With today’s electricity demand expanding beyond the reach ofavailable supply, and nationwide electric deregulation effortsproviding inconsistent results, distributed power just may be thenext big thing, according to Bear Stearns analyst Robert Winters.

With technology-laden, electricity-hungry companies popping upevery time you turn around, and blackouts and brownouts occurringmore frequently as large power grids are becoming less reliable,the analyst points towards distributed energy services as apossible solution, and maybe the “next big investment opportunityfor the coming decade.” In Winters’ 250 page report, “DistributedEnergy Services-The World’s Power and Transportation Industries:Set for a Revolution-Part 2,” he examines technologies andcompanies within the distributed energy services sector that mightbe able to take advantage of the current situation.

“Thanks to major technological advances and energy deregulation,a wave of new investment in the power industry has just begun. Webelieve that this coming era in the power industry could resemblethe wave of investments which flooded into the telecommunicationsindustry following the breakup of AT&T in the early 1980’s,”said Winters.

“Companies and municipalities need to find ways to ensure theavailability of high quality, reliable power,” added Winters.According to his research, microturbines are the best positioned ofthe “new” technologies that would be able to have an immediateimpact on electric generation.

He based his recommendation on the fact that microturbines aresmall, quiet, efficient and very versatile. “They can be used as amain power source, a back-up power source or as an alternative whenthere is a spike in traditional energy prices,” the analyst said.”Microturbines can also be used in remote locations, includingdeveloping countries, that do not have access to electricity.”Another attractive feature of microturbines is their fuelrequirements. The units often use natural gas, but can also useseveral other fuels as well.

In the study, the analyst also examined fuel cells, flywheeltechnology, and existing reciprocating engines technologies such asdiesel engines and Stirling engines, which he noted are enjoying acomeback.

In addition to the report, Winters initiated coverage on twodistributed energy companies. He labeled Active Power, a companythat is pioneering flywheel technology, as a “buy” and CapstoneTurbine Corp., a leading manufacturer of microturbines, as”attractive.”

Los Angeles-based Capstone announced late last month that it hadshipped its 1,000 microturbine unit since it began operation in1998. The company has enjoyed sizeable growth from year to year,selling just two units in 1998, 221 units in 1999, and over 548units by the end of September this year.

These latest companies added to Winter’s coverage are inaddition to two fuel cell companies he currently follows. BallardPower is currently a buy, and Plug Power is rated neutral.

Alex Steis

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