By Daniel Whitten, Nicholas Johnston and Mark Chediak
Oct. 28 (Bloomberg) -- Companies that make smart meters, thermostats and other elements of an electric transmission system gained in New York trading yesterday as the U.S. announced an $8 billion upgrade to the nation’s grid.
Echelon Corp. of San Jose, California, rose 4.5 percent, St. Louis-based ESCO Technologies Inc., gained 3.5 percent and Liberty Lake, Washington’s Itron Inc. climbed 3.2 percent after President Barack Obama announced the U.S. was giving out $3.4 billion.
Recipients will kick in the rest of the money. Most of the federal aid will go to utilities to install meters, transformers and other equipment that can control the flow of electricity and reduce power use and homeowner bills.
“The industry was in a state of paralysis, waiting for these awards,” Ben Schuman, an analyst for Pacific Crest Securities in Portland, Oregon, said yesterday in a telephone interview.
The investment is a down payment on what Energy Secretary Steven Chu told Bloomberg Television would be hundreds of billions of dollars in investments to upgrade the power grid.
The goal is to jumpstart spending in technologies that would lead to more efficient energy use, and clear the way for renewable electricity adoption, he said.
“This is not about selling widgets, this is about technology deployment, this is about getting more bang for the buck,” said Christine Tezak, an analyst for Robert W. Baird & Co. “The better you understand electricity usage, the better your investments are going to do.”
Tezak said that the money will test a range of technologies and determine whether national deployment of a comprehensive so- called smart grid is feasible.
Electric Utilities
FPL Group Inc., of Juno Beach, Florida, the largest producer of wind power; Constellation Energy Group of Baltimore; and Charlotte, North Carolina-based Duke Energy Corp. will each spend at least $250 million to add to the federal grants. Publicly traded and municipal electric utilities were among 100 grant winners in 49 states to upgrade the power grid.
Smart-grid equipment makers such as Itron, Echelon, EnerNOC Inc. of Boston and ESCO stand to benefit from the government funding, Schuman said.
“We look forward to the momentum that these grants will generate in the industry and the economy,” Malcolm Unsworth, Itron’s chief executive officer, said in a statement.
The grants, ranging from $400,000 to $200 million, will be used to develop and install technology to make electricity transmission more reliable and aid the delivery of energy generated from sources such as wind and solar power.
The money comes from the $787 billion economic stimulus legislation approved by Congress in February. Jared Bernstein, chief economic adviser to Vice President Joe Biden, told reporters Oct. 26 that the grants will “save or create tens of thousands” of jobs.
‘PR Effort’
“I truly think that this is more of an expensive PR effort on the part of the president,” said Patrick Creighton, a spokesman for the Institute for Energy Research, which is partly funded by energy companies. “If these smart meters and thermostats would truly save energy, create jobs and help the economy, than why does it need a massive government subsidy?”
Obama made the announcement at FPL’s DeSoto Next Generation Solar Energy Center, which will generate enough power for 3,000 homes when it is completed. He highlighted new technologies to transmit renewable electricity from places like Arcadia, about 60 miles (97 kilometers) southeast of Tampa, to locations where energy demand is greater.
“Frankly, after the market meltdown, the renewable energy industry was basically on its deathbed,” FPL’s Chief Executive Officer Lewis Hay III said in a telephone interview. “Through initiatives like this and some of the items they put in the stimulus bill, it really has revived the renewable industry.”
During Lunch
Hay, who told Obama about the DeSoto project during a lunch Oct. 8, said the company will use technology developed by Fairfield, Connecticut-based General Electric Co. and managed by Cisco Systems Inc. of San Jose. FPL will spend $378 million to go along with the government’s $200 million to buy 2.6 million smart meters, 9,000 power-distribution devices and advanced monitoring equipment for 270 substations.
Mayo Shattuck, Constellation’s chief executive officer, said during a conference call with reporters that his company won’t buy the equipment unless Maryland regulators approve a rate increase to pay for it.
“It is our hope that we will receive the commission’s final approval by year’s end, so we can begin providing our customers with the savings, reliability, service quality and environmental benefits as soon as possible,” Shattuck said.
Constellation’s Baltimore Gas and Electric Co. will provide new electric meters to 1.1 million households that will allow real-time monitoring of electricity use and help customers adjust their consumption during peak times.
‘Manage and Control’
“Consumers will have the power to manage and control their energy use, and we can add more clean-energy sources to the generation mix,” Luke Clemente, general manager of GE Energy Services’ smart grid business, said in a statement.
GE is bidding for Areva SA’s transmission and distribution unit with CVC Capital Partners. Areva is the world’s third- biggest maker of transmission and distribution equipment behind Germany’s Siemens AG and Switzerland’s ABB Ltd.
GE and other companies are interested in the Areva division because of the growing demand for more efficient electrical grids. GE said in February that the market for so-called smart meters that help distribute electricity more efficiently would grow to $12 billion in five years.
Echelon gained 61 cents to $14.33 and Itron gained $1.86 to $59.65 in Nasdaq Stock Market trading. Esco rose $1.37 to $40.91 in New York Stock Exchange composite trading.
To contact the reporters on this story: Daniel Whitten in Washington at dwhitten2@bloomberg.net; Nicholas Johnston in Washington at njohnston3@bloomberg.net
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