President Obama is hoping that Midwest rural areas will return the favor, and provide much needed wind-generated power to densely populated cities and towns up and down both coasts of the country…

Wind turbines are huge, and not well suited to more densely populated areas. They are a natural fit in the vast open plains of the nation’s heartland, where the wind almost never stops blowing. But there’s a problem… it’s just not the one you might think.

Here’s why wind-generated power is still going to be the driving force for change in the way we use energy, and one of the biggest obstacles it has right now to getting us to where we need to be.

A Banner Year For The Wind Power Industry

2008 was a banner year for the wind power industry:

• Previous installation records were blown away, with over 8,500 megawatts (MW) of new generating power installed in the United States alone. That’s enough to light over 2 million homes.
• Wind power installations represented 42% of all the new power generation capacity added in 2008.
• The 44 million tons of carbon emissions avoided equates to taking 7 million cars and trucks off the highways.

As a result of the current recession, the wind energy installation outlook for 2009 will be somewhat muted compared to last year, with about 5,000 MW expected to be installed. But despite the downturn, the industry is still in expansion mode.

And that’s a good thing.

A lot of the stuff is engineered and made right here: domestic “made in the USA” components now make up about 50% of the average system, up from 30% in 2005. And like any other burgeoning sector, when business is booming, companies expand and hire people.

In just the last two years, wind turbine, tower and component manufacturers announced new facilities, added or expanded 70 facilities, 55 of them in 2008 alone.

It’s creates lots of jobs as well. Today 85,000 people are employed in the wind industry. That’s a 70% increase from just one year ago. It’s all good news… well almost all of it.

Where Wind-Generated Power Is Needed The Most

You see, while plenty of wind farms dot the ranchlands of the Midwest, the bulk of the wind-generated power produced is needed in the dense urban areas on the east and west coasts.

And there’s the big problem: the existing power grids won’t cut it.

Just consider: 3,000 utilities generate power and send it to 500 transmission owners. They control over 164,000 miles of transmission lines divided into three major interconnection regions: East, West, and Texas.

As an electrical engineer, I may be one of the few who can appreciate the technology, but it’s truly amazing that it all plays together.

They’re fragmented, low power grids that aren’t capable of transmitting the hundreds of thousands of megawatts that will be needed thousands of miles away from the wind farms.

The bottom line is that in order for the estimated 300,000 MW of proposed wind-generated power to get to where its needed, $60 billion will need to be spent on grid upgrades and interconnects by 2030.

The Biggest Problem Facing Wind-Generated Power

But even assuming the $60 billion was available to be spent on this type of alternative energyright now, not a dime of it would be used to build wind-generated power transmission lines.

The problem? Red tape with a capital R:

• Regulations that aren’t designed for power transmission between states.
• Rules that burden the local ratepayers unfairly with the construction costs instead of distant beneficiaries.
• Approval times measured in years, not months.

Here’s an example of how ridiculous it gets: American Electric Power (NYSE: AEP) is a public utility holding company in the business of generation, transmission and distribution of power at both the retail and wholesale level.

As part of an expansion of its network, the company erected a transmission line between West Virginia and Virginia. The construction time was two years. The approvals took 14.

Susan Tomasky, AEP Transmission President, explains the problem: “There are lots of people with authority to make pieces of the decision, and no single entity that can say ‘yes’ or ‘no’.”

Clearly what’s needed is federal permitting to locate cross-country transmission lines. The federal government has been doing it with natural gas pipelines since the 1960’s.

Looking To The Future Of Wind Turbines

So what are the chances of the fed’s saving us, and getting it done in the near future?

Better than you might think: Jeff Bingaman – Chairman of the Senate Energy Committee – has a proposal that will require comprehensive plans for grid interconnections.

More importantly, it will greatly expand the FERC’s powers to locate big new transmission lines at the federal level (bypassing the myriad of local regulations) and the authority to properly allocate their costs.

And firms like AEP and ITC Holdings Corp. (NYSE: ITC), another power generation and transmission company, are both eager to invest and build lines from the Midwest to cities in the east.

