One hundred projects across 49 states will receive USD3.4 billion in federal stimulus funds over the next several months for the purpose of building a “smart” power grid. The money is slated to be disbursed in 60 days and will augment USD4.7 billion already being spent by utilities with the cooperation of state regulators.

The US Dept of Energy (DoE) breaks down the new spending for the following policy goals: USD2 billion to integrate “smart” components of a smart grid; $1 billion to enable consumers to reduce energy bills; USD400 million to improve electricity transmission and distribution (T&D); and USD25 million to promote a smart grid manufacturing industry on these shores. The bulk of awards, however, are focused on installing 18 million advanced meters (13 percent of American homes) over the next few years.

The “smart meter” is the linchpin of efforts to make the US power grid “smarter” and therefore more efficient. Conventional meters basically show how much electricity a user consumes. In contrast, smart meters can communicate a range of information about power usage to the utility as well as the customer.

Not only do smart meters eliminate the need for human on-the-spot monitoring, they could also give customers significantly more control over when and how they use electricity, and alert power utilities to ways to use generation more effectively as well. Combined with smart energy devices in homes and businesses, potential savings are staggering, with the DoE anticipating up to a 4 percent reduction in overall energy use.

Utilities have certainly bought into the program. That pure T&D companies like Massachusetts-based NStar (NYSE: NST) and California’s PG&E (NYSE: PCG) and Edison International (NYSE: EIX) would support smart meters is hardly a surprise. Spending immediately flows into rate base and therefore earnings and enjoys full support of state regulators. But even major players on wholesale electricity markets like Duke Energy (NYSE: DUK) and Exelon Corp (NYSE: EXC) have been rolling out smart grid investment on an unprecedented scale, and long before Uncle Sam opened his wallet.

One reason is the dire need of the US transmission system for major upgrades. In summer 1997, virtually the entire Northeast was blacked out by a glitch in FirstEnergy’s (NYSE: FE) grid in Ohio. Incidents of similar magnitude have been avoided since, thanks to lessons learned. But with power line infrastructure nearly a century old in some areas of the country, the risk of another and potentially even more economically destructive blackout is ever-present and probably greater than ever.

Even if another disaster is avoided, an estimated one-fifth of the country’s electricity generating capacity is wasted each year as the juice makes its way from power plant to plug. That’s output which, if fully harvested, could forestall the need to build a mind-boggling 200 gigawatts of new power production capacity. And it represents hundreds of billions of dollars in potential costs for building new generation, consumption of fuels and environmental/legal consequences.

A Brattle Group study commissioned last year by the Edison Electric Institute projects power utilities would need to spend some USD900 billion on T&D by 2030 to ensure system reliability. That’s even more than the USD600 billion projected for generation, and the additional USD500 billion to reduce carbon dioxide emissions. And that figure could easily go a lot higher, depending on the cost of raw materials and what’s now increasingly scarce skilled labor.

As I pointed out in an October 22 Viewpoint, we already have two smart grid plays in the NW3 Portfolio: American Superconductor (NSDQ: AMSC) and Itron (NSDQ: ITRI). The latter is the leading player in the smart meter market, with a 50 percent share in the US and 30 percent worldwide.

This week, Itron announced third quarter results that mainly reflected the poor health of the global economy. Overall company revenue fell 16 percent from last year’s levels, paced by a 22 percent drop in North America due to the “substantial completion” of several major advanced meter manufacturing contracts.

Overall earnings per share excluding items fell to 45 cents a share in the quarter, down from 81 cents the year earlier, while cash flow slipped to $87 million from $156 million. Those results also missed Wall Street expectations by roughly 10 percent.

Profit margins, however, remained generally steady, actually rising in the international division. Meanwhile, order backlog hit a record as product deployments gained momentum. That’s a clear sign the underlying business remains healthy, though a return to Itron’s old highs of over USD100 a share will likely have to wait until the global economy–and particularly the US–show further signs of as rebound. Buy Itron up to USD70 if you haven’t already.

In contrast, American Superconductor’s scarcely showed any impact at all from the general economy. Revenue for the company’s second quarter of fiscal 2010 soared 85 percent as it continued to sign new contracts with wind turbine manufacturers in Asia. That offset another drop in sales of superconductor wires.

Meanwhile, the company swung to a net profit of USD4.3 million from a net loss of USD4.1 million a year ago. And while management expects a worse result in the fiscal third quarter, it’s now raised its calendar year revenue forecast to USD300 million to USD310 million, up from a prior USD260 million to USD270 million. It also upped the full-year profit forecast to USD11 million to USD13 million, from the previous USD5 million to USD7 million.

The ability to grow rapidly in bad times is the hallmark of a truly exceptional company. In American’s case, it’s due to a superior technology and an unmatched rolodex of customers that rank among the most reliable accounts receivable in the world. And there’s plenty more where that came from. Buy American Superconductor up to USD40 if you haven’t yet.

This week, NW3 Associate Editor Elliott Gue turns his attention to the global food sector, where growth also transcends the current economic situation. His pick Potash Corp of Saskatchewan (NYSE: POT) is a premier pure play on the need for fertilizer to increase crop yields, increasingly critical to feed rapidly urbanizing Asia.

The stock is selling for less than USD100 a share, versus a mid-2008 high of around USD240. We look for it to get there and beyond. In fact, the only real long-term obstacle to that is a possible takeover at a big premium to current levels, with potential suitors ranging from Australian giant BHP Billiton (NYSE: BHP) to Chinese sovereign wealth funds. We’ll be adding Potash to the NW3 Portfolio as a Metals and Materials pick.

As is the case with every Portfolio stock, we’re playing to build real wealth. We may take profits from time to time if opportunity presents itself, as we’ve done with both BHP and Vale (NYSE: VALE).