A few years ago there was a lot of buzz about the "smart grid" and the amazing investing potential it had. The overall concept centered around a grid that could adapt and react to supply and demand changes, integrating renewable energy, variable electricity costs, and energy storage into an aging grid.
Today, a smarter grid is still a hope for the industry, but the hopes for some of the industry's once-promising companies are fading. High expectations met a utility business that's extremely slow to adapt.
Throwing in the white towel on demand response
This week, Comverge
Grid storage hasn't materialized, either
You could throw Ener1 and A123 Systems in this group of smart grid stocks, as well. They had plans not only to supply batteries for electric cars, but also to provide the storage the grid needs to adapt to renewable energy sources.
Ener1 was the first to throw in the towel and declare bankruptcy last month after sales failed to meet expectations. A123 Systems
Nor has renewable energy been profitable
I'm a big fan of renewable energy, but overall the investment hasn't been a winner. First Solar
China may be stealing renewable energy market share, but that doesn't mean Chinese manufacturers have been a better investment. Suntech Power
Wind stocks like Vestas, which trades on pink sheets in the U.S., haven't performed any better, falling more than 50% in the last year.
Is it time to give up?
Does all of this failure mean that the smart grid will always be a poor investment? I tend to think there is some hope, but patience may be the key. Trying to pick winners before the market does can burn you, so wait for companies that can prove consistent profitability before diving in too deep. Bankruptcies have been commonplace in both private and public companies, so stick with quality companies with quality balance sheets and be ready to hit the eject button if signs of trouble emerge.
I lean toward watching industries that are growing and have some solid financial foundation for investment. Solar and wind power will continue to grow demand because they've reached grid parity and will be able to produce electricity for less than traditional sources. So there will eventually be some winners emerging from the industry. Who, when, and where? That's yet to be determined.
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Fool contributor Travis Hoium does not have a position in any company mentioned, but he does have investments in solar stocks. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his CAPS picks at TMFFlushDraw.
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