Even if all goes according to plan – which isn’t ever the case in Washington – these lines wouldn’t be in service until 2020 or so. Clearly a more streamlined approach is needed. The refreshing news is that it appears politicians are actually working on the problem.

We’ll be watching and reporting on it here and in my Energy and Infrastructure newsletter soon to be published by the Oxford Club.

Next week, I’ll be traveling with my colleagues to Vancouver, British Columbia, and speaking at the Oxford Club’s Victoria Chapter Meeting. I’ll return here the following week.

Source: Wind-Generated Power: Why Midwest Wind Power Isn’t Blowing East

This from Andrew:

Two weeks ago I sold the Virginia-based utility company Dominion Resources (D).  I got out at a double-digit profit.

Of all the utilities in the S&P 500, Dominion had the best earnings growth (38.5%) last quarter. So why did I get rid of the stock?

When I recommended it in mid-2005, electricity consumption was still rising and regulated rates were providing cover for rising energy costs. Dominion also had productive gas fields in Texas and expanding Liquified Natural Gas (LNG) ports.

But now the sector is heading in the wrong direction.

In the last week alone the utility sector lost 8.2 percent. Only the financial, conglomerates and industrial goods sectors have done worse – recording bigger losses over the past week and last three months.

I got out just in time. Since I exited my position in Dominion, it has lost 9.1 percent. But as you can see, Dominion has lots of company…

As recently as last quarter, utilities were holding up fine. Their profits had risen an average of 5.3 percent (unweighted) and 0.9 percent (weighted). Along with health care and consumer staples, utilities formed a strong line of defense against the encroaching recession.

So what the heck happened?

Listen, utilities have certain advantages, like fixed prices, monopoly-like markets, and a consistent revenue stream.

But that revenue stream has sprung a few leaks. Listen to CEO Lewis Hay of Florida Power & Light (FPL)…

“A lot of people think demand for electricity is inelastic. It’s not. Our customers are cutting back, and they’re not paying their bills, either.”

I wrote to my readers last week that “I’m not quite ready to put utilities in the same category as banks…”

But utilities are sounding more and more like banks. Here’s another utility CEO, Michael Morris of American Electric Power (AEP), sounding off…

“Clearly, industrial sales will be off,” he said, “we’re selling less electricity to neighboring utilities as their needs drop.”

The recession has finally caught up to the utilities. As a result, utilities are husbanding their cash along with all the other companies…

APE is cutting back spending from $2.5 billion to $1.25 billion. FPL is and Georgia Power is also cutting back.

And in the strongest sign yet that the utility sector is no refuge for investors, two utilities cut their dividend last week: Ameren (AEE) and Constellation Energy (CEG).

Investors made a lot of money shorting banks. I’m not ready to put utilities in the same camp as the banking sector, but the weaker companies in the utility sector definitely represent shorting opportunities. My Red Flag portfolio used to be full of banks and financials. My bets that their shares would sink made mostly triple-digit gains.

Last week I added a couple of utilities to the portfolio. The utility sector is catching up to the rest of the economy – and not in a good way.

Source: Why Utilities Are No Longer a Refuge for Safe Investors

This from Smart Profits Report

A Healthcare Haven

It stands to reason that the sectors and companies that traditionally fare better during economic recessions are those that garner essential repeat business.

As my colleague Marc Lichtenfeld has pointed out many times here before, that includes the healthcare and biotech sectors. And far from procrastinating, Marc just issued his “Five Predictions For The Healthcare Sector In 2009″ for Xcelerated Profits Report subscribers in the January issue. If you’re not a subscriber, you should be! You can get more information on that here.

No matter what happens with the broader economy, people will still get sick and will still need drugs and medicines. With a growing population and people living longer, the long-term prospects for healthcare remain excellent.

