The Digital Skeptic: It's Cheap Energy, Not Cheap Data, That's Saving Us

BEACON, N.Y. ( TheStreet) -- Jeremy Pyles knows that just as important as gobs of information is gobs of energy.

"Having plentiful natural gas is the game-changer for us," Pyles yelled as we stood in front of a roaring, story-high glass furnace that burns here, day and night, at several thousand degrees Fahrenheit. We were at Niche Modern, the hand-blown, custom lighting-fixture company Pyles founded about 70 miles up the Hudson River from midtown Manhattan.

"I can add furnaces until the cows come home," he said. "Most glass makers can't."

Pyles, who is also the firm's creative director, is the classic New York digital-age success story. About 10 years ago he and his wife, Mary Welch, with minimal experience in the glass business, began peering into the world of hand-blown light fixtures.

"We attended a trade show in 2005 with eight prototypes," Pyles said. "After that, it was a race to keep up with demand."

Pyles just added a second furnace that should grow this 25,000-square-foot plant by another 20,000 square feet. His 20-employee staff melts about 1,000 pounds of glass per week to create one-of-kind showcase lighting fixtures for the likes of Starwood Hotels & Resorts ( HOT), specifically the W Hong Kong Hotel.

Revenues run about $5 million per year and grow by an average of about 40% per year, Pyles says.

From what I saw, watching a team of three cajole an elegant, $650 hanging light fixture from a blob of molten glass, it's obvious that the expected information-age elements of a network of unique intellectual property, highly trained craftspeople and global marketing are a factor at Niche Modern.

But equally important is a hidden, much more practical network: The heart and soul of Niche Modern -- its furnaces -- are fueled by a once forgotten high-pressure natural gas line that dates from an age when this town was an industrial hub.

"The people, the computers, the talent, they will all come up to a place like Beacon. It's close enough to the city," he said. "But if it were not for this cheap and plentiful energy that just happened to be here, I could not compete."

Getting smart about energy
Pyles is far from the only area business taking clever advantage of a left-for-dead energy network. Out on Long Island, the tattered Suffolk County-based Brookhaven Rail Terminal is in the midst of a major renovation aimed in part at serving a fast-growing domestic energy market.

Matthew Faruolo, an advocate for the East-of-Hudson Freight Rail Alliance, explained that Brookhaven is becoming an active node for both traditional hard goods -- such as flour for Bayport-based Wenner Bread Products -- and a center for low-cost transport and distribution of cheap domestic shale oil, gas, ethanol and other fuels.

"Freight rail is three to four times more efficient than long-haul trucks," Faruolo said.

Big energy companies are also sensing big money in resuscitating aged domestic energy assets. No less than Houston-based energy distribution giant Buckeye Partners ( BPL) announced that its roughly quarter-of-a-billion-dollar renovation of a Perth Amboy, N.J.-based tank terminal was completed three months ahead of schedule.

"Having the ability to ship products out from our marine dock via ship or barge or move it via pipeline or truck" means that "Perth Amboy will emerge as one of the premiere marine terminals in the U.S.," Buckeye CEO Clark C. Smith told investors in a recent conference call.

It's the network of calories that will count
Investors should realize that economists drilling into this emerging, renewed domestic energy network say it will be as critical to the recovering U.S. economy as any cellphone, broadband or information-based system.

I really like a book called Comeback by economic historian Charles R. Morris that breaks out the nitty-gritty of this resurgent energy platform. Morris also makes the startling -- and utterly true -- point: Unless the U.S. harnesses this energy with domestic manufacturing, our economy is doomed to become a mere energy exporter and nothing more than a "raw material colony of an Asian industrial juggernaut."

None of which surprises Pyles one bit.

"I never really thought about it until you asked," he told me. But one of the competitive elements he has over a Chinese company is access to cheap and plentiful natural gas.

"The costs to run this business are the energy costs and the labor costs," he said. "I can't compete with China with labor. But if my energy is fair and competitive, I stand a chance."
This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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