Wednesday, January 20, 2010

Energy Efficient (Smart) Grid Stock Review and Future Prospects

Grid companies are a crucial part of delivering renewable energy from points of production to consumers. Grid technology is essential to renewable energy and making that grid smarter enhances its efficiency. According to Carnegie Mellon University 65 percent of all the energy consumed to generate electricity in the US is lost each year. Energy efficiency initiatives are an important part of recouping that lost energy.

To help investors see the value of renewable energy, The Green Market followed the progress of Solar, Wind, and geothermal stock in 2009. On January 14, 2009 The Green Market published its portfolio of 13 energy efficient (smart) grid stocks.

The Green Market's grid stock Resin Systems (RS.TO), makers of composite utility poles for electricity transmission and distribution, gained 173 percent in 2009. The Green Market's smart grid stock EnerNOC (ENOC), designers of, amongst other things, demand response solutions for grid operators and utilities, gained 286 percent in 2009. Overall, The Green Market's grid portfolio averaged 61 percent in 2009.

Going forward, burgeoning demand should continue to encourage investors in (smart) grid stock, particularly in the US. The estimated annual cost of the outdated US grid is 206 billion per year. To make the grid more efficient, it needs to be updated and expanded. To maintain current electrical transmission and to increase the electricity feeds from renewable power sources, the US will need to massively invest in high-voltage transmission lines. Expanding transmission capacity is only part of the challenge, making the transmission infrastructure digital is what makes it smarter and more efficient.

In the US, grid investments will be considerable. The utility industry estimates it would cost about $50 billion to equip every home in the US with a smart meter and $60 billion to transport enough energy to offset 20% of its current total electricity use with renewable power. The US will need to spend up to $1.5 trillion on its electricity system over the next 20 years and about $900 billion for smart grid technology over the next two decades. An investment in cleaner energy could put the figure at $2 trillion.

According to the Electric Power Research Institute, "The benefits to society from gird modernization will exceed the costs by four to one."

Grid investments are a priority for China as that nation is losing 27 percent of its wind-generated power due to inefficient grid technology. Out of 12.2 GW of installed capacity at the end of 2008, only 8.9 GW made it to customers. This is why China is using 23% of its massive 500 billion dollar economic stimulus for their national electric grid, much of which will transport energy from renewable projects. Over $134 billion has already been allocated to create a high-voltage direct current (HVDC) network to connect wind farms to cities and to optimize that network with smart grid technology.

In the US, 6 billion dollars of federal stimulus money is being directed to the electric grid. Cisco Systems (CSCO) aims to get some of those federal funds as they have a variety of products designed for the smart grid, including energy management "EnergyWise" software and new products designed for home use.

A Cisco spokesperson made the sensational claim that the grid could end up being up to 1,000 times the size of the Internet. Cisco believes that just the communications portion represents a $100 billion opportunity, even if we only see a fraction of this sum, (smart) grid stock are going to keep gaining.

Next: Energy Efficient Lighting Stock Review and Future Prospects

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