Grid Connectivity: Invest in Alternative Energy's Missing Link

In Great Britain, more than 60 gigawatts (GW) of power, a quarter of that from renewable sources, reportedly is waiting to be connected to the nation’s power grid. In California, electric utilities say they have little hope of meeting the state’s mandate of achieving 20% of their generation from green sources by 2010 largely because of delays in getting transmission lines licensed and built. Meanwhile in Brazil, work is underway on what will be the world’s longest power line, which is being built with high-voltage, direct-current (HVDC) technology because it is ideally suited for hooking up renewable energy sources located in remote regions of the country.

Notice a trend here?

The “missing link” in many a nation’s scheme to go green is grid connectivity. Globally, hundreds of thousands of miles of new power lines are going to have to be built over the next five or so years to hook up the tens of thousands of carbon-controlling solar, wind, geothermal, tidal and other green electricity generation projects that governments everywhere are mandating must be built. (If, as expected, there’s a global cap-and-trade exchange in a few years, the number of needed miles of new grid will be even greater.)

It’s actually easier to invest in the “grid connectivity” sub-sector of alternative energy than it is in more prominent sub-sectors like solar and wind. Solar investors must worry about some super-duper new technology being developed that makes their guy’s business model obsolete. They also must worry about price swings in solar’s basic commodity – silicon. Wind investors, meanwhile, if they are in the U.S., run into the difficulty of buying shares in firms that only trade abroad.

With grid connectivity, not only are there relatively few leaders, they also trade on North American exchanges.

Last week, EnergyTechStocks wrote that to make money in alternative energy, an investor may need a mini-portfolio of Japanese stocks (see To Make $$ in Alternative Energy, US Investors Might Want to Build Their Own Japanese Stock Portfolio) This week the advice here is to also think about building a mini-portfolio of “missing link” stocks from among the following giants in the power transmission business: ABB Ltd. (ABB); Siemens AG (SI); General Cable (BGC); Quanta Services (PWR); MasTec Inc. (MTZ), and Valmont Industries (VMI).

There’s also a personal favorite of EnergyTechStocks’ managing editor, not that he has any money invested in the firm. It’s Composite Technologies (CPTC.OB). This company has a patented aluminum composite power line core that can transmit more power than regular copper lines. Yes, it’s more expensive, but with not-in-my-backyard (NIMBY) still ever-present, it would seem likely that governments will place a premium on getting more out of existing transmission rights-of-way.

Disclosure: No positions.

Comments

[Davewmart:]

'In Great Britain, more than 60 gigawatts (GW) of power, a quarter of that from renewable sources, reportedly is waiting to be connected to the nation’s power grid.'

The National Grid must be a bit short of power right now then, as that is about the size of the entire grid, so no power must be getting onto it!
Shome mishtak, shurely?

Sep 08 05:56 AM

[jerrydd:]

While an OK investment, it will probably bubble in a yr or two because of over hype.

The facts are RE is going to be home grown. By that I mean the distant solar/wind farm is not a very good business model. Vs home size which is the real RE future.

Home size wind, solar CSP not only doesn't have land, transmission line, overhead or stockholders but make 50-100% more income in saving or power sales than farms do. Thus shorter payback and they last 50+ yrs. These are simple machines that in real mass production will easy be the low cost energy source.

Sep 08 06:01 AM

[Jaysan:]

I have a small position in American Superconductor (AMSC). On Aug. 26 they announced that they received their second order for a D-VAR system to meet dynamic reactive compensation requirements for the Chinese power grid. See

finance.yahoo.com/news...

Sep 08 11:06 AM

[manya05:]

Yes, connectivity is important and will ramp up, but it is not enough. We also need lots of energy storage,and the investment picture there is quite murky. It is murky because no technology is a clear winner, and all are too expensive in the quantities needed.

Sep 08 12:01 PM

[searcher:]

Horses for courses. The mix of production, storage and distribution will be based on local (right down to the residence/business) needs and local solutions. If local solutions are exceded by needs, then the optimized grid will be needed, as well. That means opportunity for all, including non-renewables for a significant generational transition period.

Sep 08 12:29 PM

[terravario:]

Connectivity IS the issue. A diverse north-south, east-west grid that relies primarily upon renewables needs only to account for variability (not intermittancy) and would rely very little on storage. We need to get this idea out of our heads that a 1mw wind turbine needs 1mw of battery storage to be viable. Existing hydroelectric and pumped storage hydroelectric are really all that is needed to balance out a diverse robust grid. We need to stop thinking of hydro as baseload and more as system balancing capacity.

Sep 08 12:46 PM

[Road Runner:]

Though I'm a big believer in home solar - it will be huge - I don't believe that home solar will come close to meeting all of the electrical energy needs of the future.

First, the energy needs of the future will be much larger while oil is becoming scarcer. No one renewable energy source can keep up with it, even home solar which I think will explode in use starting in about 10 years.

Second, there are many areas where the sunshine is poor like the North, and many areas that are densely populated, unlike the urban sprawl cities of the southwestern US.

Also, I am skeptical of home wind as a large component because I have not yet seen an economical, non-obstructive home wind system. My opinion may change if I see a very promising system.

