An Electrifying Profit Opportunity

Biotechnology, nanotechnology and semiconductors are all areas investors watch closely for the next great new tech. However, transformational technology investment opportunities aren’t always found in what are commonly regarded as “breakthrough technology” fields.

Sometimes, breakthrough technologies quietly emerge in mature, well-established industries. One particular transformational technology company, for example, can more than double the economic efficiency of electrical motors and generators.

The global market for electric motors and generators is enormous, dwarfing even the computing market in size…and it has been around for over 100 years. Almost every ampere of electrical current flowing into your home was originally produced using an electrical generator. Moreover, almost every appliance and device that turns electrical energy into mechanical work uses an electrical motor to do it.

Motors and generators accomplish the same electrical/mechanical conversion, though in the opposite direction. In a sense, they are mirror image devices, but they rely on the same basic technologies.

The electrical revolution of the 20th century, motors and generators being the most important component, owes an enormous debt to 19th-century innovators such as Michael Faraday and Nikola Tesla. Faraday, a chemist by education, carefully studied the relationship between electricity and magnetism. In so doing, he discovered the principle of electromagnetic induction in 1831. Electromagnetic induction is the production of electrical current by the motion of an electrically conductive material through a magnetic field.

Faraday went on to formulate what is now called Faraday’s law of induction, a basic law of electromagnetism. The discovery ranks as one of the greatest, if not the greatest, electrical discoveries of all time. Using these new principles, Faraday went on to build some of the earliest electrical generators and motors.

Faraday’s designs, however, were rudimentary and lacking in terms of efficiency and practicality. Later in the 19th century, Nikola Tesla designed improved electrical generators and motors. This included construction of the first induction motor in 1883.

While walking through a park, Tesla’s mind conjured an image of an iron rotor spinning in a rotating magnetic field. The invention ended up serving a double purpose. When supplied with an electric current, this design could be used as a motor, converting electricity to mechanical force. On the other hand, if the rotor itself were spun by an outside force, from coal and falling water to gasoline and wind, the design could be used to produce electrical current.

The rest, as they say, is history. Tesla’s invention was a key driver for the growth of the world economy in the 20th century. Without his innovations, our modern lifestyles would not exist.

No longer did industrial processes have to rely on mechanical and hydraulic methods to transmit power. Electricity could be generated with an induction machine at one location and then sent over long distances on wires to power another induction machine for conversion to mechanical work. Moreover, the electric motor revolutionized our homes and spurred further transformational technologies. Among them are work-saving appliances such as the washing machine, refrigerator and radio. Tesla’s patents are the original intellectual source of every commercial generator and motor on the market today.

Conventional motor and generator designs suffer from several drawbacks, however.

For example, in small mobile applications such as automotive alternators and portable generators, both machines that do not use permanent magnets, conventional designs suffer from low efficiency. A lot of energy is lost in forms of wasted heat and vibration. Moreover, they are bulky and heavy for the amount of electricity they generate.

Machines that do use permanent magnets are generally much more efficient. They are also more compact. The magnets they use, however, come with an entirely new set of problems.

Permanent magnets that generate sufficient magnetic field relative to their size for modern purposes use rare earth elements. As most investors know, rare earths are, as the name suggests, scarce and expensive. They are also subject to political risks. Rare earth magnets also suffer from temperature-related performance limitations. Rare earth magnets are very sensitive to heat and do not perform well at temperatures over 200 degrees Fahrenheit. As a result, they normally require some form of active cooling that limits their application.

It is reported that late in life, Tesla announced that he had solved some of the inherent limitations of the induction machines he originally invented. Unfortunately, he died without leaving a detailed description. Tesla’s unrealized induction machine ideas have become part of the rich body of urban legends regarding secret Tesla technologies. Fortunately, there is more than enough reason to believe that he was correct when he said that the means to radically improve induction machines exists.

In fact, I recently informed the subscribers of Breakthrough Technology Alert about a company that has solved the problems Tesla was working on in his final days. Its road to commercial success has been long and rocky, but it is now, finally, poised to break into the market in a big way.

This company has reinvigorated what was thought to be a stale and stable technology. Its patented technology has the potential to revolutionize an ancient industry.

Sometimes breakthrough technologies emerge in places you would least expect to find them.


Patrick Cox,
for The Daily Reckoning

The Daily Reckoning