Although it’s somewhat unusual to see the words “good idea” and “Dept of Homeland Security” in the same sentence, it actually appears to have happened last week.

One of my favorite companies, American Superconductor (NSDQ: AMSC), and Con Edison have teamed with the Dept of Homeland Security to protect New York City's power grid with surge suppressing superconductor cable technology. This new development was announced May 21, 2007, and is a joint effort to develop and deploy a new system-level solution that utilizes high-temperature superconductor (HTS) power cable technology in Con Edison’s grid in New York City.

Code named "Project HYDRA,” this new technology is capable of carrying very large amounts of power while also being able to automatically suppress power surges. The Dept of Homeland Security will invest in the development and demonstration of this technology to enable "Secure Super Grids" (SSG) in the US.

American Superconductor will produce the HTS wire, known as 344 superconductors, for the project and will subcontract cable manufacturing to Southwire. Commissioning of the cable is expected in early 2010.

To see some animations on the whole concept of the Hydra Project, click here.

And just last week, in the teeth of the market maelstrom, American Superconductor announced that it’s manufactured and shipped approximately 17,000 meters (56,000 feet) of its proprietary second generation (2G) HTS wire, branded as 344 superconductors, from the company's manufacturing facility in Devens, Mass., for use in Project HYDRA. This is the single largest shipment of 2G HTS wire by any company worldwide.

SSG technology was developed by American Superconductor based on a decade of HTS power cable demonstrations under US Dept of Energy projects, including live grid deployments in Ohio and New York, as well as American Superconductor’s development of stand-alone HTS fault current limiters for the electric utility industry. SSG is enabled by the unique properties of American Superconductor's proprietary 344 superconductors, which are perfect conductors of electricity, but then instantly switch to resistive mode when encountering a surge in current. When switched to resistive mode, the SSG system automatically and instantly suppresses power surges.

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If this pilot project works, you can be very sure that other utilities that support major urban centers will be getting involved in this project. And it’s not just for strategic reasons; the government is subsidizing the upgrading the grid into major metropolitan areas. That means utilities don’t have to spend the money then ask regulators to pass the cost onto customers. Better margins and a better system; that’s a great deal.

It’s also a great deal for American Superconductor since it has the initial contract and the Dept of Homeland Security seal of approval.

As I’ve noted before, American Superconductor is the perfect example of the importance of creating a sustainable business model for a cutting edge technology so you can build in long-term viability. When American Superconductor launched, there was cheap power and cheap oil, and no one cared about HTS wire. But almost two decades later, this stuff is at the core of our power system for New York City and beyond.

It’s also situated in the wind power turbine and power converter markets with major exposure in China and Europe.

But the markets are selling off as financial institutions and governments reallocate their positions relative to the nascent realities coming to light since officials have grudgingly accepted the consequences of the credit fiasco, investment bank deregulation and under-the-table trading in dark pool liquidity.

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Don’t assume that a bad market and a weak economy spell bad news for all stocks or companies. There are some good companies that have dealt with worse. A company like American Superconductor never had a lot of overhanging credit exposure because it was such a cutting edge tech company that few banks would even consider loaning it money. This has worked to its advantage because American Superconductor knows how to navigate these tight-credit markets better than many companies.