Investing in the New Electricity Economy—A Primer

8/5/08Follow @gthuang

There’s a revolution coming in electric power. Passive, one-way power distribution will become a marketplace with real-time transactions. Centralized will become networked. Demand will become supply. And large-scale energy storage will finally become a reality. So what does all this mean for companies and investors?

That’s the topic of a 55-page white paper prepared by Jesse Berst and his team at GlobalSmartEnergy, a Redmond, WA-based research consultancy focusing on business opportunities in the emerging “smart energy” sector. The report was published last Friday by the Global Environment Fund, an international firm based in Chevy Chase, MD, that invests in cleantech and emerging markets.

Berst, an Xconomist, sat down with me a few weeks ago to discuss smart energy and the local state of cleantech companies. In his current report, entitled “The Electricity Economy,” Berst lays out an argument that goes something like this. First, the developed world is becoming more and more addicted to electricity without fully realizing it. Berst describes the phenomenon as “more people, more devices, more desire.” Because of this “accidental addiction,” he adds, we are highly vulnerable to natural disasters, terrorist attacks, and massive ripple effects from small problems (such as the Northeast blackout of 2003). Consider a few stats:

—The Energy Information Administration predicts that worldwide power generation will nearly double from 2004 to 2030. That is the equivalent of 25,000 additional 500-Megawatt coal-fired plants.

—In developed nations, demand for electrical appliances rose 48 percent in the 1990s.

—By the end of 2007, more than half of all U.S. households had at least one high-definition TV. A plasma TV uses two to three times as much energy as a standard TV.

—A 2002 study by the Electric Power Research Institute found that power outages and disturbances cost the U.S. a minimum of $119 billion annually.

At the same time, Berst writes, the electric power infrastructure is being rebuilt gradually, with distributed digital equipment replacing centralized electromechanical machinery. Berst is a strong proponent of the “smart grid,” an emerging set of technologies such as intelligent monitoring and communications devices whose goal is to make electricity distribution more efficient and reliable. His report goes into a lot of detail about the capabilities of these devices, comparing the evolution of the energy infrastructure to that of telecommunications and the Internet.

But what I found most intriguing was what Berst calls “electronomics”—the emerging business opportunities … Next Page »

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com or call him at 617-252-7323. Follow @gthuang

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  • arvella

    Read this about investing in the new electricity economy.