The Obama Administration has announced that it’s investing $3.4 billion in order to fund this project. Through the plan, 100 private companies, utilities, cities and manufacturers will receive grants ranging from $400,000 to $200 million in order to build a smart energy grid, reports Lynn Sweet for The Chicago Sun-Times. So far, these awards are the largest Recovery Act awards ever made on one day. (Nine things that could affect alternative energy).

Analysis shows that by getting smart grid technology off the ground, it could reduce electricity use by at least 4% by 2030. This would result in savings of $20.4 billion for both businesses and consumers. (Does this mean alternative energy is not so alternative anymore?)

The Senate environment committee also released details of its climate change legislation, which includes the share of “emissions allowances,” which is revenue that comes from regulation of a cap-and-trade system – once it’s in place. The Senate has nearly tripled the share of allowances set aside by the House for transit, inter-city rail, and other efforts to trim transport-based emissions. Elana Schor for Streetsblog reports that the Senate measure would set aside more than 3% of allowances in the first two years of the cap-and-trade system for limiting pollution from the transportation sector.

For more stories about clean energy, visit our alternative energy category.

• First Trust NASDAQ Clean Edge Green Energy (Nasdaq: QCLN)
• iShares Dow Jones U.S. Utilities (NYSEArca: IDU)
• iShares S&P Global Infrastructure (NYSEArca: IGF)
• iShares S&P Global Clean Energy (NYSEArca: ICLN)
• PowerShares WilderHill Clean Energy (NYSEArca: PBW)
  
• PowerShares Global Clean Energy (NYSEArca: PBD)
• PowerShares Cleantech (NYSEArca: PZD)
• PowerShares Dynamic Utilities (NYSEArca: PUI)
• Utilities Select Sector (NYSEArca: XLU)
• Vanguard Utilities (NYSEArca: VPU)
• SPDR FTSE/Macquarie Global Infrastructure 100 (NYSEArca: GII)

Often, investors who want to play energy would simply look at energy shares or ETFs. But the institutional approach is to look around for the cheapest way to get this exposure. For example, explains Steven M. Sears for Barron’s, if they’re looking to buy energy, they’d check out commodities, bonds, stocks, options and even credit default swaps.

This is why, if you’re looking at an energy play, Sears says you might consider a utility sector ETF such as the Utilities Select Sector SPDR (NYSEArca: XLU) because it offers a cost-effective way to get your portfolio in place if an increase in natural gas prices comes along.

Why? Utilities are increasingly using coal and natural gas to generate power, and electricity prices are set on the basis of consumer demand as well as the supply of natural gas and coal. Therefore, Sears says, XLU is showing a higher correlation to energy prices.

The biggest risk to utility ETFs and shares is the government legislation on greenhouse gases, which could increase their costs over time. Such legislation could force utilities to purchase CO2 pollution allowances, which could cut into earnings, says The Motley Fool. (Read more about what climate change legislation means for utilities).

Utility stocks typically lag during strong bull markets as investors chase higher growth prospects, but they do not tend to decline much during a bear market, Fool notes. Be sure to approach your investments with a strategy in place, such as by using the 200 day-moving-average. (Read about trend following here).

For more stores about utilities, visit our utility category.

• iShares Dow Jones U.S. Utilities (NYSEArca: IDU): up 3.5% year-to-date

• Select Sector SPDR Utilities (NYSEArca: XLU): up 2.3% yer-to-date

The Environmental Protection Agency (EPA) and state groups are criticizing the standards on smog control put in place by the Bush Administration. On the flip side, however, big business claims they are already too tough.

Environmental Leader reports under the 2008 rule, the acceptable ozone limit in the air was 75 parts per billion, down from the previous limit of 84 ppb. According to the EPA, limits of no more than 70 ppb are recommended. Scientist say that going even lower is better.

Smog regulations and limits may extend beyond the utility companies and affect big corporations, as well.

Could the cost of these changes weigh on the utility sector in the long run, or will they find a way to prevail?

