Power plays: Investing in a smart grid

"During low-demand periods when power is the least expensive, dish washers and laundry machines can be run, and electric cars can be charged. A smart grid will also allow customers with solar and wind power generators to sell surplus electricity back to the electric company.

"The biggest advantage of a smart grid is it can even out the demand for power. The result will be a greatly reduced need for expensive new electric plants, and a corresponding reduction in the use of foreign oil and the production of greenhouse gasses.

"The electrical grid that we have now is incapable of carrying the additional energy the country needs from new power sources. Nevertheless, a smart grid is not a pie-in-the-sky development for the distant future.

"Germany is already using it to reduce the country's dependence on Russian energy. In the U.S., utilities from Maryland to Los Angeles are also starting to adopt smart grid technology.

"Because the systems pay for themselves in energy savings within eight to ten years, I think nearly every power supplier will soon begin to use it. As a result, the outlook for smart grid investment profits is very good.

"Esco Technologies is a leading supplier of two-way communications systems for electric networks, a successful engineering firm. The company produces systems that communicate with smart meters and many of the devices they control.

"Esco also supplies software and support services that allow electric utilities to manage their substations, high voltage lines, and other parts of their networks. These internal efficiencies deliver many of the biggest savings from a smart grid.

"Esco is also starting to adapt its smart technology solutions for gas and water utilities. Given the grim price and supply outlooks for all energy sources, I think Esco will have a worldwide market for its products within a few years.

"Esco isn't a smart grid pure play, but that's not a negative in this case. The company is an important supplier of sophisticated filtration systems for aerospace and defense applications, which are also strong businesses.

"In addition, Esco produces radio frequency (RF) shielded enclosures, rooms, and communication facilities that are used by many private and government agencies.

"I think the best indication of Esco's potential for growth is its first quarter performance. While most companies were falling over the economic cliff, Esco more than doubled its profit. The company ain the right business at the right time.

"Another smart tech company that has yet to attract the attention it deserves is Quanta Services. The company specializes in building advanced grids for the electric power industry. Quanta also provides similar networks and services to the telecommunication and cable TV industries.

"In the electric power market, Quanta is one of the few companies that constructs complete distribution networks with towers, transmission lines, substations, control systems, and associated equipment.

"One of Quanta's strengths is building different types of networks at the same time using the same rights-of-way.

"For example, electric power lines, fiber-optic cables, and natural gas pipelines can be constructed together, and even placed in the same trench. Such multipurpose networks can be put in place at a fraction of the cost of individual projects.

"Because of the economic slowdown, Quanta's telecom and cable business is in a slump. However, I think profits will start to pick up later this year as orders for large scale power systems begin to rise. Despite some recent gains in the stock price, Quanta remains attractive."

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