Trend: Smart grid technologies reduce wasted energy, which is increasingly attractive as the costs and trade-offs of building more power plants become known.
Chris Nelder at Energy & Capital describes how smart grids save energy and why smart grid technology has great potential.
It's not every day that you see an opportunity to get in on the ground floor of a whole new industry, but smart grid technology is just that.
The "smart grid" term has come to encompass a whole array of different technologies, creating some confusion about exactly what it is. It doesn't help that the publicly-traded companies in the sector are mostly young, with cheap stocks regarded as speculative.
What investors should not be confused about is the outlook for this sector, which is nothing short of spectacular.
In many ways, the smart grid is about reducing wasted energy. That's not just good policy; it's also good business. Deploying energy saving technologies usually pays for itself quickly, and always pays for itself in the long term. It also cuts down on greenhouse gas emissions from generating unneeded power.
Smart grid technologies are going to receive a nice boost from the U.S. stimulus package as well. The Senate bill includes $11 billion to improve the electric grid.
Between the cost benefits, the lower emissions, and federal funding, investing in smart grid technologies now is a no-brainer.
Smart metering can give customers immediate feedback on their own energy consumption....Smart meters communicate usage data to the utility electronically....
But that's just the beginning. Smart meters also enable a host of other technologies. Smart appliances can take orders from smart meters about when and how to run, and when not to run. Likewise, smart sockets can control the usage of dumb devices plugged into them. The utility can quickly pinpoint service outages, and restore service more quickly.
Smart meters also allow customers with solar, wind, and micro-hydro systems to sell power back to the grid, thus enabling the deployment of more distributed generation. As plug-in hybrid vehicles become more common, smart meters will be able to use them as distributed storage, drawing down a small part of their battery power by agreement of the vehicles' owners. In time, such "vehicle-to-grid" power technologies could be the "holy grail" of renewable energy, by giving the grid a way to store energy from intermittent sources like wind, then use it later when it's needed.
Utility operators in Austin, San Francisco, and Boulder have all embarked on long term programs to replace their meters, with other cities soon to follow.
California utility operator PG&E has the nation's most ambitious program. Currently deploying new meters at the rate of 10,000 per day, the company aims to install 10.3 million new meters at the nearly 6 million homes and businesses across its entire grid by 2011. The utility estimates that roughly 90% of the $1.7 billion cost of the project will be offset in savings over its 20-year life, of which over half will owe to meter-reading savings.
The rest of the country is watching PG&E closely. If their rollout is successful and the cost benefits are clear, we should expect the rest of the country's utilities to soon follow suit.
There aren't many real "pure plays" in the smart meters themselves. The meters deployed by PG&E are made by diversified giant General Electric (NYSE: GE) and privately-held Swiss company Landis+Gyr.
But there are some side plays on the PG&E rollout, such as utility infrastructure company Esco Technologies (NYSE: ESE) whose subsidiary Aclara RF Systems Inc. provides a secure radio transmission network for the smart meters to communicate with the utility's head office.
Another smart metering company is Itron, Inc. (NASDAQ: ITRI) which provides metering, data and software for automated meter reading. Itron recently announced a deal to use communications technology by Digi International (NASDAQ: DGII) in its advanced metering network.
There are also the smart grid companies whose technologies will ride on top of the smart metering networks. Echelon Corporation (NASDAQ: ELON) makes a variety of devices that will put the "smarts" into everything from air conditioners to light switches, enabling them to communicate with each other and with the grid operator. Comverge, Inc. (NASDAQ: COMV) provides demand-response and energy management technology that allows grid operators to better manage peak and baseload capacity. A similar play is EnerNOC Inc. (NASDAQ: ENOC) whose technology allows utilities to remotely manage and reduce electricity consumption across their networks.
Even Google (NASDAQ: GOOG) is getting into the smart grid act, with a new iGoogle gadget called PowerMeter. The application will display power usage per appliance in real time, so that customers can see where their power is going. The company cites research that indicates the feedback to consumers encourages them to cut 5-15% of their energy usage by changing their behaviors. Google is offering an open-source standard for collecting and reporting that data over the Internet, and encouraging companies in the smart grid sector to conform to their standard.