• Vanguard Utilities (NYSEArca: VPU): up 5.3% year-to-date

• Utilities Select Sector SPDR (NYSEArca: XLU): up 5.1% year-to-date

• iShares Dow Jones US Utilities Sector (NYSEArca: IDU): up 6.3% year-to-date

For more stories about utilities, visit our utilities category.

The few utility companies that managed to beat expectations did so by cutting costs and raising rates, explains Melinda Peer for Forbes. Many executives also delivered a dire warning for the sector: pricing weakness will continue and no meaningful improvement will be evident until 2011, at the earliest.

Recessionary conditions have forced corporations to limit production and cut costs, resulting in lower electricity demand. Industrial retail demand for electricity is down around 12%; another 2% decline is expected this year.

The utility sector is the second-worst performer in this rally, after telecommunications. With earnings season close to a finish, 74% of the S&P 500 has beaten earnings estimates this season, while only 58% of utilities can make the same claim, explains Ariel Nelson and Adam Daniele for CNBC.

What will it take? Many companies are waiting for an industrial turnaround, which will trigger demand for the utility companies.

• Utilities Select Sector SPDR (XLU): dowm 0.1% year-to-date

• iShares Dow Jones U.S. Utilities (IDU): up 1.1% year-to-date

For more stories about utilities, visit our utility category.

After 100 days of new leadership, it’s time to evaluate the new administration’s progress. In regard to the economy, the banking crisis and the ways Obama will change the financial industry and its relation with real estate will fall under the microscope, NPR reports. NPR also has a timeline of key events so far in the new administration.

On Wall Street, investors were still unsure and mostly unfazed by a new presidency, remarks Jeff Cox for CNBC.

Obama has spent much of his time in office so far trying to right the financial system while boosting consumer confidence, health care, technology and taking some steps to ease the housing crisis. Is it working? There are some signs that the clouds appear to be lifting, but we’re not out of the woods yet.

However, some of the best-performing funds over the last three months are some of the sectors that Obama’s administration has been working to fix, directly or indirectly:

• iShares Dow Jones U.S. Broker-Dealers (IAI): up 28.5% year-to-date

• Broadband HOLDRs (BDH): up 26.7% for the last three months

• SPDR S&P Retail (XRT): up 30.4% for the last three months

While we’re seeing the clouds lift in some areas, there is much room for improvement in many others, including:

• iShares Cohen & Steers Realty Majors (ICF): down 5% in the last three months

• Utilities Select Sector SPDR (XLU): down 13.3% in the last three months

The masses are divided over the administration. They are giving Obama good personal approval ratings but express doubts over policies. The public is almost evenly divided over Obama’s economic reforms, but investors are warming up to the administration’s plans on helping the banking sector and its public-private toxic debt plan.

Obama got dealt a lousy hand. He took office during a recession, a banking crisis, a stock market collapse and rising unemployment. He also had to focus his resources on the root of the problem, the banks. The markets seem to be reacting well to the fact that there now appears to be a more defined plan.

We may have to go back to the well a few times more, but many on Wall Street feel that we may finally be on the road to a recovery.

Next up for Obama will be focusing on jobs – it’s hard to create them and think about them when you’re dealing with a banking crisis. Obama will also have to focus on stemming the tide of foreclosures and personal bankruptcies, as well.

For full disclosure, some of Tom Lydon’s clients own shares of XRT.

Max Chen contributed to this article.

House lawmakers are busy scrutinizing a bill aimed at climate change and global warming, which could ultimately affect the way business is functioning in the United States. Jennifer Collins for MarketPlace says that utility companies are concerned about expenses involved in a cap-and-trade system, which would require utility companies to buy the right to pollute. Will these expenses then be passed down to the consumers?

In response, the Democrats are considering that 40% of permits can be given away to power producers, which is a fair argument for the struggling sectors. Regions dependent upon coal and utilities serving low-income populations, to be specific. The trade-off? Free permits mean the government makes less money – money that’s supposed to fund alternatives to fossil fuels.

This was the initial purpose of the cap-and-trade system, to supply the government with a steady and dependable revenue stream. The upside is that it may become less expensive for some companies to reduce their emissions below their required limit than others. These companies can turn around and sell their allowances to companies who aren’t as efficient, according to the Center for American Progress.

