Invest in Clean Energy Transmission

We cannot choose between transmission and renewable distributed electricity. Local renewable generation requires long distance transmission to even out variations of supply. Hence, both advocates of distributed renewables and large wind and solar farms should support transmission improvements. Here are a few stocks which should benefit from such investments.

Shortly after I launched Clean Energy Wonk, Blogger took the site down because I made the mistake of including both the words "Cheap" and "Free" in the title of an article about Energy Efficiency. Since it can apparently take up to 2 months for a human to actually check that a blog is not spam, I moved the Clean Energy Wonk domain to Wordpress.

I've now posted an article on the new Clean Energy Wonk making the case that distributed wind and solar need transmission to export excess power when they are operating, and to supply power when the wind does not blow or the sun does not shine. Simply arguing that a state can produce enough renewable electricity locally to supply its needs does not mean that that electricity will show up at the right time, or even the right month. Buying storage to bridge the gap would be prohibitively expensive. I estimate that investments in transmission would cost 1/65th as much as the investments in electricity storage that they would make unnecessary. The long version on Clean Energy Wonk is called "Heretic Battles Strawman."

Because transmission is necessary for large scale renewable development, investors in transmission companies should be able to benefit from a large scale build-out of renewable generation without having to bet on a particular solar or wind company, or even a particular technology. Our Electric Grid stock list is full of such companies. These are my favorites:

WIRES:

• American Superconductor (AMSC). Although AMSC is mostly a wind company in terms of revenues and profits, recently the prospects for its eponymous superconducing cable have been heating up. Its superconductors will be crucial to the Tres Amigas Superstation linking the three major national grids, if that project is successful.
• General Cable (BGC) is a good bet for investors who expect the build-out to use tried-and-true technology. What could be more tried-and-true than traditional wires?
• Composite Technology Corp (CPTC.OB) falls in between AMSC and BGC, with its Aluminum Conductor Composite Core cables, which replace the traditional Aluminum Conductor Steel Reinforced cables. The composite core is smaller and stronger than steel reinforcement, allowing more electricity to flow in the same size wire, especially on hot days when power demand is typically highest.

CONSTRUCTION:

• Quanta Services (PWR) is the big daddy of the third party transmission construction business.
• Pike Electric Corporation (PIKE), MYR Group (MYRG), and MasTec, Inc. (MTZ) are smaller players, but could produce better returns for investors because their smaller size makes them likelier acquisition targets.

GRID OPERATOR:

• ITC Holdings (ITC) is probably the safest way to play this sector, since, as a utility gird operator, most of its assets are subject to utility regulation, and hence earn a regulated return on equity paid for by utility customers.

DISCLOSURE: Long AMSC, PWR, BGC.

Comments

[mbkelly75]

Well said and clearly written. I appreciate both the links and the stock ideas for more DD. From my own experience and study, a combination of wind and solar with transmission to level out production works very well. The Smart Grid Technology makes this MUCH easier and more efficient. Local production works well with transmission to and from major producers elsewhere. Thank you for your work on this.

2009 Nov 19 10:02 AM

[Will Deliver]

As far as Photovoltaic Solar production locally... I believe there is a summertime 'sweet spot' for every home owner that uses AIR CONDITIONING. In the summertime air conditioning demand is highest at or near peak solar efficiency. If every building that uses air conditioning in summer had a photovoltaic solar system electrical demand across the whole grid would be reduced. I think this would be beneficial to utilities that need more grid capacity for transmission and distribution. If you really think about it, big companies that own big buildings would benefit even more!

2009 Nov 19 12:39 PM

[jerrydd]

While technically correct, in real life the grid will go to low cost. And low cost is home size RE from wind, solar, CHP, CSP, etc and industrial waste heat/cogen.

What these have in common is they save so much to utility customers who pay 2x's what the utility's pay to cover profit, expenses.

This works out to a 2-3x's as little payback time.


Also many small units average out nicely in output so no big crash when the solar/wind farm loses wind or sun. Home storage is not that expensive and can pay it's way by selling high and charging low at night. It's under $100/kw for lead batteries. These last 10 yrs so $10kw/yr, just not that much.

But EV's will do a lot of grid leveling in about 10 yrs as each has a 50-200kw inverter ready to supply peak power. 100kw's is good enough for 50-100 homes, so it won't take that many EV's to make a big difference.

Charged off peak/nighttime, programed to be full whenever needed by timer or cellphone, EV's are the key to a solid, stable low cost grid combining RE, other electric sources.

For the money, material the big grid, which mostly is just so big money investors can get rich on RE, could instead be used for home size RE, eff/conservation, it would be far less expensive, increase homeowners wealth, spending power far better than distant solar, wind farms.

But investors don't make money off of small RE so we get proposals like this..

2009 Nov 20 11:23 AM

[nakedjaybird]

Likewise --- info for the gird.

John, Jack et.al - here's the way we should be using these words:

Electric Transporation:
1) electrified transit systems inside beltways, AND
2) electrified transport ferry systems (eg., freight railways or like water ferries for freight, vehicles, and people, but on land, duh!) between major city beltways across the US and for sure along the busily traveled east, west, and gulf(?) coasts.

Grid Enabled "SYSTEMS":
1) Electric Grid and Electrifed Transportation (see above) Systems intertwined with the Interstate Highway System where we already own the right-of-ways and the GRID criscrosses the total US every 100-200 miles, thru every hinterland of solar and wind generation sites AND to every major city - already platted!

These are shovel ready jobs, existing technology, resources apleanty and which immediately TAKE THE OIL OUT OF TRANSPORTATION.

2009 Nov 20 03:34 PM