I had another great conversation with my brother last night and, as usual, he provided me with plenty of ideas for investment research. The main subject centered around alternative energy, an oxymoron if there ever was one. “Alternative” in that the energy sources may change, but “energy” in that the transmission of power to those who use it may or may not change dramatically at all – at least not in the materials used.

So, on the eve of the holiday season, I'll point you to the investment possibility that brings all those holiday lights to life - the transmission lines that originate at power stations and end up in your neighborhood. The same lines that many people would like to see buried underground.

Power transmission requires lines, cables, circuit breakers, switches and transformers, no matter the energy source. A grid is composed of a network of power stations, sub stations, transmission circuits and costly conversion equipment.  The capital expense for power stations is so high that sometimes it is cheaper to import or export a portion of the power load; this is why transmission grids span countries and continents.

But, all this equipment ages and breaks down. Many current transmission lines are in need of replacement. I'm not talking about those regions where power lines were destroyed during recent hurricanes. I'm talking about places in rural areas that have power needs as urgent as those who live in cities. Take a drive one day along a rural road and you'll see what I mean. Any power line that still uses glass insulators (now considered antiques) may need an overhaul.

What goes into transmission line fabrication? A traditional overhead power line usually contains an aluminum alloy made into several strands and possibly reinforced with steel strands. Aluminum has replaced copper as a transmitting metal, as it is lower in weight for equivalent performance and much lower in cost.

Overhead transmission lines usually are uninsulated, which means that those lines are placed with required minimum clearances to maintain safety. But, during adverse weather conditions such as high winds, snow and ice or low temperatures, those clearances can be altered. The need to maintain those clearances is one expense experienced by power companies and passed on to the users. This is why many folks want their power lines buried.

So, why aren't more power lines buried? One word: expense. Oh, I'll add another word, just to make this more interesting: expense. The life-cycle cost of an underground power cable is two to four times the cost of an overhead power line.

One reason behind this expense is the fact that the power field underground is far different than that of an overhead power field. Underground cables emit much less power in their magnetic fields, so they need to be insulated, usually with a sheath of cross-linked  polyethylene (XLPE). Some cables may wear a lead jacket in conjunction with XLPE insulation to allow for fiber optics to be seamlessly integrated with the cable for data transmission. But, this type of insulation is fairly new. According to Wikipedia:*

Before 1960, underground power cables used to be insulated with oil and paper and ran in a rigid steel pipe, or a semi-rigid aluminum or lead jacket or sheath. The oil was kept under pressure to prevent formation of voids that would allow partial discharges within the cable insulation. There are still many of those oil-and-paper insulated cables in use worldwide. Between 1960 and 1990, polymers became more widely used at distribution voltages, mostly EPDM (ethylene propylene diene M-class); however, their relative unreliability - particularly early XLPE - resulted in a slow uptake at transmission voltages. While cables of, say, 330kV are commonly constructed using XLPE, this has only occurred in recent years.

As I mentioned previously, glass insulators are one indicator of aging power lines – another is the oil and paper insulation encasing buried cables. So, as with any other technological investment, I need to be aware of the changes in how power is transmitted and the cost involved; if not, then I may miss out on new investment opportunities and their value over time.

For instance, recent advances have been made and patented in the search for transmission lines that carry higher load capacities at less expense – and this is one way to reduce or maintain the cost of power to end users over long distances. But, they all use the same materials – aluminum and steel. The only difference in transmission is in the additions of conduits or other devices that help electricity run faster through diversion to less heavily loaded lines or through conduits or added metals that help the electricity run more efficiently (the more metal, the more load-bearing capacity).

The changes that may be made over the next decade include power sources, such as dams (which means construction), water turbines, wind turbines and the materials used to construct those machines that will turn water and air into energy and the materials used to sheath underground cables.

So, if I were looking for a long term investment with less risk, I would look at metals and the producers of transmission lines in this sector, because metal is the only viable conduit for electricity for the masses. But, if I wanted an investment possibility with more risk, I would seek out companies that produced polymers and companies that were developing alternative energy forms. For the latter, I would dig deeper to discover the materials they were using to develop turbines.

On a related note – those holiday lights may or may not be a burden on the December power bill. This expense varies, depending upon location, the number of decorations used, and the type of lights used. If you decide to discard worn-out decorations, remember to dispose of them responsibly. Lights – even the more efficient LED versions – contain lead and other toxic substances. An eWaste (electronic waste) solution is the only way to dispose of this type of waste. Even Santa knows that.

Have a safe and happy holiday season!

Linda Goin