Top 10 Technology Trends : 2010 to 2020 (Allianz)

Top 10 Tech Trends of the Coming Decade
Ba
10/22/2010

Walter Price, portfolio manager for the Allianz RCM Technology Fund, discusses the key themes that will drive growth in the technology sector over the next decade.


When the market evaluated the internet’s potential in 1999-2000, it enthusiastically anticipated robust tech earnings growth but it was too early and too extreme. Ten years on after numerous adjustments, we are about to enter a new secular growth era in the technology industry, as a number of key developments are coming together to provide the potential for positive change. The technology sector will continue to evolve over the next couple of years, setting the stage for what we believe will be an extended extraordinary growth in corporate profitability.

Walter Price, portfolio manager for the Allianz RCM Technology Fund, comments: In today’s world of short memories and short–term focus, it is easy to overlook the continued rapid fundamental changes that have taken place over the last decade in the technology sector. When looking forward to the next ten years, while there are a number of key areas we have already seen growth in, such as the LED TV, there are also some brand new developments in this sector which are still yet to be widely adopted. Therefore, these are the areas to watch for future investment opportunities as they will be the products which will potentially have the most rapid and increased growth over the next 10 years. The top 10 technological trends that we believe will play a key part in this growth over the next 10 years are:

1. Internet TV / video
The function of the PC will transform, primarily, into a consumption device for information and entertainment. We expect recommendation engines will grow significantly in importance and media content will be freely available over the internet.

2. LED technology
LEDs can offer 90 per cent energy savings and a significantly longer lifespan in comparison to regular light bulbs. Over the next few years, LED technology will likely cross quality and cost thresholds for widespread replacement of indoor and outdoor lighting, starting a considerable investment cycle.

3. Cloud computing
This is the biggest trend in enterprise computing since the late 1980s, and it is enabling businesses to move to a more efficient IT model. Cloud Computing offers large cost savings and a great amount of scalability and flexibility. For most large companies this will be a two part journey moving to an internal cloud of fewer, large data centers before eventually moving to external cloud vendors

4. Smart grid/energy infrastructure
The electrical grid is often referenced as the world’s most complicated machine, yet it is hopelessly outdated, and it can no longer adequately balance future supply and demand without huge investments. Neither higher penetration of renewable nor large scale electric car deployment will be feasible without smart grid investments.

5. Proliferation of access points and democratization of computing
Access to computing resources, for a long time the domain of the desktop computer and later the laptop, is fast being complemented by many others, such as smart phones, tablets, TVs and navigational devices. Interaction is moving away from keyboards to a variety of touch, voice and gesture–aided access.

6. Solar
Prices are falling every year so that within the foreseeable future solar power systems will likely come much closer to delivering electricity at grid parity in even challenging environments.

7. Display technology
A transition to OLED display in the coming decade has started, which can provide thin, low–power, better–picture, bendable and low-cost displays.

8. Rechargeable batteries
Significant growth in storage batteries will be required for mobile devices, hybrid cars and power plant electricity storage. This is in addition to the progress currently underway to increase energy density of storage systems.

9. Gesture recognition and the evolution of the user interface
The Windows-icon-mouse-pointer–based user interface has been around for almost 40 years. The introduction of motion-based technologies from game consoles and the evolution of user-device interaction (gesture recognition, eye tracking, speech-to-speech translation, etc.) may lead to a complete refresh cycle of hardware, software and peripherals—the iPad is just a first initial step in this direction.

10. Global connectivity: 50 billion connected devices in 10 years’
time The vision of a tenfold increase in wirelessly connected devices over the next ten years, we believe, will continue to be one of the biggest drivers of technology this decade, with the next billion first-time users coming via smart phones, not the PC world.

Smart Grid Technology (Business Week)

Smart Grid Technology October 5, 2009, 8:18PM EST The Coming Energy Revolution
Smart-grid technology will bring huge savings to companies as varied as Cisco, PG&E, and Cargill, and to consumers, too. But who will foot the bill?
By Rachael King

Food producer Cargill is taking a carving knife to its electricity bills. At a plant in Springdale, Ark., where the company handles about 50,000 turkeys a day, electricity bills run more than $2 million a year. But Cargill thinks it can cleave $680,000 from the total by using its own generators on high-demand days.