But in a poor economic and investing climate, your best bet is to stick with the powerhouse pharmaceutical companies like Johnson & Johnson (NYSE:JNJ) and Proctor & Gamble (NYSE:PG), which are masters of the “razor-and-blade model” (basically, once a consumer buys a razor from the company, he/she needs to keep buying blades for it, thus generating repeat business). In the biotech world, look at big boys like Genentech (NYSE:DNA) and Gilead Sciences (Nasdaq:GILD).

Food, Glorious Food (And A Bunch Of Other Stuff, Too)

If people regularly require medicines and drugs, they need everyday essentials like food and drink even more. And while the retail sector is struggling overall, there are some companies that should fare well as the economy stumbles and consumers cut back.

You got it… discount retailers. Okay, so I know pretty much all retailers are slashing prices these days in a desperate bid to get folks to spend their hard-earned dough. But the ones who already boast a discount model as their bread-and-butter are better prepared. That includes sector bellwether Wal-Mart (NYSE:WMT), plus bulk goods stores like Costco (Nasdaq:COST) and BJ’s Wholesale Club (NYSE:BJ), which also offer a huge range of items at bargain-basement prices.

Switch On And Profit

Another favorite safe haven sector during economic downturns is utilities. Again, the companies within it produce goods that consumers can’t live without: Energy and power such as electricity.

The Dow Jones Utility Average (^DJU) includes major power producers like American Electric Power Company (NYSE:AEP), Exelon Corporation (NYSE:EXC), Consolidated Edison (NYSE:ED), and Southern Company (NYSE:SO), which generate reliable, repeat revenues and also pay hefty dividends.

And speaking of dividends, you could head to tiny Luxembourg this New Year and pick up a beefy one with steelmaker Arcelor-Mittal (NYSE:MT). A Business Week article cites the company as a potential turnaround performer next year, stating:
“Most analysts think it’s unlikely that Old World bourses will rally before the second half of 2009. Still, investors with more appetite for risk – and a willingness to pore over balance sheets – can find some good values even in cyclical businesses such as manufacturing. Bleak earnings outlooks have already been factored into many share prices.”

And having endured a brutal 2008, slumping from $78 to $24 a share, Arcelor-Mittal has announced widespread cost-cutting measures that includes shedding 9,000 jobs in a bid to save $1 billion. Its forward Price-to-Earnings ratio is just 2 and with Obama’s infrastructure revolution set to get underway in 2009, the global steel giant could be well poised to profit from it.

The “No-Hype” ‘09

As 2008 thankfully disappears, it will be more important than ever to stick to the tried-and-tested investing principles in 2009.

Right off the bat, that includes being very watchful for hype. In a down market, some companies will undoubtedly be keen to gloss over or downplay any bad news, for fear of causing harm to their stock prices in an already weak market.

Make sure the companies you invest in boast strong, honest management teams, with minimal spin and no excuses. It sounds simple, but look for companies with competitive advantages and which continue to grow revenues and earnings and even pay dividends as a key sign that they’re probably still in good shape.

Remember that with recession hanging over the economy – one projected to be the worst and longest since 1982 – upward momentum could be tough to achieve. Investors are still very skeptical and, among other things, are likely waiting for GDP growth to improve (or at least not be revised lower)… for corporate earnings to beef up… for job losses to ease… for Obama’s tax cuts… and to see what kind of effect Obama’s huge economic stimulus package proposal has. It will arguably take something around $750 billion to provoke much sustained, positive reaction.

So be very wary about bold statements, proclaiming that we’ve seen a bottom in the stock market. We probably haven’t yet. Meantime, consider some of the companies mentioned above and/or those that pay dividends.

Source: Three “Safe Haven” Sectors For Your 2009 Portfolio

Buying shares for income has traditionally entailed investing in sectors that economically aren’t going anywhere.  U.S.-focused investors find themselves owning railroads, trucking companies and electric utilities, not the most exciting of sectors, and most unlikely to grow your investment as a percentage of the global economy.

