One of more interesting and practical areas of the green movement is that of energy efficiency. The idea of using our watts wisely rather than figuring out how to generate more power is catching on with the general public and law makers. On June 29, President Obama and U.S. Energy Secretary Steven Chu announced an aggressive plan to promote energy efficiency. Using a $346 million investment from the American Recovery and Reinvestment Act, the two hope to spur innovation in commercial and home building energy usage. Residential and commercial buildings consume 40% of the energy, and represent 40% of the carbon emissions in the U.S.
The plan has several stages including retrofitting existing structures, as most of our buildings were constructed before 1979, researching advanced HVAC systems, increasing the number of Energy STAR compliant appliances, the advancement of solid-state lighting and the phasing out of incandescent bulbs.
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Through these incentives, the Department of Energy hopes to reduce emissions of up to 594 million tons of CO2 from 2012 through 2042, nearly the equivalent to removing 166 million cars from the road for a year, which will save consumers $1-4 billion annually during this period. With the focus on long-term energy efficiency, investors have an opportunity to profit from the growth in this area. By choosing investments that conform to the standards or operate in the outlined stages of the plan, home runs are almost assured.
Home Energy Retrofit
Nearly 43% of a home's energy consumption comes from heating and cooling the structure. To this end, home energy audits are becoming more popular. One of the best ways to undertake an energy audit involves using an infrared camera and videotaping the heat differentials across the building's various surfaces. Auditors can then deduce where heat and energy are escaping. As the largest thermographic and infrared camera manufacturer, FLIR Systems Inc. (NASDAQ: FLIR) is leading the way in energy audits. The company is experiencing a bull market for its products, with a 28% annual sales growth rate for the past five years. FLIR reported quarterly earnings on May 1, with a net income of $54.3 million compared with $36.5 million for the same period in 2008.
Solid-State Lighting
Cree Inc (NASDAQ: CREE) has become the poster child for the light-emitting diode (LED) movement. Its LED products remain a viable way to reduce energy consumption by 85% versus incandescent light, and 50% compared to a CFL. As the only publicly-traded pure LED player, since Philips Electronics (PHG) snapped up Color Kinetics a few years back, Cree has remained a buyout target itself. The company recently upped its earnings guidance for the fourth quarter 2009. Cree now targets revenue in a range of $143 million to $150 million with GAAP earnings of seven to nine cents per share. CEO and Chairman Chuck Swoboda remained optimistic about the growth potential for LED lighting in fiscal 2010.
HVAC
With the recent turmoil in the automotive industry, Johnson Controls (NYSE: JCI) saw its share price plummet all the way down to a low $8.35. The company has roared back as it shifted its focus away from reliance on the automobile sector and continues to grow its integrated building management offerings. The company offers a complete suite of products that help both new and old buildings operate more efficiently and use less energy during operation. Recent achievements include a contract with New York City's Empire State Building resulting in a $20 million energy efficiency retrofit. The project is expected to reduce energy use by more than $4 million annually. For the second quarter of fiscal 2009, Johnson Controls reported net sales of $6.3 billion and a loss of $193 million, or 33 cents per diluted share. This number represents restructuring costs associated with its automobile division. Analysts predict significant growth next year and return to profitability in the third quarter of 2009.
Bottom Line
With the recent announcements by the Department of Energy to increase efforts in energy efficiency, both the environment and investors win. Focusing on reducing consumption rather than increasing production is a good way to profit from the green movement. The stocks mentioned here provide a good way for investors to in that area. (For additional reading, see Five Companies Leading the Green Charge and Green Investors Get Heard.)
