Investing in the New Electricity Economy—A Primer
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to be found in what he calls the electricity economy. According to the Brattle Group, North America alone will need nearly $1 trillion of investment in power transmission and distribution technologies between now and 2030. Here are some other stats from Berst’s report to put smart energy and cleantech on the funding map:
—In the past three years, at least 300 venture capital funds have entered the cleantech area.
—In the first half of 2008, more than 50 percent of the venture capital invested went into the smart grid space.
—Of the 28 IPOs from June 2007 to June 2008, 10 were in cleantech or smart-grid technology.
—An estimated $38 billion in various funds is now targeting cleantech, not counting private equity firms, regional angel groups, and utilities.
The bottom line? Berst’s report flags a few areas that he considers promising for investors. The power industry, he writes, is moving beyond traditional generation and into networked “microgrids,” beyond traditional distribution and into readable dashboards and intelligent control, and beyond traditional business models and into efficient new billing platforms. The early beneficiaries of these trends will be large construction and engineering firms, followed by companies that figure out how best to store and transport bulk renewable energy from wind farms and the like.
In terms of supplying home and business monitoring devices—such as smart meters and predictive software to anticipate the ebb and flow of power needs—keep an eye on cable companies (e.g., Comcast), software makers (Microsoft), network equipment makers (Cisco), and audio/video manufacturers (Sony). As for new business models, Berst writes, look for companies that offer better efficiency to utilities (e.g., Comverge, or Advantage IQ, a spinoff of Pacific Northwest utility Avista). In the future, customers will demand a choice in “power plans,” just as they have a choice in phone plans, features, and carriers.
“The nation’s power bill is more than twice the size of the nation’s phone bill,” Berst writes. “With so much money at stake, electricity customers will demand the same kind of choice and selection. And they will slowly get it, as technology improves and as regulators awaken to the consumer benefits of competition.”