• Utilities Select Sector SPDR (XLU): down 11.7%year-to-date

• iPath Global Carbon ETN (GRN): down 13.3% year-to-date

President Barack Obama has just unveiled a $4 billion plan to fund new power-transmission technology, reports Ian Talley for The Wall Street Journal.  Obama wants to spur the development of a new artificially intelligent “smart” grid that could increase the efficiency of the nations electrical infrastructure.

Benefits of the smart grid include better use of renewable energy and a reduction in greenhouse gas emissions. The U.S. power grid has been woefully out-of-date.

U.S. officials verified warnings that experts from Russia, China and other nations have been trying for years to probe and exploit those vulnerabilities. According to Ellen Nakashima and R. Jeffrey Smith for The Washington Post, the Pentagon has spent more than $100 million in the past six months responding to cyber attacks or other network disruptions.

The private industry controls much of the U.S. electrical supply has not taken efforts to defend themselves from attacks that would leave them at risk. The Obama administration is nearing completion of a two-month review of cybersecurity policy, which may spur a stronger Federal policy for security standards protecting vital industry that the U.S. economy needs.

Other experts believe that it is the responsibility of the utility company rather than the Federal government to assess risk and avert any if possible.

• Utilities Select Sector (XLU): down 11.2% year-to-date

The unofficial fourth quarter earnings came in – we’re about 80% there now – and the year-over-year earnings for the S&P 500 are down 36%, according to the Bespoke Investment Group. Analysts previously expected an increase of 30% from Q4 2007 to Q4 2008.

On a sector basis, three managed to see a year-over-year increase in earnings. They are:

• Utilities. The sector was up 6.1% in the fourth quarter. Utilities Select SPDR (XLU) is down 7.5% in the last month and down 4.9% in the last three months.

• Consumer Staples. The sector was up 9.6% in the 4th quarter. Consumer Staples SPDR (XLP) is down 6.9% in the last month and down 7.7% in the last three months.

• Health Care. The sector was up 9.9% in the fourth quarter. Health Care Select SPDR (XLV) is up 0.5% in the last month and up 4.2% in the last 3-months.

It is estimated that the year-over-year percent change for the S&P 500 will be -31.09% for Q1 ‘09, -25.4 for Q2 ‘09, and -11.7% for Q3 ‘09.

There was some talk this morning that we might be spying a turnaround in certain areas, particularly those in which President Barack Obama is poised to sink billions of dollars into.

The three ETFs highlighted in the segment are areas of the market that are showing signs of strength and could benefit when an economic recovery takes place. The key is to either look for those areas moving above their trend lines, or those areas that Obama has pledged to improve – they could be an investor’s best opportunity to make some money.

SPDR Gold Trust (GLD) is up 2% over past week.

• Gold continues to be viewed as a safe haven, as economic uncertainty remains the order of the day and investors are still tentative about fully emerging from their foxholes.
• Central banks around the world are cutting interest rates, which could lead to an abundance of paper money. Meanwhile, economic stimulus plans at home and abroad could lift inflation.
• GLD continues to hit new highs – its total holdings are 10% higher than a month ago, a signal that the yellow metal is still in great demand.

iShares Nasdaq Biotech (IBB) is up 2.3% over past week.

• The biotech sector stands to benefit from a rash of expiring patents, because it’s giving the pharmaceutical companies an extra push to create new drugs that will replace them.
• Meanwhile, the FDA has more money and resources at its disposal, which could quicken the drug approval process.
• Obama has stated that he supports research, development and tax credits for research.

Utilities Select Sector SPDR (XLU) is down 1% over past week, but the tide could be changing for this sector soon.

• The fundamentals of the utilities sector are intact – these companies have solid credit and a supportive regulatory environment. Infrastructure is a major opportunity for the sector, because we could use some improvement, and there’s room for a lot of it.
• Obama wants to sink $11 billion into this area that would go toward creating smarter electrical grids.
• One particular benefit of this ETF is that it has an attractive 4.2% yield, good for income investors.