Smart Investing In The Smart Grid

| September 14, 2010 | 0 Comments

It’s no secret electricity usage is surging worldwide.  In fact, growth in electricity demand is outpacing overall growth in energy demand.

Think about it, people are consuming electricity for space heating and cooling, cooking, refrigeration, lighting, water heating, and to power all the great consumer electronics.

Consider this…

Two-thirds (66%) of our economy depends on electricity.  But back in the 1950s, only 40% of the U.S. economy relied on it.

Clearly, access to electricity is vital to our economy’s health.

But amazingly, America’s electrical grid is still basically the same as it was 100 years ago!  It’s estimated that power interruptions and blackouts cost the American economy between $80 and $150 billion a year in lost productivity.

The truth is, our “dumb” transmission system is in need of a major overhaul.  We need a 21st century transmission grid to support a 21st century economy.

A smart grid will supply power wherever it’s needed, whenever it’s needed.  T. Boone Pickens calls it “the modern equivalent of building the Interstate Highway System in the 1950’s”.  And I agree…

Fortunately, within the last few years, the wheels on a smart grid revolution have begun to turn.  But this industry is still in its infancy.

What I’m leading up to is this…

A small group of companies are going to make a bunch of money on the smart grid.  And they’re going to make their shareholders very wealthy. But picking the right companies is key.

What exactly makes a grid smart?

A smart grid is essentially the merging of two massive networks.  It combines the transmission grid with the communications grid.

So, the core of a smart grid is networking and communications technology.

This technology is designed to reduce costs.  As well as increasing reliability, security, and efficiency.

One of the first technologies being deployed are smart meters.

These meters allow utilities to monitor usage in real-time.  It reduces the costs of meter reading.  As well as giving them immediate feedback on power spikes and outages.

Of the 140 million electric meters in the US, about 40 million are currently plugged into the smart grid network.  That’s less than 30%… So there’s still huge growth potential for the companies who make smart meters.

Here’s why…

Right now the smart grid network lacks the necessary infrastructure for utilities to use smart meters to their full potential.  This has been a stumbling block for widespread use and implementation of smart meters.

But that’s about to change.

Just a few weeks ago, smart meter maker Itron (ITRI) and networking giant Cisco (CSCO) announced a partnership to address these stumbling points.

According to Itron, “Our customers have reiterated [the network is] critical to the success of their smart grid initiatives.”

This is a game changer for Itron.

They’re joining forces with Cisco to tackle the biggest holdup in widespread adoption of smart meters.  It gives them a huge advantage over the competition.

Simply stated, utilities have options when they choose a smart meter manufacturer.  Being the company who helped develop the network is a huge selling point.

It should allow them to increase sales and earnings by capturing a bigger share of the market.  And it has already led to a number of analysts increasing their price target.

Even before this announcement, sales were expected to grow 25% this year and another 17% next year.  And judging by their increasing order backlog, sales trends are looking strong.

With the boost they get from the Cisco deal, we could easily see ITRI rocket up by 30% or more soon.

And this is only the beginning…

There are plenty of opportunities for companies to make a ton of money on smart grid technologies in the next decade.  It’s vital to our success as a nation.  And the wheels of progress have only just begun to turn.

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Category: Commodities

About the Author ()

Corey Williams is the editor of Sector ETF Trader, an investment advisory service focused on profiting from ETFs and the economic cycle. Under Corey’s leadership, the Sector ETF Trader has become one of the most popular and successful ETF advisories around. In addition to his groundbreaking service, Corey is the lead contributor to ETF Trading Research, where he shares his insights about ETFs and financial markets on a daily basis. He’s also a regular contributor to the Dynamic Wealth Report and the editor of one the hottest option trading services around – Elite Option Trader.

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