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Why Electric Utilities Might Be Set For A Huge Global Shakeup – Part 2

Most of us sleep with our air-conditioners or fans on throughout the night. We store food in refrigerators. We depend on our mobile devices and computers for work and leisure.

It’s hard to downplay the importance of electricity in nearly everything we do. In fact, electricity has become such a ubiquitous and natural thing in our lives that I think most of us never give a second thought to the electric utility companies that provide us with power.

But, there may be an interesting global shakeup happening with electric utilities and it deals with the concepts of a Supergrid and distributed power. In this article, I’d describe distributed power and its importance. In a separate piece found here, I’d be touching on the Supergrid. So, let’s get started.

Distributed power

Distributed power is a different type of system compared to the commonly seen centralized electrical distribution systems. Instead of having huge power plants produce power and then transporting electricity to other areas via a grid, distributed power involves much smaller power sources that generate just enough electricity for a small community or even just a building.

One example of a distributed power source can be seen in U.S.-based electric car manufacturer Tesla MotorsPowerwall battery pack. It can help store electric energy that is generated from solar panels. The stored power can then be utilised when the sun isn’t shining and the panels can’t produce electricity.

According to a report by the U.S.-listed conglomerate General Electric Company, the world had started out with distributed power systems of localized energy generation and distribution. Most power plants were small in size and electricity was only distributed within small areas. But, with the rise of mega power plants, infrastructure was built to create centralized power grids, where the power source can be far away from where the power is consumed.

But, General Electric is seeing a shift in this trend and distributed power might be making a comeback. As stated in the aforementioned report by the company, distributed power systems had already accounted for 36% of global electric capacity additions in 2010, up from just 10% in 1950.

If distributed power becomes the main type of power system in the electric utilities industry, what kind of implications might there be for electric utility companies in the region? In Malaysia, there are companies such as Tenaga Nasional Berhad (KLCI: 5347.KL). In Singapore’s stock market, there are, among others, companies and trusts like Sembcorp Industries Limited (SGX: U96) and Keppel Infrastructure Trust (SGX: A7RU).

A Foolish conclusion

Even though many investors see electric utilities as a defensive and slow-changing type of industry, it is important to note that changes can still happen. As the saying goes, the only thing in life which is constant is change. As things change and evolve, it is our job as investors to consider how the transformations may impact our investments.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim doesn’t own shares in any companies mentioned.