torsdag 26 juli 2007

Prediction of the Cleantech Market: Looking into the Crystal Ball (II)

I have in a recent post written about my predictions for the cleantech market. In that post, I suggested that energy efficiency would be the sector that will get the most attention in the near future from investors. In this post, I will develop the issue, including suggestions of the companies that would benefit from such attention.

Energy efficiency is low-hanging fruit when trying to reduce GHG emissions. Both in industrial and domestic sectors, there are huge gains to be made/wastes (naturally, the cost of capital may vary). In many cases, it is easier to implement these measures than that to replace fossil fuel sources with renewables as a way to reduce CO2 emissions. There is a large potential for companies that provide energy efficiency a key issue in their product offer and perform well, since the concept is yet to take off on a grand scale. Considering that potential, some of them might be undervalued today. Further on, as the world economy grows, and new groups adapt to Western consumption patterns and standards, the need for energy efficiency will increase.
Good performance in the EE area may not show in the stock price however, if energy efficiency is a small part of the companies activities.

Some of the companies and sectors suggested in this post might not be thought of as "energy efficient" at a first glance, but they will profit from providing efficient products and services. Citing Tom Konrad, there is no Vestas of energy efficiency. Energy efficiency isn't a clearly defined sector, but rather a philosophy that spans across several sectors. A common characteristic however, is technology. Through technology the use of energy will diminish: power technology, engine technology, building & infrastructure technology, information technology and so forth. Energy efficiency is about making components and appliances lighter yet stronger, wasting less energy and resources.

Power monitoring and regulation
It is quite obvious that companies that work directly with energy efficiency are bound to benefit from an energy efficiency wave. Especially companies for monitoring and regulating power at a large scale are interesting. These companies may be found in the software, microelectronics & power engineering sectors.
Example of companies in these sectors:
enerNoc: Energy and power management for utilities
Energy connect: Supply and demand based power management
Comverge: Power management & Metering

IT, data management & computing efficiency
Stationary and server computers waste a lot of energy in the form of heat. In addition, because of this heat the computers need to be cooled to avoid break-downs, causing further energy consumption. With ever increasing server parks, this is becoming a significant factor. Google has together with Intel launched a program for increasing energy efficiency in computing, and setting performance targets. The initiative includes tech heavyweights such as Dell and eBay. In addition to improved management, using innovative materials may reduce power consumption. Information technology obviously also offers opportunities for reducing energy consumption, such as remote working, video conferencing etcetera.
IBM: processing data for peak-hours calculation, server management software
Google: efficient information management
Norstel: low energy semi-conductor materials
Cisco & WebEx: remote office solutions
Western Digital: a new line of energy efficient hard drives

Increasing the use of LED for lighting will reduce energy consumption drastically, according to Peter Svensson, energy consumption from lightning represents 22%, and with a higher use of LED lighting that consumption could be reduced by 50%. They are already more efficient than CFL bulbs ("low energy bulbs"). Further on, CFL bulbs contain mercury. Still they seem to be the mainstream choice for years to come. More countries are bound to follow in the footsteps of South Africa, Brazil and Australia to phase out incandescent in favour of CFL bulbs. LED lighting would probably need larger cost reductions before making a real break-through.
LED & CFL bulb producers:
Lighting Science Group Corp

Infrastructure & construction
The have we construct and maintain buildings and infrastructure has an important impact on the energy consumption. Companies that can deliver “green buildings”, or that provides parts that lower energy consumption will benefit from this. Further on, consultants refurbishing existing buildings and infrastructure will have a busy schedule.
Johnson Controls: building energy efficiency
HySSIL Pty Ltd: light weight, high-strength concrete
Chromogenics: energy saving, "intelligent" windows
ITT Flygt: pump systems awarded for their efficiency

Efficient power generation, transformation & operation
General Electric & Sensicast Systems: remote motor management through wireless networks
Power Efficiency Corp: technology for managing electrical motors & increasing efficiency
ABB: a large number of products & services increasing efficiency

Energy efficiency is not only for the philantropic investor, it is a necessary measure and as such a sound investment opportunity.