Time To Go Long Electricity

There is a thought-provoking new data-rich report out from the North American Electric Reliability Council. It looks at the reliability and adequacy of the North American grid, and the results are eye-opening, with grid capacity margins declining precipitously over the next decade:

click to enlarge

Some other highlights:

* Electric capacity margins will decline over the 2006–2015 period in most regions.
* The projected decline in margins reflects a short-term resource acquisition strategy that has been the norm for most of the past ten years.
* Electric utilities forecast demand to increase over the next ten years by 19 percent (141,000 MW) in the United States and 13 percent (9,500 MW) in Canada, but project committed resources to increase by only 6 percent (57,000 MW) in the U.S. and by 9 percent (9,000 MW) in Canada.

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Comments

[jack fulbright:]

The Elec Grid issue is a theme I have thought about but still am not sure how to capitalize. It seeems to me that the utes themselves may not be the way to capture outsized returns. The utes will be strapped with expansion, construction, and repair costs that will mitigate gains. I think the way to approach this is via the companies that would benefit from building out and supplying the utes with upgraded equipment. My problem has been that I don't know which companies do this. Most of the ones I'm aware of are major conglomerates where this area would be only a small part of their business.

Anyone out there have some ideas on some small caps that would benefit from this theme?

2006 Oct 17 08:19 PM

[James Finch_:]

Uranium companies are most likely winners with increased electricity demand. That's the theme found on the World Nuclear Association's website among others, such as Nuclear Energy Institute.

2006 Oct 18 01:32 AM

[P Wilson:]

Sorry about previous post, potential power grid infrastructure investments are:

Thomas and Betts (TNB)
Infrasource Services (IFS)
Quanta Services (PWR)

2006 Oct 18 10:23 AM

[WC Whiner:]

What uranium companies?

2006 Oct 18 02:57 AM

[harry blunder:]

how about Hubbel (HUB/B), Wesco (WCC), Thomas&Betts (TNB) or ABB (ABB)?

2006 Oct 18 07:52 AM

[Dave Huntsman:]

Two non-traditional plays on who utilities may be buying from:

- BCON - small, not profitable, and unloved, it has the most advanced flywheel technology around. It is hoping that in the demo units it is selling to a couple of utilities that it's big break will be into the market of managing the frequency hic-cups of the grid using the energy stored in the flywheels.

- AMSC: I bought this some time ago as my long-term play on grid upgrade and energy efficiency. Currently only one of their three divisions - the non-superconducting division, which sells grid-interconnect power converters for large wind turbines - is profitable. The other two Divisions are not - yet. But the Wires division is where the core high-temperature superconducting wires are made; the Supermachines Division is where AMSC then makes big, rotating machines out of those self-same wires.
They have high hopes - the key word here is 'hope' - for big marine motor business. It is clear, to me, the Navy wants to put some of these motors in some of their new ships (like later versions of the new Zumwalt-class destroyers). Since isn't totally wishful thinking; the Navy has given them $100m already to produce a 5 megawatt demo test motor; a full-size (but non-seaworthy) 37.5 MW motor (ie., destroyer size) currently being assembled by Northrup Grumman at the Philadelphia Naval Shipyard; and a similar size Generator. (The latter not from the research arm of the Navy, but from the operational end, which is significant). BUT....those Navy programs are under severe- as in huge- budget dilemmas as we speak; not sure that they will be able to buy what they want to.
But that brings us to utilities........becau... it turns out one of these big supermachines can also be plugged into the grid, and step in as a sort of 'grid shock absorber' whenever huge loads are suddenly dumped on a local grid. TVA has had problems with local grids in that regard; they paid AMSC several years ago to finalize the design of one of these - and then put one in the grid right outside a steel blast furnace in Tennessee. It worked apparently better than expected - or at least, harder than expected, as it went in just as steel demand zoomed. Based on that successful 2-year (?) demo, TVA ordered 2 operational units - each 50% larger than the demo unit - and both are being assembled now; the second one will be installed in a grid in March.
So while two commercial orders for real, HTS-grid upgrade hardware does not an industry make, this company - in existence since 1989 or thereabouts - has clearly been on an upward product trajectory; and in fact is farther along in its wire performance than it predicted it would be just a few years ago.
TVA has also committed to buy 2 more units; though their sizes are TBD.

Note also the above doesn't even include potential HTS main bus electrical cable sales. Currently a 2000-ft cable is being installed along Long Island Power's main 'spine'; to be operating in 2007, it's performance will be a key determiner, I think, of how sales of primary cable wire go for utility upgrades in urban areas.

AMSC just had its conference call the other day; it's here:
www.amsuper.com/invest...

And it will be making a presentation Wednesday this week, accessible here:

www.fulldisclosure.com...;coid=86422&cl...

2006 Nov 06 09:29 PM