The secret behind this money-saving plan lies in what's known as the smart grid—a wholesale revamp of the system that distributes energy to homes and businesses around the country. Government bodies and utility providers are in the early stages of this multibillion-dollar upgrade to transform the existing grid into a two-way network where power and information flow in both directions between the utility and the customer, not just from the provider to the user.

Done right, the revamp will cut bills, reduce consumption, give users more say in the kinds of energy they use, and even let customers produce their own energy and sell it back to power providers. "What's going to happen with the smart grid is that we're going to create a network that's larger than the Internet," says Guido Jouret, chief technology officer for the emerging-technologies group at Cisco Systems (CSCO), one of the many companies working on the technology needed to modernize the electric grid.

A $20 Billion Market in Five Years
The Electric Power Research Institute, a nonprofit research and design group, estimates that it will cost $165 billion, or roughly $8 billion a year for 20 years, to create the smart grid. The market for the gear needed to overhaul smart-grid communications alone may reach $20 billion a year in five years, Cisco estimates. Other technology companies developing smart-grid software and hardware include IBM (IBM), Oracle (ORCL), Google (GOOG), and Siemens (SI).

The tech sector's interest is fitting considering the similarities between the energy-grid upgrade and the computing revolution of the 1980s that saw hulking, centralized mainframes give way to PCs. The existing U.S. power grid dispenses electricity but is limited in its ability to gather intelligence from end users—hence the monthly visit from a meter reader. Now utilities are replacing outmoded meters with so-called smart meters that foster a back-and-forth between customer and utility. In much the same way PCs opened the door to third-party software and services and use of the Internet, smart meters are paving the way for tools and services that make the system more responsive to shifts in energy demands.

Cargill is counting on smart-grid tech to lower its bills. Many utility vendors set rates for industrial customers based on peak-use patterns. So in a common practice known as peak-shaving, Cargill taps its own generators to keep its 365,000-square-foot Springdale plant cool on summer's hottest days rather than use energy from its electricity vendor, PowerSecure (POWR). The challenge is determining when peaks occur. PowerSecure keeps close tabs on Cargill's generators, as well as fluctuating electricity prices, and when it can tell that rates are on course to pass certain preset thresholds, it fires up Cargill's generators remotely.

Easier to Opt for Solar or Wind
In the future, Cargill may choose to run its generators more often and sell power back to the utility when prices are high, says PowerSecure CEO Sidney Hinton. While Cargill's utility provider doesn't currently purchase energy generated by customers, other utilities, including PG&E (PCG) in California, have begun buying solar energy generated by customers on corporate campuses and residential rooftops.

Another benefit is that customers may soon get more leeway in determining the nature of the power they purchase, more easily opting for renewable energies such as solar and wind, says Matthew Trevithick, a partner at venture capital firm Venrock. Companies that are actively trying to cut their carbon footprints, such as Coca-Cola (KO), may be able to specify the percentage of renewable energy they buy, opting to pay more for wind, for example, if it helps them meet go-green targets.

But questions abound over who will foot the bill for the grid's modernization. The American Recovery & Reinvestment Act has allocated $4.5 billion in grants and loans through the Energy Dept. for the smart grid to enhance security and to ensure reliability of the electric grid to meet growing demand.

What of the remaining costs? Often, capital improvement expenses are passed along to customers. Before that, though, utilities need a green light from state regulators. "Certain states will go first because of cost," says David Leeds, an analyst specializing in the smart grid for Greentech Media. For instance, he says that in California, electricity costs 15¢ per kilowatt hour, compared with about 5¢ in Georgia.

Discounts for Lower Peak Usage
California utilities are leading the way in smart-meter installation. Northern California's PG&E is the leader, spending $2.2 billion to deploy 5.4 million smart meters, according to a Greentech Media report. Southern California Edison is No. 3, spending $1.63 billion on 4.8 million smart meters. (Columbus (Ohio)-based American Electric Power (AEP), with a goal of installing 5 million meters, lands between the two California utilities.)

Utilities stand to benefit from smarter-grid technology, too—particularly during high-demand periods. When demand for electricity exceeds supply, such as on hot summer days when air conditioners are running, utilities must find additional power or potentially face blackouts. Some are forced to tap expensive, natural gas-burning power plants that are kept for just such a purpose. Alternatively, utilities can buy power on demand from the spot market. The problem in either scenario is that rates charged for electricity remain constant even when the cost of supplying it can surge. As a result, utilities may lose money on hot days even though consumers are using more power.

