With the oil price on the rise again, the race is on to find new energy sources.
Expect to read a lot about this in the mainstream press in the months ahead. But today I’d like to focus on another important trend no one’s talking about. It’s the trend to actually reduce our need for energy. As you’ll see, this is a massive opportunity...
According to the Energy Saving Trust around £8.5bn of energy is wasted in the UK every year. And, compared with the massive technical and political challenge of finding new energy resources, it is a whole lot easier to go around turning off light-bulbs and walking to work instead of taking the car.
These of course are trivial measures. But there are other ways that can make a much greater difference. There are a great many small companies working on exciting ways to save energy, and one that caught my eye is the AIM-quoted Energetix (ticker: EGX).
Three new technologies helping to solve the energy crisis
Energetix is involved in three very interesting technologies. The first goes by the name of Pnu Power and is considered to be a viable alternative to the conventional batteries used for standby power by utility companies. Clean, reliable and lasting three times as long, Pnu Power’s system is based on compressed air and has already been bought by the Californian energy management specialist P&E Automation, and Telecom Italia.
The second product is called Genlec. Almost identical to a domestic wall-hung boiler, this is a CHP (Combined Heat and Power) generator that basically acts as a mini-power station within your own home. Unlike a conventional boiler that heats up water that then cools down if unused, the Genlec only fires up when heat is actually required. And it can also generate electrical power. Commercialization of this product is under way in Belgium and the Netherlands, thanks partly to a subsidy from the far-sighted Dutch government...
But there is one Energetix product that really grabbed my attention...
It’s for Smart Voltage Management. And that’s a subject that I described in detail in the most recent edition of my newsletter Red Hot Penny Shares. Let me explain... Essentially smart voltage management addresses the fact that most almost all electricity users receive, and pay for a higher voltage than they actually need or want. Partly to compensate for leakage from the transmission grid, but also to cope with power supply fluctuations as heavy loads are switched into or out of the grid, power generators routinely supply an excess voltage.
In fact the typical voltage level received by a UK house is 245 volts, despite the fact that 220 volts is the level that would optimise performance of electrical appliances and keep the energy bill to a minimum.
There is a handful of companies that supply Smart Voltage Management systems to big commercial users. Companies can easily run up six or even seven figures electricity bills and so it makes good sense to spend a few thousand on a device that can cut this by, say, 10%.
But the domestic market is a harder nut to crack. We are using twice the amount of electricity to light our homes and power our many domestic appliances that we were in 1970. And yet few of us are prepared to go to the trouble and expense of investing in energy-saving devices or forms of self-generation such as solar roof panels.
A sector to follow as we all become more aware of the need to save energy
According to the UK’s Minister for Energy and Climate Change, Ed Milliband, the average UK household is wasting £300 of energy per year. But much as governments bang on about the problem, habits will only change if energy saving products are cheap... and easy to install and understand.
Energetix has a 49% stake in another AIM-listed company, Vphase (ticker: VPHA), which has a smart voltage management product designed for the household market. A small box that can be fitted by an electrician, it works in conjunction with the fuse box to selectively apply voltage reduction to the circuits most likely to deliver the greatest savings.
In the same way that headphones can cancel out unwanted noise, this product works by countering excessive voltage. For example if the incoming voltage is measured at 243V, the VPhase technology will apply an opposite voltage of 23V, stabilising the voltage at an energy-efficient 220V.
Vphase has formed liaisons with Southern & Scottish Energy and British Gas, and hopes that the forthcoming introduction into the UK of smart meters will make us all more aware of our energy usage, and how we could save money.
Maybe one day we will all have Smart Voltage management systems in the cupboard under the stairs. But early adoption of this technology will come from commercial users.
So the idea is to look for the companies which are providing ways for commercial operations to save on their energy. It’s a major trend that the mainstream press hasn’t picked up on. Whilst they’re looking the other way, companies like Energetix and Vphase could offer a great way to play the energy efficiency trend.
