Make no mistake: General Electric is a big proponent of smart grids.

"We can probably improve the efficiency of the grid by 5 percent," said Steve Fludder, vice president of Ecomagination at GE, during an interview at the Cleantech Forum taking place this week in San Francisco. Five percent doesn't sound like much, but it translates to 41,000 megawatts of generating capacity, or 41 gigawatts.

"In terms of reducing carbon emissions, it is a big deal," he added.

Efficiency – along with carbon reduction and water – is one of the primary pillars of the ecoimagination group and smart grids are a big part of the efficiency story. The group almost functions like a "best of" group within GE. Jet engines, wind turbines and other various products are selected and branded as Ecomagination products if they provide significant environmental and economic benefits. (Certification for the program is conducted by a third-party company.) The company then totals up the revenue from those profits on an annual basis to see how its environmental push is doing. Last year, the products in the group accounted approximately $18 billion in revenue. The goal is to boost the figure to $25 billion by 2010.

GE is conducting several trials on smart grids in the U.S. and internationally. Fludder's organization is also working with GE's appliance division so that intelligence can be added to refrigerators, washing machines and other devices. Although appliance makers have been somewhat reluctant to Internet-enable fridges and other appliances in the past, demand response systems and other smart grid programs will change that.

Just as important, consumers now want more eco-friendly products. They may only be willing to pay a moderate premium at best for them, but a change in mentality has occurred.

"It will become part of the market. Something has happened in the mind of consumers. Climate change has to be addressed. We have to be more responsible stewards with regard to natural resources," he said. "Scale begets cost-effectiveness and cost-effectiveness begets wider adoption but on top of that people are emotionally engaged... The power of this may surprise us all."

In water, GE is starting to look for fundamentally different solutions to purification and desalination. Some water processing "has been done the same way for a long time," he said.

"We can basically have the ability to do anything with water," he said. "We see the waste stream as the source of water for [relieving] stress on traditional sources."

GE is also examining ways to produce equipment for carbon capture.

We'll post more from our interview with Fludder in a subsequent story.