Just after 4 p.m., everything went dark at my office in Rockefeller Center... At the time, I worked as a portfolio manager for a New York City family office.
This Industry Is Racing to Save Our Electrical Grid
By Joe Austin, senior analyst, Chaikin Analytics
The stock market had just closed for the day. So my coworkers and I were getting ready to head home.
I only lived 10 blocks away. But it was a typical, sweltering mid-August day in the city. And without power, the elevators weren't working.
That made the trek a lot rougher than normal...
I'll never forget walking down 21 flights of stairs to get out of the building. Then, when I got home, I had to climb another 28 flights to reach my apartment.
That night, the iconic New York City skyline sat in darkness. Cars moving through the streets below provided the only flashes of light.
I sat in my apartment and ate leftover takeout food. I shared a bottle of wine with the neighbors downstairs. And I went to bed in an unfamiliar, eerie silence.
A few of my colleagues spent the night at Grand Central Terminal. Without power, no trains could take them home to the suburbs.
Here's the craziest part...
The historic blackout on August 14, 2003 actually began about 500 miles away in Ohio.
Scorching heat pushed electricity demand to extreme levels in the suburbs of Cleveland.
The demand surge caused a power-generating plant in Eastlake, Ohio to go offline. That put a strain on high-voltage transmission lines in Walton Hills, Ohio.
The lines drooped into the trees below – and ultimately failed.
After that, electricity rerouted through neighboring transmission lines. But those lines couldn't handle the sudden flood of demand. And one by one, their breakers tripped.
A software "bug" exacerbated the problem. The alarm system didn't go off as expected after the initial power failure.
That turned a routine local blackout into something much worse...
Within minutes, more than 500 generating units at 265 power plants went dark. In total, roughly 55 million people lost power across eight U.S. states and Ontario, Canada.
At the peak of the blackout, 80% of the electrical grid's load had vanished.
Some areas remained without power for several days. And just in case power failed again, Toronto's subway system and streetcars didn't run for a couple of extra days.
More than two decades later, it's still the largest blackout in North American history.
Every time I hear about grid-reliability issues, I think about those 49 flights of stairs that I had to climb back then. And New York City is still close to the edge today...
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The New York Independent System Operator ("NYISO") tracks the reliability of the state's power system. It manages the system's output to prevent overload.
According to a report from NYISO this past October, four "peaker" power facilities in New York City are past their prime.
A peaker facility typically only runs when demand spikes.
Think about those sizzling summer afternoons when everyone cranks their air conditioning. Or brutal cold snaps when everyone needs heat.
The city wants to permanently close these four aging peaker facilities. They're inefficient and create terrible pollution.
But New York's grid can't handle losing them yet...
Without these facilities, the city would face massive power shortages. According to NYISO, it would come up between 400 and 1,000 megawatts short in summer peaks through 2030.
The summer heat isn't going away. So that's a huge problem.
The state of New York hopes new projects will fill the gap. But even if everything comes online as planned, New York City will still face demand shortages in 2029 and 2030.
NYISO's report noted that nearby Long Island faces similar problems. In that area, shutting down two peaker generators will create shortages starting in 2027.
Across the country, grid operators are struggling to keep the lights on.
According to the U.S. Department of Energy, 104 gigawatts ("GW") of mostly coal and natural gas power plants will retire by 2030. And the country only has about 22 GW of equally reliable capacity ready to replace them.
Even if enough power comes online, getting it where it needs to go is another huge problem.
A report from the U.S. Department of Energy found that more than 70% of the country's power transformers are at least 25 years old. Around 60% of circuit breakers in the U.S. are at least 30 years old. And 70% of transmission lines are past 25 years old.
Many of these parts are operating well beyond their intended lifespans. And it shows...
Outages already cost the U.S. economy around $150 billion each year.
The last comprehensive study on complete grid modernization came out in 2021. It estimated the total cost at $7 trillion to $8 trillion. And last March, the American Society of Civil Engineers gave the U.S. energy infrastructure a "D+" grade in its annual assessment.
Just getting through 2030 will require $1.4 trillion in grid investment. Analysts estimate that we'll then need a similar level of spending every five years through 2050.
Of course, as we've discussed previously here at the Chaikin PowerFeed, this demand for power creates opportunity for investors.
And right now, I have my eye on one industry that can expect to keep benefiting from this influx of cash...
I'm talking about Construction and Engineering.
In the Power Gauge, we can do a "health check" to get a pulse on this corner of the market...
Over the past year, stocks in the Construction and Engineering industry have surged nearly 50% on average. That's almost 3 times the growth of the S&P 500 Index over the same time frame.
And the Power Gauge doesn't see this trend slowing down anytime soon. Our system says the Construction and Engineering industry is "strong" right now.
And out of 44 stocks in the space with ratings, 14 of them are "bullish" or better. That compares with only 5 with "bearish" or worse ratings. So there are plenty of strong stocks to choose from in this industry.
Put simply, an electrical grid past its prime and growing AI demand keep the Construction and Engineering industry strong. And the Power Gauge sees a lot of opportunity with stocks in this space right now.
Good investing,
Joe Austin
Market View
Major Indexes and Notable Sectors
# Hld: Bullish Neutral Bearish
Dow 30
+0.52%
8
14
8
S&P 500
-0.01%
120
234
143
Nasdaq
-0.57%
21
50
29
Small Caps
+1.09%
661
939
291
Bonds
-0.5%
Energy
+3.15%
5
13
4
— According to the Chaikin Power Bar, Small Cap stocks are more Bullish than Large Cap stocks. Major indexes are mixed.
* * * *
Sector Tracker
Sector movement over the last 5 days
Materials
+4.74%
Energy
+4.12%
Industrials
+3.26%
Consumer Discretionary
+2.94%
Health Care
+2.14%
Financial
+2.06%
Consumer Staples
+0.98%
Real Estate
+0.22%
Information Technology
+0.19%
Communication
-0.2%
Utilities
-1.64%
* * * *
Industry Focus
Insurance Services
17
27
9
Over the past 6 months, the Insurance subsector (KIE) has underperformed the S&P 500 by -7.47%. However, its Power Bar ratio, which measures future potential, is Strong, with more Bullish than Bearish stocks. It is currently ranked #12 of 21 subsectors and has moved up 1 slot over the past week.
Top Stocks
HIG
The Hartford Insuran
ALL
The Allstate Corpora
AIZ
Assurant, Inc.
* * * *
Top Movers
Gainers
APA
+8.47%
TPL
+7.66%
MHK
+6.91%
SW
+6.71%
IP
+6.37%
Losers
STX
-7.72%
DDOG
-7.61%
WDC
-6.1%
ADSK
-5.86%
MRNA
-5.66%
* * * *
Earnings Report
Reporting Today
Rating
Before Open
After Close
Earnings Surprises
NEOG Neogen Corporation
Q2
$0.10
Beat by $0.03
CMC Commercial Metals Company
Q1
$1.84
Beat by $0.30
RPM RPM International Inc.
Q2
$1.20
Missed by $-0.21
* * * *
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This work is based on SEC filings, current events, interviews, corporate press releases, and what we've learned as financial journalists. It may contain errors, and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility.
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