Good investing,
Tom Bulford
For The Right Side
P.S. If you’re interested in this energy saving technology, have a look at the story in more detail in the latest Red Hot Penny Shares. There I reveal my best way to trade the “rush for energy efficiency” with a penny share that’s tapped into the desire by companies to cut energy costs. I’ll send this to you when you request my latest report: 3 Tiny Stocks and One Big Oil Boom.
MARKET NOTES
Gold’s bullish trend is intact
BY SHIVVY ARORA Despite a recent pullback, gold continues to give out a strong bullish message.
Think about it in logical demand and supply terms. Total supply of gold doesn’t alter much. In fact, it only grows at about 1% a year. Meanwhile, demand has been rising as investors flock to the yellow metal as an inflation hedge. This means prices will rise.
Take a look at the chart below. It tracks gold prices in sterling terms (black line) for the past five years. You can see the sharp upward trend from 23 Oct 2008 to 20 Feb 2009 as its popularity started to soar. It gained an impressive 50% during this period.
Despite a recent pullback, gold prices will rally
Source: 24hgold.com
It then hit a peak at £680/oz (circled) and has fallen since. But this pullback is not the end of the bull market in gold. The fall that we see on the chart is more to do with the strengthening of sterling against the dollar. That and the fact that investors moved out of gold and back into equities as markets recovered.
But gold prices haven’t gone far enough to reverse our bullish stance. In fact, the current trading range of £520-£600/oz is a decent entry point for new investors. However, look out for a break below the level of £500/oz, which could undermine positive market sentiment.
Almost everything is in place for a new surge in gold prices. The threat of inflation looms large. A rise in crude oil prices triggers the same concern, providing support to gold. And the equities rally doesn’t have legs – as soon as it falters, you’ll see investors again piling back into gold.
All that needs to happen for gold to start rallying in sterling terms is for the pound to start falling against the dollar. Given the state of the UK economy, this really isn’t that difficult to imagine.
The Daily Reckoning – A new era for inflation
BY BILL BONNER
London, England
Monday, 29 June 2009
Not much action in the markets on Friday. The Dow was off 34 points. Oil slipped to $69. Bonds rose a bit. Gold and the dollar remained pretty much where they were.
The thought that we kept having this weekend was an old one: that nothing is more dangerous than good luck. Or as the great Mongolian philosopher En Yur Faz put it:
“Luck has a way of kicking you in the derriere.”
If you’re lucky enough to win the lottery, you should watch your back. Almost all lottery winners are broke within a year or two. Many are even more broke than they were before they won the lottery. Because their good luck causes them to miscalculate.
There was a story about one lottery winner in the press here in London last week. He had won millions of pounds. Feeling lucky, he invested in a number of enterprises suggested by friends, relatives and total strangers – all failed. He married a much younger woman – who later left him (taking with her the house he bought for her). He invested on the advice of analysts and advisors – who naturally turned out to be idiots. And he lent money to people who, naturally, couldn’t pay it back. He was in the news because he had been arrested for attacking one his old friends while trying to collect a debt (he needed the money to pay his rent!)
Evelyn Adams won the New Jersey lottery twice – in 1985 and 1986. Talk about luck! She won $5.4 million in total. But don’t go looking for Evelyn in a Beverly Hills or Palm Beach mansion. She lives in a trailer.
"Everybody wanted my money. Everybody had their hand out…,” she says.
Or take the case of William "Bud" Post. He won $16.2 million in the Pennsylvania lottery in 1988. Think he’s fixed for life?
"I wish it never happened. It was totally a nightmare," says Post.
Within a year he was $1 million in debt and had to declare bankruptcy. Now, he is said to live on food stamps.
Niall Ferguson explains, in his book “The Ascent of Money,” that it was good luck that ruined the Spanish economy of the 16th century. Indeed, we passed along the same basic facts here in the pages of these Daily Reckonings… Read on...
To read the Daily Reckoning in full, click here.
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