Rules Being Changed to Spur Clean Energy Transmission, Profit

wind transmissionThere’s been lots of talk about the smart grid lately, and all that it can do for improving energy efficiency and increasing our use of renewables.

From smart meters to real-time two-way communication with utilities, smart grid technologies are shaping up to be integral parts of a futuristic grid–a much needed makeover for our quickly aging and inadequate system.

At a Piper Jaffray cleantech conference a few weeks ago, a special session was dedicated to the topic.  Not one of the panel members had the same definition of what, exactly, a smart grid consists of, and that’s perfectly acceptable at this point.

What they did agree on, however, was one thing: the need for increased transmission.

Transmission: The Key to Switching Energy Gears

Think about it.

Where does the sun shine strongest?  Middle of the desert, right?

Where does the wind blow best?  I’ve always assumed it was the plains.

That’s precisely the problem.  The most abundant solar and wind resources are located in some of the most sparsely populated areas.  To maximize their impact, we need to find a way to get all that clean energy to the people.  And the current system ain’t cuttin’ it.

It’s a well-known obstacle in the cleantech community, and the attention paid to it lately is beginning to pay off in a big way.  
Billionaire T. Boone Pickens–once an oil wildcatter–has been an early and frequent supporter of the transmission cause, often stressing that "transmission issues are still the biggest problem facing America’s energy supply."  And he wants "to see the equivalent of the Eisenhower highway system for power distribution."

After spending $2 billion of his own money to purchase wind turbines for what he claims will be the largest wind farm in the world, the State of Texas said it could pay up to $6.38 billion to lay new power lines to accommodate the 4,000 MW by 2014–and much more after that.

It’s becoming the yang to clean energy’s yin; the required tat for its growing tit.

Boone’s Billions Aren’t Alone

As such, investors and politicians alike are discovering transmission’s critical role for green energy.

That’s why the recently-signed stimulus provided at least $11 billion for the smart grid and related transmission technologies.  I say ‘at least’ because other tax breaks and incentives in the bill are bound to indirectly benefit the sector.  Yin and Yang, remember.

But that wasn’t enough for Senate Majority Leader Harry Reid, who recently said he would introduce legislation to ease and speed the the approval process required to expand transmission capacity.

And regional grid operators released a report last week claiming that up to $80 billion in transmission projects would be needed for the nation to get 20% of its power from the wind.  That has led to a lot of excitement in the industry, as both businesses and investors prepare for the coming boom.

There have been numerous new transmission proposals just in the past few weeks.  ITC Holdings Corp. (NYSE: ITC) has proposed a $12 billion high voltage superhighway that would carry wind-generated electricity to Wisconsin from Iowa and the Dakotas.  
And Pepco Holdings (NYSE: POM) has applied to build a new 230-mile line from northern Virginia to Delaware that would cost $1.4 billion.

With the President’s goal of doubling the use of renewable energy in the next few years, you can bet there will be plenty of more profitable projects like that.  Reid and the rest are making sure it all goes down as smoothly as possible.  

In fact, in addition to Reid’s proposal, the Federal Energy Regulatory Commission recently approved a new process to speed the permitting of new transmission projects.  One of the features of that program eases the bidding process and singles out winners.  While it’s not the pure market process the market is used to, at least it’s getting easier to see who the winners will be.  TransCanada (NYSE: TRP) is the winner in the first deal to stem from that program.

In California–which has some of the reddest tape–Ahhnold has created a one-stop permitting shop for renewable energy and transmission projects–a process once divided among nine agencies.

We’re witnessing a time when legislative doors are being thrust open for the cleantech industry, bringing about much needed change to our energy picture, but also creating guaranteed markets and investment winners in the process.

For market purists, it’s not the Street climate they’re accustomed to–Washington is bypassing competition and choosing winners.

But for green capitalists, this is the moment we’ve been waiting for.  Clean energy transmission and investment opportunities are only going to grow.

Nick Hodge is a regular contributor to Green Chip Review and Energy & Capital. One of the bright young minds in today's cleantech industry, Nick is putting his knowledge of nascent green markets to use in several ways. . . He's the Managing Editor of Alternative Energy Speculator, an investment advisory service focused on taking advantage of every aspect of cleaner energy, from the stop-gap companies that are making a fortune lowering carbon emissions to makers of more fuel efficient engines and other technologies that will help the U.S. successfully build a bridge from current fuel to the energy of the future. Nick also runs Green Chip International, which is dedicated to giving you the sharpest insight, not just into clean technology trends but also the geopolitical context that makes markets move. A featured guest on Canada's Business News Network and Yahoo!'s Tech Ticker, Nick is also very interested in uncovering the massive profit opportunities associated with a growing lack of freshwater and the maturation of the global carbon markets. Nick is also the co-author of the bestselling book, Investing in Renewable Energy: Making Money on Green Chip Stocks.

One response

  1. A key element of this discussion is timing. When do we want to start making measurable progress towards energy independence? A Smart Grid will help us be more intelligent about how we use and conserve energy, but it is 10 years and billions of dollars away from mass-market implementation. Off-shore and remote wind farms that promise hundreds/thousands of megawatts of power are also 10 years and billions of dollars away. Only a distributed network of community-scale facilities will help reduce demand on an already over-taxed grid because it generates power where the demand is located. Homes, municipal building, commercial installations, and small utility-scale facilities can generate a large portion of our national demand without causing major upheaval from an environmental or visual impact – and many can be implemented in a short-period of time meeting the ‚Äòshovel ready’ requirement for federal and/or state funding. Readers will understand the analogy, the ‚Äòold’ energy model of major plants run by regulated utilities with power distributed through a grid controlled by quasi governmental agencies is like the Government/conglomerate era mainframe computing; but when a distributed computing model came along and grew into what we now call the Internet the ‚Äòpower’ and value it released was orders of magnitude greater for individuals, companies, investors, and society. We must immediately focus federal dollars in the form of feed in tariffs, tax credits, and other incentives to building the ‚Äòenergy Internet’. We lost 8 years to an administration blind to science – we need bold action. We need to just BUILD BABY BUILD.

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