Innovation in distributing electricity has traditionally been the preserve of corporate behemoths like General Electric and Siemens, which sell equipment to utilities. But smart-grid technology has allowed IT companies and startups to enter the market.

Currently, most smart-grid money is going toward the rollout of systems that connect smart meters in consumers’ homes to utilities by means of various communication technologies. But by 2015, the smart-meter market will peak at $5 billion, according to Bob Gohn of the clean-technology analysis firm Pike Research, and utility capital expenditures will be aimed at automating distribution, using technologies that improve the flow of power through the transmission network (see “Managing Renewables”).

In the distribution automation sector, established firms such as GE, ABB, ­Schneider Electric, and Siemens are finding themselves competing against new players, including large IT firms like Cisco and IBM and telecom companies like AT&T and Verizon. The new entrants are attracted to the smart grid because energy is one of the last sectors to incorporate IT and they see a new opportunity to profit from their technology and customer bases.

DATA POINT

Total length of new and upgraded power lines that will be installed in Europe over the next 10 years.

Cisco has made a particularly aggressive entry into the smart grid, moving to compete in nearly every subsector—including advanced metering networks, distribution automation, data storage, and even home energy management. In the past year, Cisco has purchased the wireless network startup Arch Rock and partnered with Itron to work on a grid communication platform based on Internet standards. Cisco is developing an Internet-protocol-based communication system for Duke Energy’s $1 billion smart-grid infrastructure project, which will connect the utility to four million customers in a five-state service area. And it has developed a touch-screen-based system that can connect with smart appliances to let residential customers manage their energy use.

Startups, which in the past found it difficult enter the utility grid market because of high capital costs, have discovered exploitable niches in smart-grid technology. Among those attracting venture capital are ­GridPoint and Silver Spring Networks (see “Gluing the Grid Together”), which have partnered with utilities to deploy new energy management systems, and Tendril, AlertMe, and EnergyHub, which are developing home area networks that enable appliances and smart-grid devices to communicate. The coming wave of plug-in hybrids and all-electric vehicles should create additional opportunities (see “Everything Is the Grid”), such as developing software to optimize the schedule on which cars are recharged.