Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19
Central Banks Move To Keep The Global Markets Party Rolling – Part III - 14th Aug 19
You Have to Buy Bonds Even When Interest Rates Are Low - 14th Aug 19
Gold Near Term Risk is Increasing - 14th Aug 19
Installment Loans vs Personal Bank Loans - 14th Aug 19
ROCHE - RHHBY Life Extension Pharma Stocks Investing - 14th Aug 19
Gold Bulls Must Love the Hong Kong Protests - 14th Aug 19
Gold, Markets and Invasive Species - 14th Aug 19
Cannabis Stocks With Millennial Appeal - 14th Aug 19
August 19 (Crazy Ivan) Stock Market Event Only A Few Days Away - 13th Aug 19
This is the real move in gold and silver… it’s going to be multiyear - 13th Aug 19
Global Central Banks Kick Can Down The Road Again - 13th Aug 19
US Dollar Finally the Achillles Heel - 13th Aug 19
Financial Success Formula Failure - 13th Aug 19
How to Test Your Car Alternator with a Multimeter - 13th Aug 19
London Under Attack! Victoria Embankment Gardens Statues and Monuments - 13th Aug 19
More Stock Market Weakness Ahead - 12th Aug 19
Global Central Banks Move To Keep The Party Rolling Onward - 12th Aug 19
All Eyes On Copper - 12th Aug 19
History of Yield Curve Inversions and Gold - 12th Aug 19
Precious Metals Soar on Falling Yields, Currency Turmoil - 12th Aug 19
Why GraphQL? The Benefits Explained - 12th Aug 19
Is the Stock Market Making a V-shaped Recovery? - 11th Aug 19
Precious Metals and Stocks VIX Are About To Pull A “Crazy Ivan” - 11th Aug 19
Social Media Civil War - 11th Aug 19
Gold and the Bond Yield Continuum - 11th Aug 19
Traders: Which Markets Should You Trade? - 11th Aug 19
US Corporate Debt Is at Risk of a Flash Crash - 10th Aug 19
EURODOLLAR futures above 2016 highs: FED to cut over 100 bps quickly - 10th Aug 19
Market’s flight-to-safety: Should You Buy Stocks Now? - 10th Aug 19
The Cold, Hard Math Tells Netflix Stock Could Crash 70% - 10th Aug 19
Our Custom Index Charts Suggest Stock Markets Are In For A Wild Ride - 9th Aug 19
Bitcoin Price Triggers Ahead - 9th Aug 19
Walmart Is Coming for Amazon - 9th Aug 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Investing in the Smart Grid: Debunking the Three Biggest Myths About This Energy Industry

Commodities / Energy Resources Sep 26, 2010 - 08:09 AM GMT

By: Investment_U

Commodities

Best Financial Markets Analysis ArticleDavid Fessler writes: I looked at the statistics and thought, “Uh-oh.”

After all, the messy dotcom boom-to-bust of 10 years ago is a stark reminder of what can happen when too much money chases after an industry that can’t keep up.


Today, investment capital money is consistently flowing to another hot area. In fact, companies within this segment of the energy sector received more than half of all venture capital money in 2009.

I’m talking about “Smart Grid” companies – that is, those helping to beef up the U.S. power grid infrastructure.

So is the amount of investment a cause for concern here? Nope. Far from it.

I’ve written about the Smart Grid topic several times in previous Investment U columns, but you might not hear too much about it in the mainstream news. After all, it’s not as flashy or exciting as the dotcom era was.

Nevertheless, there are some big myths when it comes to investing in the Smart Grid area. Let me bust them and show you where to invest instead as America tries to solve its power problems…
One Squirrel Shuts Down an Entire Neighborhood

The other day, I lost power at my house, just as I was in the middle of some work.

In the past, I’d have probably cursed a lot. But a few years ago, I installed an uninterruptible power supply in my office. So when the power goes out, it keeps my computer on long enough for me to save my work.

But here’s the remarkable thing: When I called the power company, it was completely unaware of the problem. This highlights a major problem in our nation’s power distribution network – a lack of adequate technology and awareness.

But the Smart Grid is going to fix all that, right?

The answer is “yes”… eventually. And when it’s fully implemented, the Smart Grid will make problems like this a thing of the past. However, getting from where we are today to keeping the lights on 100% of the time will take a decade or so.

And such a massive infrastructure project opens up some huge opportunities for investors.

But beware: As they do with most new technologies, the media and some analysts have zeroed in on the wrong areas of the Smart Grid to invest in. That’s because they don’t understand the problems that really need solving.

Even worse, they’re clueless as to who’s doing what. Making the power grid “smart” is a very complex problem. And understanding it can be daunting.

