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An Investor's Guide to Companies and Opportunities in the Electrification/ Power / Grid Modernization sector
This guide provides an overview of the electrification / power / smart grid / grid modernization sector, and the investment opportunities associated with segments of the industry. It walks through the electric supply chain, then breaks it into segments, outlines innovations and disruptions happening in each, and identifies the CAGR and TAM associated with several segments of the electrification market. It then outlines the firms associated with R&D and product market share in each segment. It can be used by investors to evaluate investment opportunities and better understand what publicly traded companies operate in certain segments of the electrification / power / smart grid / grid modernization market. It suggests the best investment opportunities by forecasted growth into 2030.
Electric Power Subsector Market Opportunities
As of late 2024, the Electric Power subsector is forecast to increase by a 28% CAGR through 2032, largely driven by global decarbonization efforts, EV transport growth, AI-based power demands, and changing consumer needs. The stage is set for investors to achieve above average to high returns in this sector, and for market entrants and existing players to rapidly gain share in the early innings of the electric modernization market.
The industry will start to exhibit signs of faster decentralization as residential consumers continue to experience increasing rates amidst a downturn in personal incomes. The cost of modern electric infrastructure (and thus capital and operating expense) is simultaneously increasing, and for now, the residential and commercial consumers subsidize that cost. This trend is unsustainable and creates the need for new power modulation and demand gating/sharing technology, fueling the 28% CAGR associated with this market.
Demand for electric power will be accelerated by robust global governmental funding and support for electrification, modernization, and decarbonization efforts. However, some segments of this market could be very challenged in 2025 by US Federal policy that strongly de-emphasizes offshore wind and the domestic EV market.
Regardless of administration change, the electric power market offers several subsegments for potential entry, each with their own barriers, characteristics, and market structure. The following pages will outline a framework for assessing these opportunities, the players in each market segment, and growth areas to help investors and firms evaluate the best entry point for the Electric Power market.
Overview of the Electrification and Modernization Market
Investors need to understand the market and its various segments to make better informed decisions. The exhibit below illustrates the six components of the electric power supply chain at a very high level.
At the most basic level, the electric supply chain consists of:
Generation facilities and their inputs (e.g. natural gas, coal, nuclear, solar, wind, hyrdoelectic, biomass/biofuel)
Substation infrastructure, which includes power modulation assets and facilities
Transmission infrastructure, which includes power transmission and monitoring
Step-down substations which include inverter and transformer infrastructure to prepare power for lower voltage distribution
Distribution networks (transformers, pole assets, lines, connections)
Customer consumption (residential/commercial/industrial usage)
Innovation and Disruption Affecting the Electrification / Power / Grid Modernization Supply Chain
Each of these supply chain areas is seeing innovation and disruption from new technologies and approaches. The US electric grid is based largely on 19th and 20th century concepts and has remained largely unaltered as demand for electricity has surged, and new sources of energy came online at scale in the first two decades of the 2000's. Below are areas in which the supply chain is changing - these areas represent market opportunity for investors:
The Best Investment Opportunities: Total Addressable Market (TAM) and CAGR (Compound Annual Growth Rate) By Electric / Power / Grid Modernization Market Segment
Opportunity Analysis
The largest opportunities in electrification / power / grid-modernization lie in Grid Re-Architecture (20.5% CAGR), Sensor-based Phasor Measurement and Remote Monitoring (20%), Distributed Energy Resource Management or DERM (18.3%), EES or Electrical Energy Storage (11.2%), and Carbon fiber line replacement (8.8%).
Dwarfing all of these opportunity areas, combined, is Offshore Wind Power Generation, forecast to be an astonishing $140B market by 2036. However, this TAM seems unrealistic given the failure of offshore wind to compete effectively with all other forms of power generation due to substantial capital investment, environmental regulation, and maintenance costs. Additionally, US Presidential candidate Donald Trump has targeted offshore wind as a priority to de-emphasize through his administration's policy. Since the offshore wind segment is largely burgeoned by the US Federal government, it is highly unlikely that this market segment will perform as currently forecast by the DoE because of an increasing likelihood that Trump will win the 2024 US election.
Why the Opportunity Exists
For over 100 years, the entire business model of the electric utility was architected around central power generation by regional monopolies, supported by state and Federal government. This model resulted in a largely centralized grid design with materials available in the 1920s-1940s (copper wire) stringing transmission lines to houses across wide expanses in the rural US, and with mazes of overhead lines crisscrossing in cities.
In the past, electric generation was limited to coal, then coal + hydroelectric power. Over time, nuclear power became a viable source of generation. Thanks to R&D advancements and successful demonstration projects, the early 2000's ushered in an era of viable renewable energy, mainly solar and wind, but also including biofuel and biomass. Since the electric grid is based on a centralized model and one way (Direct Current - DC) power, and legacy technology, the grid needs to adapt to incorporate these new sources, and increase its distribution and transmission capacity.