Many utilities have encouraged consumers to voluntarily engage in energy efficiency, but changing consumer behavior can be challenging. For example, Southern California Edison has used the slogan "Give your appliances the afternoon off" for decades to try to get customers to reduce the strain on the grid from 2 p.m. to 7 p.m., when millions of customers turn on large appliances such as clothes washers and dishwashers. While energy-efficiency programs have helped reduce consumption, the utility stands to make even bigger gains with the installation of smart meters.

Plants Can Keep Going During Storms
But as information on usage is extended further to the residence or business, customers will be able to see just how much energy their lighting, air conditioning, and appliances use. "The idea is that electricity costs more at peak-demand times, so if you showed those pricing signals to people, they can choose to shift usage to off-peak times," says Jeffrey Taft, global smart-grid chief architect at Accenture (ACN). The smart grid will also give utilities the ability to automatically turn down business and consumer appliances on peak days. Customers would probably be given some sort of discount in exchange for letting the utility cut power to certain systems at key times of the day.

In Springdale, Ark., the local utility once faced a high-demand day and called and asked Cargill to fire up its generators and separate from the grid—and paid the company to do so. "In the long run it netted out a lower cost for us," says Cargill Engineering Manager Jim Edwards. Those generators have come in handy at other times, too. When there was a big ice storm in Northwest Arkansas this past winter, Cargill ran the generators for six days straight to keep producing turkey meat. "We were the only facility in this area to continue processing products," says Edwards. "If the plant had been closed for those six days, it would have lost about $1.2 million."

King is a writer for BusinessWeek.com in San Francisco.

Investing in the Smart Grid - Utilities (marketwatch)

Smart grid not clever enough to avoid recession
BY MarketWatch
— 6:55 PM ET 05/29/2009

NEW YORK (MarketWatch) -- While the U.S. government and electricity producers get ready to spend hundreds of billions to upgrade the nation's power lines and electricity infrastructure, the so-called smart grid may not be clever enough to escape economic uncertainty.

After Congress OK'd $30 billion for the electric grid, advanced battery manufacturing and energy efficiency projects, much of the money included in the $787 billion economic stimulus bill signed into law on Feb. 18 remains unused.

As utility companies prepare for the peak summer season of 2009, new efforts to update the power grid remain in limbo in the face of a new regulatory landscape and other changes affecting long-term plans for the electric generation and transmission business.

Wall Street hasn't been exactly cheering either, with power companies lagging the broader stock market by a big margin. But the smaller, more nimble companies tapping new technology to wring higher performance out of an aging power grid have fared far better.

"It's all very convoluted on how it'll all work," said Justin McCann, analyst with S&P Equity Research. So far, the government has pledged loan guarantees and tax credits for projects, but concrete progress remains vague.

Before diving into the new federal subsidy programs, experts point out that the industry is still waiting for rules on loan guarantees from the Department of Energy. Utility firms welcome new federal tax credits, but are trying to clarify how they would affect existing tax breaks for depreciation and other expenses.

And in a sign that public policy can't always compensate for a slower economy, at least one turbine plant in the sector remains mostly idle -- not immune from competition from abroad and a recession at home.

While the slow economy may take the sting out of spikes in demand in June, July, August and September, the nation's power system remains vulnerable to large-scale blackouts from monster hurricanes and other natural disasters.

Fresh regulations also loom in the power industry and elsewhere, as Congress and the Obama administration plan for a cap-and-trade system to reduce carbon dioxide emissions.

Instead of huge ramp-ups in spending, McCann said, utility giants such as Exelon (EXC), FPL Group (FPL) and Southern Co. (SO) have been working on big infrastructure projects already in progress and deferring others until credit markets improve.

With the business in flux for the power grid, Exelon (EXC) CEO John Rowe said in a speech this week that "there is no grand structure for the electricity business that is completely accepted" nowadays.

"What's a smart grid, does anyone know? And of course the answer is, everybody has their own definition of the smart grid," he said.

Some think it's new power lines to carry wind power from the Dakotas to the Midwest, or from West Texas to Houston, or smart meters to improve efficiency, he said. The goal would be to transform the current patchwork of aging cable and technology into a "self healing system" that increases reliability, he said.

"It can be all of the above, but whichever you choose, it's expensive," Rowe said at the Sanford C. Bernstein & Co. Strategic Decisions Conference.

While talk of new transmission lines remains front and center in the debate, communities aren't exactly lining up to volunteer for new 200-foot transmission towers in their collective back yard, either.

