NEW YORK (TheStreet) -- There's a $10 billion-a-year opportunity in front of a small collection of companies you probably think of as laggards in your portfolio.
Most of the companies are European. They're the suppliers of equipment to the nation's power grid, and the $10 billion opportunity is in the area of grid storage.
Thanks to renewable energy, the demands of modern computers and a little-known order known as FERC Order 890, demand for storing power on the nation's electric grid -- a $200 million market last year -- should be a $10.4 billion market in 2018, according to Lux Research of Boston.
Senior analyst Steve Minnihan told me the industry's system integrators, including ABB , General Electric , Siemens and Schneider Electric, will take the bulk of this market, gradually evolving from custom-engineered installations to standardized systems delivered via containers and installed where needed.
"It's just what we saw with the UPS (uninterruptible power supply) market," he said, "and will take five to seven years to develop." The only thing that could forestall this, he added, is if one of these suppliers loses patience and decides to withdraw from the market, as Siemens withdrew from the solar inverter space.
This is a market sweet spot, as I wrote last month . The FERC order provides incentives to meet the demand, utilities are buying wind and solar plants that require more storage and cloud data centers are demanding more reliable, stable power supplies.
Of the four companies mentioned above, it's ABB that looks like the best investment. It is heavily leveraged toward the utility space, it delivers a range of storage technologies and it discusses power first in descriptions of the business.
Over the last 12 months the shares are up 37%, but still offer a solid dividend and yield 3.18%. That dividend has been rising steadily over the last few years, from 44 cents a share per quarter to the current 70 cents. A European regulation similar to FERC 890 could send this stock into overdrive.
Schneider Electric, whose shares are traded only in Europe, is based in France and is also focused on energy management. Its specialty, however, is low-voltage equipment like circuit breakers and switches, and the company is in the process of refinancing its debt, writes Business Week.
Siemens and GE are less leveraged to the space but should come out as the biggest winners in terms of market volume. Siemens calls its systems SieStorage, using lithium-ion batteries that ship in storage containers. GE Energy is working on similar systems.
Last week's Energy Storage Association meeting in Santa Clara featured two smaller companies -- S&C Electric of Chicago and AES Energy Storage, whose parent owns utilities in the Midwest, as lead sponsors.
Instead of theoretical discussions, Eric Wesoff of The Energy Collective writes, the focus instead was on lessons learned from pilot programs, integration with solar and wind power, the need for big data analytics, and for standards. They were practical questions, which he called "a noticeable step forward."
Speaking in Atlanta recently, the Department of Energy's point man on this, Imre Gyuk, said power outages cost the U.S. economy $79 billion a year, in an energy market worth $250 billion. He said the market needs 200 kilowatts of storage for each megawatt of power. Certainly that's worth $10 billion.
At the time of publication, the author was long AAPL.
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