Even in those so-called “tried and true” sectors, in the modern U.S. economy of huge payouts, stock options and multi-millionaire management, you aren’t likely to get the dividends you deserve. For example, the railroad company CSX Corp. (CSX) yields 1.5%, trucking company J.B. Hunt Transport Services Inc. (JBHT) yields 1.0% and even electric utility American Electric Power Co. Inc. (AEP) yields a modest 4.3%.

All three companies pay out less than half their earnings. The remainder is retained in the company, or used for share buy-backs, to provide capital gains for top management’s greedy stock options. If you can’t get decent dividends from investing in these admirable operations, dividend investing in the United States is a lost cause.

But internationally, income investment is a horse of a different color.

First, international firms don’t follow the Wall Street model of huge salaries, generous stock options and seven-figure bonuses. Less money earmarked for executive compensation means more cash in investors’ pockets.  And that’s a good thing, because international investors have a natural cynicism about retained earnings, believing that money that stays with the company is just management’s to waste. It’s much better to have the excess cash paid out in dividends, to do with, as you like.

Second, foreign markets are growing much faster than the United States. If the local economy is growing at 7% to 10%, even the railroads and electric utilities will grow at a similar pace, providing an increasing stream of profits.

Third, you don’t need to confine yourself to companies growing at the speed of an arthritic snail to get good dividends or sacrifice the capital gains that come from investing in sectors that provide the world’s new ideas, intellectual growth and economic advance. Unlike the technology firms in the United States, some international companies in growth sectors don’t feel they have a God-given right to keep ALL the earnings under management’s control. Instead, they pay out dividends to shareholders.

The international appeal of dividends makes more sense when you remember that many of these companies are still controlled by the founders or their immediate heirs. Large dividends on their holdings are understandably attractive to these rich founding families.

Furthermore, in some countries such as Taiwan, the tax system rewards paying dividends, by imposing an additional “retained profits tax” on companies that keep too much of their earnings without making good use of them.  (The United States had a similar tax from 1936 to 1958, but the management lobby proved stronger than the investor lobby, so it was repealed.)

Internationally, you can find what seems impossible in the United States: Companies in growth sectors, with good track records, that nevertheless pay out good dividends, at least at the 4-5% level and sometimes more. By investing in such companies, investors can have the best of both worlds:

• A substantial dividend that they can live on.
• And the chance of capital gains in the future as the company expands.

It’s almost like U.S. investing in the halcyon days of 1949, when the Dow Jones Index had a Price-Earnings (P/E) ratio of 7% and a 6.9% yield (U.S. Treasuries yielded less than 3% at that time). And while we can’t go back in time, by investing internationally and picking carefully, we can get some of the advantages of an investor in 1949. And even possibly do as well as that investor did during the subsequent decade of Eisenhower growth and stock price rises.

Here’s how to “have it both ways,” when it comes to international income investing:

Administradora de Fondos de Pensiones Provida SA (ADR: PVD), commonly known as Provida, is the funds manager of the privatized Chilean social security funds, a business it has diversified to hold investments in fund administrators in Peru, Ecuador, Mexico and the Dominican Republic. Majority owned by the Spanish bank Banco Bilbao Vizcaya Argentaria with a P/E ratio at 9 times trailing earnings, and a dividend yield of 7.6%, this stock is especially juicy for income investors. Growth will likely come from increases in assets under management, as Chile becomes richer and some expansion of the Chilean pension fund model to other countries.

Acer (Taiwan) (London Stock Exchange: ACID) is the world’s third largest manufacturer of personal computers, with top technological innovation in Taiwan and the ability to manufacture in the cheap-labor rural China. P/E ratio 12 and a dividend yield of 5.6%, plus you get to participate in the growth of the PC industry.

Eni SPA (ADR: E) is Italy’s entry in the “Big Oil” stakes. Because of Italy’s neutral foreign policy posture, it has the advantage of being able to operate in countries like Kazakhstan, Libya and Venezuela where U.S. companies have difficulty. At a price-earnings ratio of only 6.7 with a dividend yield of 6.6%, it currently offers excellent value with chances for growth if oil prices stay high and new oil sources remain attractive.

