Energy - Profit From The Smart Grid
The Dynamic Wealth Report
April 8, 2009
Profit From Smart Grid Growth
by Brian T Mikes, Editor
Last night after work and the gym, I headed home. Pulling into the
driveway I noticed something unusual. There was a big white piece of
paper taped to my front door. I wondered what it could be.
It’s not uncommon to find advertisements at our doorstep. Someone’s
always trying to sell something. But this wasn’t an advertisement.
This was some type of official notice.
I grabbed the paperwork and started reading. It was a notice from APS,
the local utility. The electricity to the house would be cut for a short
while.
Now, I know it’s not uncommon to lose power due to a storm, an equipment
failure, or even an accident… but this was different. They were shutting
off our power to replace the meter. The house I live in is only 3 years
old… the meter couldn’t be bad already.
I knew in an instant. APS is installing an AMR system.
Now I know that look on your face. You’re wondering, “What’s an AMR
system?”
An AMR system is simply an “Automated Meter Reading” system. It’s an
automated way for the utility to collect the meter readings from tens of
thousands of houses quickly and efficiently. The next time you get your
utility bill, look at it closely. Somewhere on the statement they’ll
list the date the last meter read took place.
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In some areas, the time between actual meter reads can be a few months
or a year or more.
Bet you didn’t know the utility can “estimate” your energy usage and
bill you for it! Now, the cost of doing a meter read is fairly
expensive. You have to pay hundreds of people to walk from meter to
meter and take a reading. Then you need them to accurately record that
data. The utility won’t admit it, but they have a huge number of errors
every day.
Now, I have an investment idea based on the AMR technology… but before I
get to that, let me explain how it works.
First, let me say this. There are a number of technologies out there. All of them are different and the technology can get quite complex…
here’s the simplified version.
When a utility decides to roll out an AMR system, they typically plan to
deploy it to all of their customers. Deployment times can take anywhere
from a few months to a few years. The utility has two options. They can
install a brand new digital meter with the technology already built in,
or add on an AMR unit to the old-fashioned meter. Here in Phoenix, they
went the digital route, and that means replacing every meter on the
grid.
In the new digital meter is a little radio chip. Every so often the chip
wakes-up and sends out a signal identifying itself and announcing the
last meter reading. Here’s the cool thing… this signal can be adjusted
to fit the needs of a customer or utility.
In a residential setting the utility might collect data once a month. In
a commercial or industrial setting the utility can collect data every
day, every hour, or even every few minutes!
All of this data gets routed through a receiver and sent back to the
utility.
The technology is a godsend to the utilities. An AMR system gives them a
more accurate picture of consumer demand. It allows them to monitor big
users of electricity. It can help with energy conservation. It even
eliminates meter reading mistakes.
But the utilities won’t publicize the best benefit of all… it saves them
millions!
These AMR systems take us one step closer to a truly smart grid. And not
just for electricity. These AMR systems are available for gas and water
utilities as well.
So, after reading the notice on my door I walked into the house. I
noticed all of my digital clocks blinking.
I realized they’d already swapped out my meter. I immediately grabbed a
flashlight and went running outside. Yes, my girlfriend thought I was
crazy.
I got to the side of the house, found the electrical panel and took a
quick look.
Unfortunately, I was very disappointed.
It was an Elster Meter. I know that means nothing to you, so let me
explain. When I was an investment banker, I worked on a multi-million
dollar financing for an AMR company. That company was Itron (ITRI).
Elster is one of Itron’s biggest competitors.
Now, I’ll admit, I’m biased. If I had a choice, I’d want an Itron meter
on my house. When I worked with the company, I got to know the
management team very closely. I got an inside look at their plants,
facilities, and met many of their employees.
In my opinion, Itron is the best AMR company in the world.
I took a look at the stock recently. I can’t believe how low it’s
trading. This stock was consistently above the $100 a share mark, and
today it’s trading for more than 60% off. The company has a 1.6 billion
market cap, making them one of the largest players in the industry. Last
year they did almost $2 billion in sales, and were hugely profitable.
That alone makes them a great buy, but there is much more to the company
than that.
Itron is a leader in developing the technology for a smarter grid. Every-thing they do is tied to making energy usage more efficient, and
that makes the company a true “green enterprise”.
In my opinion, they are one of the few ways to play
the “Smart Grid” future. I’ve run out of room today, but at some point
in the future I’ll talk more about Itron. I encourage you to take a look
at the company. Now might be a great time to add some to your portfolio.
***Editors Note: This Friday the markets are closed for the Good Friday
holiday. Our next installment of the DWR will be published on Monday
April 13. We hope everyone has a happy and safe holiday weekend.
• Ethanol (Under $1.60 per gallon)
Corn prices are relatively stable, and oil prices have been steadily
rising. This should signal a perfect environment for ethanol. Unfortunately, that hasn’t been the case. Ethanol has trended lower
since the beginning of the New Year when it peaked at over $1.75 a
gallon.
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