When the economy was in the doldrums and the massive 2009 Recovery act and stimulus were announced, news about the massive transformation facing our energy grid was everywhere. Since that time, a variety of ambitious infrastructure and efficiency projects were launched. Then the money stopped flowing. Investment in the smart grid or enernet seemed to cease and the project vanished from the news headlines. However, don't be fooled. Spending on the smart grid is still growing and the first great infrastructure project of the 21st century is alive and well. For investors, there are still plenty of opportunities to profit from the build-out.

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ASCE's Grim Findings
The creation of a smarter electrical grid has real promise in helping curb our energy addictions. This updated grid will ultimately enable consumers and utilities to communicate back and forth. This communication link can bring dynamic real-time pricing, outage information, demand response functions and help utilities match consumption with demand. In addition, new transmission networks will help bring renewable energy sources from where they are produced to the regions where power is needed. Likewise, grid-sized storage options will help turn peak power into base-load energy. Overall, these are critical upgrades that are desperately needed.

The American Society of Civil Engineers (ASCE) recently released its latest "Failure to Act" report, which pertains to the nation's crumbling infrastructure, and the numbers aren't good. The group's findings show a gap of $107 billion dollars between today's trends on grid investment and what the country needs to invest between now and 2020. ASCE predicts that the "combination of aging equipment and capacity bottlenecks," will result in electricity interruptions, equipment failures, power surges and ultimately high costs for businesses and consumers. Just how high? The group estimates that by 2020, these grid issues will cost Americans around $197 billion dollars and GDP will fall by $496 billion.

However, things aren't all lost. Despite the recent dwindling spending due to the lack of stimulus, investment in the smart grid is still growing at a compound annual rate of 17.4%. Likewise, utilities are continuing with several major projects. For example, Duke Energy (NYSE:DUK) and American Transmission are developing a 950-mile transmission line that will deliver wind energy generated in eastern Wyoming to California. Industry group the Edison Electric Institute (EEI), estimates its members plan to spend at least $64 billion on expected transmission system improvements through 2022.

SEE: Trust In Utilities

Playing the Build-Out
While the continued spending is certainly a bullish sign for the smart grid, the gap predicted by the ASCE is alarming and means that there's plenty of work to do. For investors, that means there are plenty of opportunities as well. The First Trust Nasdaq Clean Edge Smart Grid Infrastructure ETF (Nasdaq:GRID) is often cited as a great way to play the build-out. However, the fund hardly trades and has less than $15 million in assets. A better bet is to choose some of its individual holdings.

Providing much of the vital equipment, such as transformers and inverters needed to build out the grid, is Switzerland's ABB Limited (NYSE:ABB) and France's Schneider Electric (OTCBB:SBGSY). Schneider is the world's largest maker of low- and medium-voltage equipment and recently has been adding smart grid software to its arsenal. ABB continues to leader in everything electrical from high voltage cables to switch gears. The Foreign duo, plus Germany's Siemens (NYSE:SI), remain the gold standards when it comes to grid equipment.

Smart meters are still a key component in the intelligent grid and Itron (Nasdaq:ITRI) continues to be the 800-pound gorilla in the room. Roll-outs of the meters in the U.S. and Europe continue to grow at a rapid pace, and will ultimately help the industry leader. In addition, both Elster Group (NYSE:ELT) and ESCO Technologies (NYSE:ESE) have been seeing additional orders from big utilities for their products.

SEE: ETF Liquidity: Why It Matters

The Bottom Line
While spending may have slowed down in the wake of the ending stimulus measures, there is still much work to be done on our smart grid. That continued investment spells opportunities for investors. The previous picks along with firms like Jinpan International (Nasdaq:JST) and AZZ (NYSE:AZZ), make ideal selections to play the build-out.

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At the time of writing, Aaron Levitt did not own shares in any of the companies mentioned in this article.

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Tickers in this Article: DUK, GRID, ABB, SBGSY.PK, SI, ITRI, ESE, ELT, AZZ, JST

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