Although alternative energy is almost always billed as the answer to our nation’s energy addiction and global warming, viable clean-tech solutions address both problems. Encompassing technologies that improve the efficiency of the electric grid and reduce consumption, clean tech can be a highly effective means of conservation.

According to the US Dept of Energy, the average US power facility was built in the 1960s using technology developed in the 1940s and 1950s. Substation transformers are 50 years old on average, more than a decade past their expected life span. Meanwhile, US electricity demand has grown more than 25 percent over the past two decades.

Wide-scale implementation of alternative energy would require a massive upgrade to our nation’s energy infrastructure. Already, power outages cost the US $150 billion a year in lost productivity, and outages are up 41 percent over the past five years.

For alternative energy to make a meaningful contribution to the US consumption mix, huge installations would need to be built in remote areas of the country. That, in turn, would necessitate the construction of a huge number of transmission lines and substations to deliver the energy to urban consumers.

And the US power grid actually comprises three separate grids with surprisingly few interconnections. Although electricity can cross between grids, just a few strategically located outages can wreak havoc–recall the Great Northeast Blackout of 2003. In its investigation of this outage, the US-Canada Power System Outage Task Force found that overgrown tree limbs brought down more than 250 power plants in just a few hours.

As I’ve told readers of Global ETF Profits and Louis Rukeyser’s Wall Street, nuclear power is the alternative energy that shows the most promise–assuming certain regulatory logjams can be broken. That being said, nuclear power still elicits a great deal of disagreement.

In the July 10 issue of ETF Weekly, Solar Power’s Dimming Prospects, I wrote about President Obama’s announcement of loan guarantees for two solar-power projects, noting that this dependence on government funding is a weakness. To that end, I regard most alternative-energy investments as a losing bet in the short to intermediate term.

Since the President’s announcement, Market Vectors Solar Energy (NYSE: KWT) and Claymore/MAC Global Solar Index (NYSE: TAN) are up a little more than 1 percent after giving back much of their earlier gains. As a point of reference, the S&P 500 was up almost 3 percent as of Monday’s close.

But funding issues are just the tip of the iceberg.

For solar-sourced energy to significantly reduce consumption of fossil fuel-sourced energy, much of the Four Corners section of the Southwest would have to be covered in solar panels. For wind energy to make a dent, a huge portion of the Midwest would have to be covered in wind turbines.

That’s just not practical, and even if it were, our current power grid couldn’t support these new facilities; the US focus on developing alternative energy resources is a classic case of putting the cart before the horse.

Before US infrastructure can support alternative energy, billions upon billions of dollars will have to be spent on grid upgrades, expansion and other improvements. And that’s where the real opportunities lie in the short term.

Necessity makes for a powerful investment thesis, but such improvements also go a long way toward reducing consumption, fitting nicely into the conservationist mantra of “reduce, reuse, recycle.”

A smart grid involves a number of technologies that work in concert to improve efficiency, including computer systems that route energy to where it’s needed most and new tools to monitor end users’ consumption.

Companies in these niche markets have enjoyed steady to rising sales because they’re leveraged to spending by utilities and consumers, rather than government support. That being said, the group also benefits from some government subsidies.

For example, Itron (NSDQ: ITRI), which offers technologies that meter consumer usage and provide that data to utilities in real time, has grown revenues steadily in a weak economy; utilities continue to invest in its technology.

Earnings have been lumpier at Power-One (NSDQ: PWER) and Quanta Services (NYSE: PWR), but these names offer key services in infrastructure development and construction and will play critical roles going forward.

First Trust NASDAQ Clean Edge Smart Grid Infrastructure (NSDQ: GRID) offers exposure to all things clean tech.

Although the exchange-traded fund (ETF) tracks weeds out companies with market capitalizations of less than $100 million and names that fail to meet minimum liquidity requirements, the ETF carries some added risk because most of its holdings fall into the mid-cap category.

The fund’s portfolio also includes a bit more exposure to solar-power plays, which could weigh on performance.

Overall, however, it’s a great play on clean-tech infrastructure at an attractive price–the expense ratio is just 0.70 percent.

What’s New

Global X Management launched Global X Brazil Financials (NYSE: BRAF) last Thursday, its 14th internationally focused fund. Thanks to booming exports, Brazil’s middle class has expanded dramatically, along with demand for banking and other financial services. If you’re looking to profit from Brazil’s growing domestic demand, this ETF, along with Global X Brazil Consumer (NYSE: BRAQ), is a great option.