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The European Supergrid

An article about the "supergrid" being built by a handful of North Sea countries in Europe recently graced my inbox--another example of one of those quixotic projects the Europeans take on, and Americans say, "Yeah, good luck with that."

But when the Europeans work together they do a better job than most people expect—the European Union and the euro are cases in point. A foreign bond trader I've known for years constantly--and I mean up until a couple years ago--predicted that the EU would unravel and the euro would collapse as a viable currency. Needless to say, his skepticism hasn’t been borne out.

One of the key advantages European nations have independently as well as collectively is that their population density makes innovative energy solutions necessary and advantageous. The US has much more empty land to stick big generation plants far away from large populations, which helps power utilities limit costs for locating and building plants.

In Europe the “not in my backyard” phenomenon is larger by orders of magnitude; individual governments are more apt to seek alternatives to building new plants. The prospect that neighboring countries could seek damages for cross-border pollution is another consideration.

Again, as with the best companies in the world, clean-tech isn't necessarily about being green; it's about making pragmatic decisions about how to implement available technologies to create more efficient production cycles with less waste. How technology is used makes for successful innovation.

That's the philosophy behind the recommendations in Portfolio 2020; identifying innovative companies that are developing or harnessing key technologies--companies that will set the stage for outsized growth in coming decades. There's a global economic shift going on and if you can't see it, you're going to miss the biggest opportunities. Some say it's technology, but we argue that it's innovation--the actual application of technologies.

All right, back to the supergrid.

The article I ran across was a new spin on an earlier proposal from the EU to fill the Sahara desert with solar panels and then ship the electricity back to Europe. The interesting thing about this project is the power would be shipped back to Europe using high-voltage DC power lines.

This was precisely why Nikola Tesla's invention of alternating current (NYSE:AC) won out over Thomas Edison's direct current (DC). A hundred years ago, you couldn't send DC power any distance and transform it on the users' end to usable electricity. Time and technology has solved the transformer challenge, yet the world is essentially built on AC power transmission--though DC transmission is more efficient.

This Sahara solar project would be big enough to scale up DC high-voltage transmission on an economy of scale right out of the gate. From there, the idea could spread anywhere cleantech is a priority--like China.

All renewable energy sources generate DC current. Presently, especially in the US, the challenge is to collect the DC power, convert it to AC power and step it up to a usable voltage to upload to the high-voltage AC power grid.

If you could simply ship DC power, life would be a lot cheaper and easier for consumers and utilities. But the infrastructure isn't there, and there's not a whole lot of money lying around for anyone to pioneer this effort in the US, especially notoriously thrifty utilities. This Sahara project could be a major game-changer for the global clean-tech sector.

Alternatively, in the far north where the sun doesn't shine so much, this other piece of the supergrid project is taking shape. Articles dating going back to 2006 reported that European nations planned to build building a North Sea supergrid from the renewable energy generated in the region.

The first countries on this supergrid will be the wind farms of Scotland, solar panels of Germany and hydroelectric dams of Norway. From there, the project will include nine countries in all: Germany, France, Belgium, the Netherlands, Luxembourg, Denmark, Sweden and Ireland and the UK.

This project would generate about 30 GW of electricity for Europe. Just Norway's hydroelectric contribution could be equal to the electricity generated by 30 coal-fired power plants. And although that will bring joy to the hearts of global warming acolytes, the project’s real value is revolutionizing our long-term power consumption and generation abilities as both consumers and producers.

GS Early is Executive Editor of Personal Finance, Co-Editor of 2020 Investing and Associate Editor of Portfolio 2020.


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