[Editor’s Note: When it comes to global income issues, Money Morning Contributing Editor Martin Hutchinson knows his stuff.  An investment banker with more than 25 years’ experience, Hutchinson has worked on both Wall Street and Fleet Street and is a leading expert on the international financial markets. In February 2000, as an advisor to the Republic of Macedonia, Hutchinson figured out how to restore the life savings of 800,000 Macedonians, who had been stripped of nearly $1 billion by the breakup of Yugoslavia - and then the Kosovo War. Hutchinson’s “Insights on Income” column is a regular feature in Money Morning].

Source: Insights on Income: You Don’t Have to Sacrifice Capital Gains for a High Yield

My primary weather experience was in a windswept place, where even calm days had an intermittent 30 mph “breeze.”

And maybe that’s why I can’t get excited about storage for wind-turbine energy. The idea that the wind might stop blowing for an extended period of time and you may need to rely on stored power, while evident to me on a daily (or at least weekly) basis out here on the East Coast, is antithetical to deep-seated instinct.

Despite my insistent, if illogical, argument against the idea, I am assured by those in the business that, yes, wind turbines do sometimes stop moving. And when they do, batteries to store and release back excess energy from earlier, more blustery, hours is a necessity, which is where NGK Insulators (NGKIF: Pink Sheets) comes in.

Alternative Energy Stocks: Sodium and sulfur

NGK, a Japanese industrial ceramics manufacturer, just began selling nontoxic sodium-sulfur batteries with 4.3 times the capacity of their highly toxic lead-acid counterparts.

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Japan Wind Development Company, which helped NDK create the batteries specifically for the wind-farm industry, is trying them out at its Rokkasho wind farm, and analysts think the batteries could generate 13 times the profit for the farm during peak hours if they work as expected.

The NAS batteries, named for the elemental symbols of their two main components (Na for sodium, S for sulfur), offer wind farmers the chance to store energy generated during non-peak hours, meaning much higher profits when they sell it at peak-hour prices.

And it’s a good thing, too. The batteries cost $2.9 million per megawatt of storage capacity. But that could be worth it if wind farms can efficiently save the power they build up at night to sell to electric companies during the day, when energy goes for a much higher price.

The NAS batteries are the most “dense” on the market, meaning they store the most amount of energy in the least amount of space. And they require uniform, high-grade ceramic that, NGK says, it, alone, has been successful in producing. In other words, they’re the most efficient batteries in the industry, and only NGK makes them.

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The Biggest Solar Energy Project Ever

Using a source officially discovered by NASA in 1978, a small California company has perfected a way to harness the “Earth’s Energy Budget.” which NASA has measured at 174 trillion kilowatts per day.

Yes, I said 174 trillion kilowatts each day. That’s enough energy to power New York City for 1,827 years.

And this tiny California solar company, recently featured on NBC’s Today Show, just figured out how to harness this energy. In less than a decade, these systems will be on nearly every home and office building in North America. Learn more…

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Alternative Energy Stocks: Trial runs

Xcel Energy (XEL: NYSE), the largest wind-power company in the U.S., is testing out NAS batteries. And the country’s largest coal-electricity producer American Electric Power Company (AEP: NYSE) just ordered 7 megawatts of storage from NGK in hopes that the batteries will smooth out its current power production. Success in these companies could mean energy storage may soon have a new leader.

NGK trades on the Tokyo Stock Exchange, and it has a pink sheet listing in the States. But I’m not willing to recommend the company just yet.

Alternative Energy Stocks: 1% is not enough

NGK is still primarily an industrial ceramics company. And its battery division, although profitable for the first time in 2007, currently makes up less than 1% of the company’s total earnings.

Estimates for the fiscal year ended March 31 put the company’s NAS battery division at a profit of 500 million yen (about $4.96 million), while the company’s total profit will probably be around 67 billion yen ($664 million). If NGK’s new batteries do catch on, the division will have to ramp up sales quite a bit before it makes a sizeable impact on the company’s bottomline.