An Investor's Guide to Companies and Opportunities in the Electrification/ Power / Grid Modernization sector
This guide provides an overview of the electrification / power / 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 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, hydroelectric, 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:
In our next blog post, we'll cover how these innovations are creating subsegments of opportunity, and just how much opportunity from a TAM/CAGR standpoint these segments represent. As I said, it's downright "shocking"!
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