And, electrical grid improvements are needed for many reasons besides power from wind and solar farms. China is building HVDC lines in a fury just to move power from the hydro dams. www.desertec-australia... One of the largest HVDC lines in the world was just completed to carry the hydro power from Norway to the Netherlands. pepei.pennnet.com/disp... There is also proposals to link the many islands of southeast Asia with HVDC cables. www.desertec-australia...


On Sep 08 06:01 AM jerrydd wrote:
>
> While an OK investment, it will probably bubble in a yr or two because
> of over hype.
>
> The facts are RE is going to be home grown. By that I mean the distant
> solar/wind farm is not a very good business model. Vs home size which
> is the real RE future.
>
> Home size wind, solar CSP not only doesn't have land, transmission
> line, overhead or stockholders but make 50-100% more income in saving
> or power sales than farms do. Thus shorter payback and they last
> 50+ yrs. These are simple machines that in real mass production will
> easy be the low cost energy source.

Sep 08 05:20 PM

[TinyTim:]

The US has been underbuilt in transmission lines since the mid '70's. The only reason things are still working is that gas fired plants can be built close to cities which is where the large demand is. I attribute the lack of lines to NIMBY, drop in energy use since the first gas crisis and environmental pressure. After 30 years, several utilities are now agitating for rate increases "to pay for more tranmission capacity."

"high-voltage, direct-current (HVDC) technology because it is ideallysuited for hooking up renewable energy sources located in remoteregions of the country."
a bit of a stretch. HVDC is good for moving large blocks of power over very long distances with no intermediary stations. a few RE sources won't cut it. The savings are slightly lower losses due to no "AC skin effect" and two conductors for DC instead of 3 phase AC. There aren't many HVDC in the US for these reasons. One is the Pacific Intertie. Most RE sources will require short & lower power lines.

"miles of new power lines are going to have to be built"
You bet, about 30 years worth.

"ACCC patented aluminum composite power line core that can transmit more power than regular copper lines."
you just blew your cred. The last copper transmission line was strung in the 30's from Boulder Dam to LA and I have a piece in my collection. Most high tension lines since then have been ACSR (aluminum conductor steel reinforced)-that would be a stranded steel core.

ACCC (aluminum conductor composite core) from CTC has a high temp, lower expansion coefficient, carbon-glass fiber core. Since the electrons are carried in the aluminum anyway, this is a specialty product for situations where sag is an issue.

3M has the same product, called ACCR (aluminum conductor composite reinforced). Also specialty product. Utility T&D engineers and lineman don't care too much for "new" stuff, especially when the old stuff works fine.

The main cost of transmission lines is the right of way and construction. Steel towers are cheap, conductors are cheap, disc insulators are cheap. What costs is the equipment at each end, like switchgear and transformers, especially for HVDC.
There are several suppliers for each and plenty of contractors and none is a pure play. The only domestic manufacturer of ACSR these days is Southwire. General Cable doesn't do overhead transmission. ABB & Siemens do many things besides substations.
Aluminum rod for ACSR would be a tiny fraction of production from Alcoa, etc.

Bottom line is even if utilities suddenly realize they need a lot more transmission capability, it will be so diverse and piecemeal, I don't see a play there.

As a desert dweller, I'm waiting for PV to hit rock bottom so I can achieve net zero after a decent payback period.

Sep 08 09:33 PM

[Road Runner:]

TinyTim, I agree with you on the US market. I doubt HDVC will be big in the US because of strong NIMBY, and because there is little need to transmit electricity underwater where HDVC is mandatory, and because intercity solar (homes, business roofs and parking lots) will be giant in the southwest US where electricity rates are high, and we have lots of natural gas for gas-fired plants. I wouldn't recommend ABB if I was only focused on the US market.

But, where ABB will do well is the rest of the world as I discussed in my previous post. The rest of the world is going to build many HVDC lines. And, the emerging markets that need to build their whole electric grids are going to use all the other electrical products that ABB produces.

Sep 08 10:52 PM

[Midwest guy:]

Road runner
Thanks for the whole picture view.
I found the links interesting and reinforce my buying in certain sectors.

Sep 09 12:11 PM

[bschu:]

If you want to drive yourself nuts in a short period of time, hang around a Wind Driven power gererator. The noise will send you to the happy farm and your neighbors (if you had one at your house) will have target practice with the blades. Then the "Tree Huggers" will have you in court due to all the birds killed.

NOT GUNNA HAPPEN!

Sep 09 05:50 PM

[quick:]

You forgot about ITC! It's pretty much a pure play on expanding the power grid, much like PWR.

Sep 10 08:40 PM

[William Dav...:]

ABB appears to be the main supplier in Europe for HVDC lines. The European Grids are starting to link together and there is EU proposal to create full Northern and Southern European Smart grids using HVDC. For current and future projects see en.wikipedia.org/wiki/...
www.trec-uk.org.uk/res...
business.timesonline.c...

Sep 21 10:20 AM

[Tom Konrad:]

Bill,
Connection is only half of the transmission picture. The other half is geographic diversification: variable power sources such as wind become easier to integrate if your effective grid covers thousands of miles rather than hundreds. The wind is always blowing somewher, but if every wind farm is only connected to the closest city, and the connections between those cities are weak, it won't do you any good when you most need it.

Oct 02 12:05 AM

[Alan Young:]

This is a compelling story, and I have seen numerous articles about it over the past year or so. Trouble is, these stocks are not doing well, despite the good story.

When is our country going to get serious about investing in the grid?

Oct 02 02:05 AM