That leaves most investors with money parked in companies that are going nowhere fast. So I’m going to dispel the three biggest myths about where to invest in the Smart Grid.

Smart Grid Myth #1: You Should Invest in Smart Meter Companies

President Obama has called for the installation of 40 million smart meters in American homes. And it’s triggered a big boost for smart meter companies over the past two years.

As such, people have heralded smart meter manufacturers like Itron, Inc. (Nasdaq: ITRI), General Electric (NYSE: GE), Sensus, Elster, and Landis+Gyr as the solution to America’s energy problem.

Nothing could be further from the truth.

Operational quirks aside, smart meter companies haven’t exactly set the investment world on fire.

For example, if you plunked money down on shares of Itron two years ago, you’re down over 41%. And GE has tumbled by 38%.

Problem: A smart meter costs anywhere from $100 to $250. The average regulated utility would need a rate increase in order to justify its cost, unless it got some of the government’s stimulus money to pay for it. Either way, you’re the one who’s ultimately going to pay for the meter.

Problem: There’s also a privacy issue. Many folks just want the power company to provide power without them knowing what the power is for and making decisions for you.

For example, if your computer’s screen saver kicks in while you’re in the shower, the power company could shut down your computer in the interests of “smart power.” And if you want an irate customer, just turn off his air conditioning when he needs it most.

In addition, a few smart meter projects haven’t worked out as planned. Erratic software and hardware has caused more than a few customers to demand that their smart meters be removed.

Tip: Stay away from smart meter companies. Smart meters are destined to become a commodity item and the companies that make them will make little profit over the long haul.

Smart Grid Myth #2: You Should Invest in Long-Distance Transmission Companies

There’s no doubt that America’s power transmission system needs more capacity. With big commercial wind farms planned for the Midwest, we’ll need additional high-voltage lines to get the power to densely populated areas on the east and west coasts.

Problem: However, waiting for these companies to make money will be like watching a Bonsai tree. You won’t see much happen for a long time. The reason?

Regulatory approvals. Unlike gas and oil transmission lines, whose permits are granted at the federal level, electrical transmission lines require hundreds of local approvals.

Dozens of zoning boards, town governments and planning commissions drag the average transmission approval process out to three to five years.

Tip: If you’re investing in transmission companies, while the business is sound, be mindful that it could take a while before you see a sizeable return on your investment.

Smart Grid Myth #3: You Should Invest in “Smart” Appliance Companies

These days, there are tons of companies making smart, energy-saving appliances. While many work efficiently, it’s too early in the game to invest your money in them.

You see, competing standards for home networking like Zigbee, Insteon, Zwave and WiFi are all supposed to play together. And smart meters need to be able to talk to all of them. It’s a real can of worms.

Tip: Buying the companies that make smart appliances is a waste of money right now. Take Whirlpool Corporation (NYSE: WHR) for example, which makes many of them. Its shares are down nearly 14% in the last two years.

So where should you invest your money with regard to the Smart Grid and the companies involved with upgrading it?

The Only Place to Invest in the Smart Grid

Under the current system, power moves in one direction: from the generator to your house.

But that’s going to change. Power is going to start moving in the other direction. And home wind generators, rooftop solar panels and plugged-in electric vehicles all represent power generation sources.

However, managing them is the biggest problem that power companies are going to have to solve as part of the Smart Grid implementation. And that means the power distribution network will see the biggest change.

Power companies are just starting to realize it. And more importantly, they’re starting to invest in it. Bigtime. They’ll be pumping in hundreds of billions of dollars over the next decade.

Companies like Cisco Systems, Inc. (Nasdaq: CSCO) and a few others will play a role in this area.

But I’ve found one company that has a five-year lead over its competitors. In 2008, it grew over 25%. And last year, it notched up 30% growth. What’s more, when I spoke to the COO of its Smart Grid operations, he saw no end in sight to that growth picture.

Subscribers to my Peak Energy Strategist research service have just received a detailed report on it, plus another fast-growing company that we just added to the Peak Energy Portfolio. You can get this report, learn more about these companies and get the full story on my energy and infrastructure-based Peak Energy Strategist right here.

Source: http://www.investmentu.com/2010/September/investing-in-the-smart-grid.html

Good investing,

David Fessler

http://www.investmentu.com

Copyright © 1999 - 2008 by The Oxford Club, L.L.C All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Investment U, Attn: Member Services , 105 West Monument Street, Baltimore, MD 21201 Email: CustomerService@InvestmentU.com

Disclaimer: Investment U Disclaimer: Nothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Investment U Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules