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The Goal – Decarbonization

Clean energy

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” The only reason for making an investment and laying out money now is to get more money later on. That’s what investing is all about.”
Warren Buffett

One Method – Replace vehicles that burn fossil fuel, thereby adding carbon to the atmosphere, with vehicles that do not.

The road to reach the goal of “decarbonization” is filled with complexities, dependencies, huge expense and also opportunities.

Vehicles that are now available or in development include electric vehicles (EVs), hybrid vehicles, hydrogen fuel cell, ammonia fueled, other synthetic fuels.

One of the fundamental industries on the critical path impacting the ability to reach the goal is the Power Grid. The success of EVs is dependent on the upgrade of the Grid.

All of the vehicles listed have some degree of dependence on the Grid.

Electric vehicles (EVs) are 100% dependent.

That dependence, along with the number of EVs that will be sold now and in coming years, will have a major effect on the Grid.

It is useful to know how the Grid works and where the problems and opportunities exist.

Source: https://visualcapitalist.com

“According to the U.S. Energy Information Administration (EIA), the U.S. power grid is made up of over 7,300 power plants, nearly 160,000 miles of high-voltage power lines, and millions of miles of low-voltage power lines and distribution transformers, connecting 145 million customers throughout the country (EIA, 2016).”

The US is made up of 3 independent grids, the Eastern with 31 balancing authorities, the Western with 34 balancing authorities and Texas with 1, which are very loosely connected.

To prevent blackouts and ensure the reliability of the network, the balancing authority manages, in real time, a finely tuned balance between system supply and demand.

“The redundant design of the grid helps prevent service interruptions to retail customers due to transmission line or power plant failures.

The grid must be very carefully managed. “Regional balancing authorities manage grid operations to ensure that electricity supply constantly matches power demand in a balance that maintains the reliable service of the electric grid system.”

In addition to auto EVs, the Grid will have to support EV trucks, power needs of companies re-shoring their manufacturing from the far East, and more.

Increased demand = need for major upgrades

Power grid demand will increase 14 -19% by 2030 and 27% -39% by 2035, According to a report by CNBC.

This will require a massive infrastructure buildout. The Inflation Reduction Act allocated $3B for this endeavor.

However, ten times that much will be needed per Rob Gramlich of Grid Strategies, who estimates $20-30 Billion per year for new transmission line miles and new delivery capacity. (CNBC: Can The U.S. Power Grid Handle The EV Boom?)

The complexities are immense. It is as though you are creating a new power grid to interconnect to the current grid.

It will take years to accomplish.

Just think of the supply chain requirements. And, other countries are facing the same situation.

Today electricity is generated using hydroelectric dams, natural gas, oil, coal and nuclear.

Green energy, such as wind and solar, are now part of the mix but do not produce enough energy replace coal at this time.

To meet the demand of EVs and the decarbonization goal by 2030, nuclear could be considered but so far that has not been a popular option.

However, it also takes a long time to build a nuclear facility and to build out the Grid’s transmission infrastructure.

In 7 years, 2030 will be here. Time is of the essence.

We know the goal. We know some of the problems to reach it including money and time.

Where are the opportunities for investors?

Companies that design, manufacture, install or service grid components would be one of the first places to look for opportunity.

Here are some top companies in the industry. They all appear to be victims of the September – and October – swoons and are not currently trending.

Put them in your Trending Stocks Watchlist and set the timeframe for 20 days trending for a solid trend or whatever timeframe you prefer.
MasTec, Inc. (MTZ)
FLUOR Corporation (FLR)
Itron (ITRI)
NV5 Global (NVEE)
Quanta Services (PWR)

There are hundreds of electric utility companies across the US and dozens in almost every state. Here are the 10 largest who are likely to be driving the Grid upgrades.

Pacific Gas & Electric (PCG)
Southern California Edison (EIX)
Florida Power & Light (NEE)
Consolidated Edison (ED)
Georgia Power (SO)
Dominion Energy (D)
DTE Energy (DTE)
Duke Energy Carolinas (DUK)
Consumers Energy (CMS)

Much will be happening in the next 12+ months. The contracts to do this work will be in the $10s to $100s of Millions of dollars and may be announced on these company’s websites.  Stay tuned.

Remember – Ride Your Winners; Cut Your Losses – in order to make and keep your profit!

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