Early on, the smart grid market was dominated by giants like IBM, Itron (an early leader in utility meters that is moving up the technological food chain very successfully), and Echelon, which makes network infrastructure gear and software. But now that it's taking off, an array of newcomers are introducing innovative ideas. Here are some of the more interesting examples:

New Jersey-based Comverge recently signed a deal with Connecticut Light and Power Company to create 130 megawatts of "virtual peaking capacity" by installing demand response gear like smart thermostats and load control switches in customer homes and businesses. Once in place, the system will allow Comverge to selectively cut back on usage during peak periods and then sell the negawatts to the utility. Comverge's managed capacity exceeded 1.5 gigawatts in early 2008, making it, in a strange sort of new economy way, a major power producer without actually generating any power.

Massachusetts-based EnerNOC focuses on commercial energy customers, "aggregating demand reduction" by tying backup generators and industrial equipment into a network that utilities can draw on as needed. In exchange for committing to reduce their electrical demand by a certain percentage when needed, customers get a monthly "capacity payment" from EnerNOC. In addition, they earn a "curtailment payment" every time EnerNOC actually pushes the button. In early 2008, EnerNOC claimed 700 demand response customers, representing nearly 1,000 megawatts in potential electricity savings.

Perhaps most ambitious of all is the platform being rolled out by Virginia-based GridPoint, which enables utilities to "reshape the load curve" by directly managing a network of distributed energy sources to lower peak and raise off-peak demand. This is the kind of system that will be needed when vehicle-to-grid and other distributed sources become widely available.

Smart Grid's Growth Prospects

Dramatic. Most of the world's power grids will be upgraded in the coming decade. That means millions of smart meters and related gear, and numerous openings for new technologies, services, and business models. Because the smart grid offers so many technological points of entry, start-ups are flooding this space with everything from broadband-over-power-line services that allow utilities to monitor their power flows while offering customers high-speed Internet, to chipsets that power networks of smart appliances, to meters that more efficiently transmit data to and from utilities. The market they're creating is vastly more interesting than the old dumb grid, and should spawn some great growth stocks (see Table 12.1).

Table 12.1 Smart Grid Stocks