Smart Grid: Powering Us Out of Recession

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by: Mark Fidelman

Several years ago a power plant in Florida shut down suddenly. That put a sudden shock on the grid and shut down a large baseload plant in Georgia at the same time. The Georgia plant employed around 800 people at the time. Those employees averaged about $35,000 a year or about $10.00 per hour in the mid to late 1970’s. The plant was down for about 8 hours. It produced 8000 megawatts of electricity per hour. The cost of one kilowatt of electricity was about $0.10 (ten cents). Multiplying 1000 kilowatts per megawatt times 8000 megawatts per hour times 10 cents per kilowatt times 8 hours times 800 employees times ten dollars per hour comes out to $7 million. If the Georgia plant had been on Smart Grid Technology, the digital sensors would have protected the plant and it would not have shut down due to the shock placed on the grid by the Florida plant.

A Day Late and a Dollar Short…Again!

Are we always going to be “a day late and a dollar short” compared to other nations in this respect? Georgia Power Company has installed Smart Meters on all of the residential and commercial power meters. That move displaced all of the old-fashioned human meter readers. Most of them were relocated to other jobs within the company so that did not cause a large layoff of employees. Now the company does not have to contend with the problem of meter readers being bit by dogs or stung by wasps. We are behind other nations in this developing technology, in fact a company called Invensys Process Systems (IPS) has been awarded a contract to provide digitized control systems and simulator control systems to China for about $250 million dollars. This is part of China’s overall program to reduce dependence on coal fired plants and reduce carbon dioxide emissions while increasing their nuclear power plants and thereby increasing their total electric energy supply to meet present and future growth needs. This is just one example but there are hundreds of others similar to this one.

The Bottom Line: What Does It Cost?

The initial conversion from the present national grid system to the new Smart Grid system will initially cost billions for the installation of equipment and reconfiguring the controls. In Boulder, CO alone, the estimate was $100 million to convert the city’s population of 100,000 to digital. Since almost all of the power companies in America are regulated by a state utilities regulating commission, this expenditure would have to be approved by each states utility commission. The President’s stimulus package includes money for this purpose but it has to be requested and approved through the state commission. At this time, West Virginia and Georgia are leading the way in moving to the new digital systems. The other states are at various stages along the way. The next five to ten years will see the greatest changes in the power industry since the birth of nuclear power back in the early 1950’s.

Can Smart Grid Technology Help Lead Us Out of the Recession?

This emerging technology may be happening at precisely the best time for it. Now, while America, and yes, much of the rest of the world too, is in the bottom of probably the worst financial situation that we have faced since the Great Depression of the 1930’s, this Smart Grid conversion can put hundreds of thousands and possibly millions of people back to work and out of the unemployment lines. Many jobs would be short term for the initial installation of equipment but more employment would remain in place long term due to the businesses that are created to make money from it. However, similar to South Korea’s Wireless Super highway initiative, the government needs to mandate standards and provide a platform for entrepreneurs and Smart Grid businesses to thrive.

Putting many of the people to work in the power industry will require many of them to be retrained. This training will also cause a greater workload on the technical schools and colleges, requiring more instructors, more classrooms and training equipment. The employment agencies could be the pivotal point in this process by referring people to the schools for training based on the contingency of getting work when they graduate. This training will cost money that can come from the stimulus program and the states’ budgets. Getting the lawmakers to approve such a plan should not be difficult considering the many benefits involved.

The Smart Grid’s Secret Weapon

One of the powerful effects of the internet and cloud computing is the ability to store data on servers which are accessible 24 hours a day. Conversely, energy on the grid needs to be used or it’s lost. However, an emerging technology is taking shape that could prove to be the holy grail of energy storage. Ultracapacitors are just now entering the market as an effective replacement to batteries. In fact, 5.11 Tactical is offering the first rechargeable flashlight running on an ultracapacitor that not only recharges in 90 seconds but will run for 90 minutes at 270 lumens. Imagine a much bigger ultracapacitor that can store energy in a homeowner’s garage or a local business that can store energy to resell to customers. Theoretically, energy resellers could be storing energy when rates are low, then resell it when rates go up (energy arbitrage).

Who’s Playing In This Game?

There will be many businesses started to accommodate all of the sales and work needed to fully implement the Smart Grid Technology. We need to start now though, because in the past year and a half there has been thousands of companies going into bankruptcy and taking chapter 11 protection. Much of that can be offset to a large extent by the emerging smart grid startup companies as they put people to work and put money into the economy.

We will probably see many of the familiar names maneuvering for positions to reap more sales from this conversion. Names like Cutler-Hammer Controls, Square D Electrical Supplies, Ingersoll-Rand (NYSE:IR), The Shaw Group (SGR), General Electric (NYSE:GE), Westinghouse (NYSE:WAB) as well as non-traditional technology companies like Google (NASDAQ:GOOG) and Microsoft (NASDAQ:MSFT). There will be some big international players like the Siemens Company (SI), Framatome, FCI connectors and AREVA (OTCPK:ARVCF).

Because this is going to be one of the biggest money moving events in recent memory and many of the larger financial institutions and private investors will be maneuvering for position to be able to reap the rewards. Unlike the internet, the risk is that the government acts too slowly and tries to over regulate the grid. Such a scenario would be a mistake given the potential for a new frontier and even bigger opportunity to produce jobs and revenue. However, given the dot-com and real estate bubbles, my bet is that the current administration will over regulate it and cause it to develop much slower than the internet.

The next few months will show us which way the smart grid is going to develop. Watch companies like Google, General Electric, ABB (NYSE:ABB) and other major industry players for tips on the direction of the smart grid. If a self-regulated smart grid emerges, these companies have significant upside potential. Owning a basket of these stocks would be wise.