Sector Watch: Sizzling opportunities

Here’s a shocking fact: electricity demand in North America will increase 19% over the next 10 years, but generation capacity will increase only 6%, according to the North American Electric Reliablity Council.

Electricity cannot be easily stored but rather must be generated and delivered as needed. As a result, maintaining a reliable power system requires real-time balancing between supply and demand. Inadequate existing grid systems, however, coupled with lack of infrastructure investment and rising peak demand, have increased the frequency of electricity brownouts and blackouts, which collectively costs the United States $80 billion in productivity losses annually.

Enter Comverge, Inc. (Nasdaq: COMV), and EnerNOC, Inc. (Nasdaq: ENOC), two small caps that provide services enabling electric utilities to increase grid reliability and available electricity capacity during periods of peak demand.

EnerNOC is in the business of helping power suppliers and their customers balance electricity supply and demand. Its Network Operations Center remotely manages electricity consumption across a network of commercial, institutional and industrial customer sites. During periods of peak demand, EnerNOC makes capacity available to its electric power grid operator and utility customers by reducing consumption from its participating end-user customers. Power suppliers pay EnerNOC for these services and the company shares a portion of revenues with end-user customers.

By enabling utilities to meet peak demand, the company provides a cost-effective alternative to new power plants and transmission lines. About 10% of infrastructure is built to supply electricity during periods of peak demand that occur less than 1% of the time. EnerNOC can help utilities reduce required infrastructure spending by more than $5.9 billion per year. 

So far, EnerNOC’s performance has been impressive.

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