Cities around the world – from Houston, Sardinia, to Acropolis – are all experiencing power outages.
That’s because we’ve officially entered another record-breaking summer heat wave.
In Italy, temperatures are expected to soar above 104 degrees Fahrenheit. Meanwhile, California’s Death Valley reached 125.6 degrees Fahrenheit this past Sunday.
As temperatures increase, so does the demand for electricity to power air conditioning in homes and businesses.
But when too much demand is placed on power grids, existing power supplies are stretched too thin. Things start to shut down.
Yet, heat isn’t the only catalyst behind rising energy demands.
There’s another reason why power grids are under immense pressure. It lies at the heart of America’s re-industrialization – or manufacturing construction – boom.
And it spells an opportunity for investors who know where to look. But first, let’s take a look at how the power grid really works…
The Power Grid Should Be Reliable
One thing is true about power…
We expect it to be there when we need it. Stability and predictability are key.
That’s where the power grid comes in. It delivers electricity from power plants to end users. Power plants generate electricity from three types of energy resources: fossil fuels, nuclear power, and renewable energy sources – such as wind, solar, and hydropower.
The power grid has three main jobs:
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Ensure the most efficient use of available energy resources.
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Provide the greatest possible power supply.
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Make dependable and economic power system operations.
Grid operators balance power supply and demand in real-time. But power outages can occur when there’s an imbalance between the two.
Grids also fail when any part of them fails. When that happens, it creates a “power surge load” on other parts of the grid. A surge can stress the grid beyond its computed capacity. This, in turn, can lead to broad power failures.
Failures can be caused by extreme weather events such as heat waves, blizzards, or hurricanes. Almost 96% of power outages are due to weather or natural disasters.
The growth in renewable power sources can also strain the grid. Solar and wind power can produce more electricity than grid operators have accounted for in the power grid system design.
What all of this means is that greater electricity demand will require more accurate power load projections.
Over the next few decades, electricity needs will balloon as more people and businesses access existing grids quicker than new ones can be built.
But there’s another boom that will add an extra layer of demand for the power grid…
The U.S. Factory Boom
Contrary to warnings about an economic downturn, America is seeing a post-pandemic boom in manufacturing construction.
Think factories being built or totally updated from the ground up.
By April of this year, U.S. manufacturing construction nearly doubled over the same period last year. Private manufacturing construction hit a total of $132 billion over 2022. You can see that in the chart below.
The increased spending in manufacturing can be chalked up to the government signing new laws into action.
These bills include the Inflation Reduction Act (IRA), Bipartisan Infrastructure Act, and CHIPS and Science Act. Together, they unleash federal funds for new projects in chipmaking, electric vehicles (EVs), and renewable energy.
This means more factories and more energy use for ongoing and future operations.
For one, the CHIPS Act allocates $52 billion worth of funding to create more chips within U.S. borders. And to do that, companies are building more factories. Giants like Intel and Texas Instruments announced $215 billion worth of factory projects just in the past few years.
The Bipartisan Infrastructure Law has also pushed companies to build factories. Since the legislation passed, manufacturers have allocated 20 times the investment in new construction as they did before the bill came on the scene.
This includes $50 billion of funding for factory projects in the clean water provision space in Iowa, Wisconsin, Illinois, and Indiana.
The Inflation Reduction Act, on the other hand, added $242 billion in investments covering more than 191 new clean energy projects. That includes new factories for EV production as well as wind and solar energy technology.
Overall, these projects are bringing about a factory boom that’s revitalizing the center of America. It’s reshaping the nature and geography of American manufacturing.
Right now, we are beginning to re-shore and rebuild.
But there’s more to the story…
On Monday, I’ll dive into how the factory boom is adding extra strains on the power grid… how it’s unleashed a “race to the grid”… and how you can profit from the increased demand for energy.
Stay tuned for more.
Regards,
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Nomi Prins
Editor, Inside Wall Street with Nomi Prins
P.S. The boom in U.S. manufacturing can be traced to one thing… the U.S. government.
That’s because where Washington’s money goes, private investment money follows…
And after many conversations with my political contacts in D.C., I discovered one of the biggest opportunities of 2023.
It’s a tiny, $2 firm that has just been granted a virtual monopoly over an entire $1 trillion energy subsector.
This firm is still flying under the radar for now. But on August 1, shares are set to soar…
If you’d like to get in beforehand, make sure you watch this video presentation I put together.