Firms are leading the way in development of new products, services, materials, and software, much of it AI-enhanced, to meet the energy needs of the next American generation.
Market Players by Segment
Below are the major players in each segment, as well as a list of all companies involved in next generation electric power technologies.
All Market Players Comprehensive List
https://docs.google.com/spreadsheets/d/1m8WuhbHwqgcNPhE46hF0C6cSFyChwtmlDEBQ3BqElSA/edit?usp=sharing
Publicly Traded Opportunities
The following firms are publicly traded entities, and represent consideration for future investment. In a subsequent guide, we will provide more detailed analysis on these companies and their unique positioning in the market.
Player | Subsector | Is Publicly Traded | Analyze Further | Stock Symbol | Current Price |
Lockheed Martin Corporation | Microgridding / Grid Integration and Re-Architecture | TRUE | FALSE | LMT | 468.58 |
Exelon Corporation | Microgridding / Grid Integration and Re-Architecture | TRUE | FALSE | EXC | 35.52 |
Tesla | Microgridding / Grid Integration and Re-Architecture | TRUE | FALSE | TSLA | 256.56 |
Toshiba Corporation | Microgridding / Grid Integration and Re-Architecture | TRUE | FALSE | 6502.T (Tokyo Stock Exchange) | #N/A |
Honeywell International, Inc. | Microgridding / Grid Integration and Re-Architecture | TRUE | TRUE | HON | 218.47 |
ABB | Microgridding / Grid Integration and Re-Architecture | TRUE | TRUE | ABBNY | 57.94 |
Caterpillar | Microgridding / Grid Integration and Re-Architecture | TRUE | FALSE | CAT | 360.58 |
Schneider Electric | Microgridding / Grid Integration and Re-Architecture | TRUE | FALSE | SU.PA (Euronext Paris) | #N/A |
Siemens | Microgridding / Grid Integration and Re-Architecture | TRUE | FALSE | SIEGY (OTC), SIE.DE (Frankfurt Stock Exchange) | #N/A |
Eaton | Microgridding / Grid Integration and Re-Architecture | TRUE | FALSE | ETN | 332.46 |
General Electric | Microgridding / Grid Integration and Re-Architecture | TRUE | FALSE | GE | 162.85 |
Hitachi | Sensors / PMU / Remote Monitoring | TRUE | TRUE | HTHIY (OTC), 6501.T (Tokyo Stock Exchange) | 107.43 |
Itron (U.S.) | DERM - Distributed Energy Resource Management | TRUE | FALSE | ITRI | 142.61 |
Oracle (U.S.) | DERM - Distributed Energy Resource Management | TRUE | FALSE | ORCL | #N/A |
Enel (Italy) | DERM - Distributed Energy Resource Management | TRUE | FALSE | ENLAY (OTC), ENEL.MI (Milan Stock Exchange) | #N/A |
Mitsubishi Electric Corporation (Japan) | DERM - Distributed Energy Resource Management | TRUE | FALSE | MIELY (OTC), 6503.T (Tokyo Stock Exchange) | #N/A |
Doosan Heavy Industries & Construction (South Korea) | DERM - Distributed Energy Resource Management | TRUE | FALSE | 034020.KS (Korea Stock Exchange) | #N/A |
Vivint Solar + Sunrun | Electrical Energy Storage - EES | TRUE | FALSE | RUN | 17.28 |
GE Vernova | Electrical Energy Storage - EES | TRUE | FALSE | GEV | 182.74 |
AES | Electrical Energy Storage - EES | TRUE | TRUE | AES | 17.65 |
Johnson Controls | Electrical Energy Storage - EES | TRUE | TRUE | JCI | 72.18 |
Energizer | Electrical Energy Storage - EES | TRUE | FALSE | ENR | 30.33 |
Enphase Energy | Electrical Energy Storage - EES | TRUE | TRUE | ENPH | 116.17 |
Albemarle | Electrical Energy Storage - EES | TRUE | FALSE | ALB | 97.71 |
Panasonic | Electrical Energy Storage - EES | TRUE | FALSE | PCRFY (OTC), 6752.T (Tokyo Stock Exchange) | #N/A |
Tesla | Electrical Energy Storage - EES | TRUE | FALSE | TSLA | 256.56 |
Conclusions
This is meant to be a guide for investors trying to learn more about the electrification / power / grid modernization vertical. The space presents several compelling opportunities for analysis and potential investment/market entry. However, many policy risks in 2025 may temper the outlook for specific areas like offshore wind and non-domestic (US) produced EV's, solar components, and materials.
For more information, contact us at ShadowHornet - info@shadowhornet.com, or access our Energy/Utilties research archive at: ShadowHornet.com/IndustryResearch.
July 17, 2024