Earlier this months, Edison International (EIX) scrapped plans for a 50-mile power line right-of-way in Arizona, after objections from state officials. The owner of Southern California Edison hopes to move ahead with plans to connect Palm Springs, Calif. with generation facilities on the books near Blythe, Calif.

American Electric Power (AEP), the transmission line specialist in the U.S., continues to grapple with regulatory OKs for new conduits, even as Washington officials ponder proposals to increase the power of the Federal Energy Regulatory Commission to site power towers.

Market beats up power companies

The smart-grid effort, as well the coming carbon dioxide legislation, cap off a tough year so far in the stock market for the 35 issues in the S&P utilities sector index.

The sector has been facing higher operating expenses, cash payments for pension plans, and tight capital markets, plus many investors maintain that improvements in the economy are more likely to benefit other sectors more.

Exelon (EXC) currently leads the class as the bulkiest power company in the S&P 500 with a market cap of more than $31 billion. FPL Group (FPL) holds the No. 2 position at $23 billion, followed by Southern Co. (SO) with $22 billion. Dominion Resources Inc. (D) comes next at about $19 billion, and Duke Energy (DUK) wraps up the top five at $18 billion.

Recent months have seen a shake-up among the top names in the business, with Constellation Energy selling a big chunk of its nuclear business to Electricite de France and Exelon (EXC) moving to buy NRG Energy (NRG) through a hostile offer to common shareholders.

Collectively, the largest publicly traded utility components of the S&P 500 are down 9.4% so far in 2009, compared with a gain of 0.8% for the S&P 500, as of Wednesday's close.

In year-to-date performance the S&P utilities sector index ranks last out of the 10 sub-sectors of the S&P, noted Howard Silverblatt of S&P.

While the big cap names struggle, some smaller-cap companies with ties to the smart grid and clean technology sector have rebounded this year.

Smart grid technology firm Comverge (COMV) have risen to above $9 a share from $5 a share earlier this year. EnerNoc (ENOC) has risen from below $10 to more than $22 now.

American Superconductor Corp. (AMSC) is also up handily for the year, along with Enersys (ENS) . Echelon Corp. (ELON) has remained about flat this year. Itron (ITRI) is lower for the year and Esco Technologies (ESE) about flat.

General Cable Corp. (BGC) and Composite Technology are also seen as beneficiaries of grid spending.

Peak summer conditions still expected

While utility companies have already reported lower usage because of the recession, it's likely that demand for power will still increase during the usual summer surge.

In New York, for example, the operator of the state's power grid, NYISO, expects peak power usage to climb 3% from the year-ago period to 33,452 megawatts.

"Heat waves, causing increased power use by air conditioning and cooling systems, could produce peak loads this summer to rival those of recent years," said Stephen G. Whitley of the New York Independent System Operator.

Power grids remain vulnerable to a host of hazards posed by nature, from squirrels to rainstorms and even heavy tree growth.

Meanwhile, the industry is sifting through a host of new government incentives starting to kick in under the American Recovery and Investment Act.

The law earmarked $4.5 billion in matching grants for smart grid projects that help utilities and their customers to track and manage the flow of energy more effectively, curb peak demand, reduce blackouts, and integrate renewable energy and storage, including electric and plug-in hybrid vehicle batteries.

Another $32 billion has been set aside for grid improvements, including 3,000 miles of new and upgraded transmission lines.

Southern California Edison has laid out plans to spend $1.2 billion for smart meters, while Pacific Gas & Electric plans to spend $1.7 billion through 2011 on new meters.

The cost to put a smart meter in every home in the United States has been estimated at $6 billion," SBI noted in a recent study. "However, unless smart meter costs fall substantially below $100 per meter, overall costs will likely exceed $15 billion if all 150-plus million electric meters in the United States are replaced with smart meters."

While some programs move ahead, some in the industry has yet to fully tap into the new incentive packages.

"More than 100 days have passed since the Recovery Act became law in mid-February, but U.S. power companies are still frustrated by the lack of clarity and the lack of guidelines needed to disperse some of those funds," Platts analyst Peter Maloney said in a study this week. "There is only about $18 billion in direct spending allocations designated for power sector capital projects, but there is much more than that in the form of loan guarantees and tax incentives," Maloney said. "Unfortunately both the loan guarantee program and the tax incentives for power sector projects come with ties to past programs that complicate their successful implementation."