Finding Small Smart Grid Plays

Whenever the words "stimulus" and "green energy" can be attributed to any stock, it should certainly be considered as a core investment holding.

Smart grid plays are one of the green energy plays currently being boosted by stimulus grants. The difference between smart grid systems and other renewable energy plays is that the former are already easily implemented as compared to solar and wind, which currently have large technological and distribution barriers to overcome. Tuesday, President Obama named the utilities that will benefit from $3.4 billion in stimulus grants to implement smart grid systems.

From the Wall Street Journal:

"The Obama administration on Tuesday named 100 utility projects that will shae $3.4 billion in federal stimulus funding to speed deployment of advanced technology designed to cut energy use and make the electric-power grid more robust.

When combined with funds from utility customers, the program is expected to inject more than $8 billion into grid modernization efforts nationally, administration officials said."

The benefits can be enormous:

"The Department of Energy said grants of $400,000 to $200 million will lead to the installation of at least 18 million advanced digital meters, which should bring the nation's total to about 40 million, or enough to cover one-quarter to one-third of U.S. homes.

The new meters -- also known as "smart" meters -- funded by the stimulus grants differ from conventional meters because they are electronic, not electro-mechanical, and they contain communicating modules and software that enables them to receive signals and communicate to utilities or to utility customers. They are the backbone of demand-reduction efforts because they will allow utilities to charge different rates at different times of day and they can be programmed to alert consumers when grid conditions require special action."

For me, the real winners are those who produce the smart grid devices. The current trend is for small firms with cutting edge smart grid technology to partner with bigger firms who can better distribute and utilize the technology. Among the small firms are Echelon (ELON), Comverge (COMV) and EnerNOC (ENOC). Their current or potential partners include Eaton (ETN), Itron (ITRI) and Johnson Controls (JCI). I have bought a small position in ELON for the model portfolio.

Disclosure: Long ELON

Comments

[redbaron:]

What JCI products are used, or potentially used, in the smart grid? I own the stock, and was unaware of this connection. Here I have been looking for such a stock, and I already own it. Could the author or anyone else share more information on the JCI smart grid products, and how they work within the smart grid connection?

Oct 28 07:35 AM

[William Taylor:]

Thought BCON, Beacon Power, might be one of your picks. Any opinion? I have seen their flywheels work and the concept and execution is excellent. If that can be translated into orders then their business model will be very profitable.

Oct 28 10:19 AM