Smart grid isn't a single market. It's two.

On one hand, you have smart grid proper: the multibillion-dollar opportunity to sell transmission equipment, storage, demand response services, software and cables to harden and enhance the massive network that connects power plants to consumers.

Then you have the inside-the-meter market, i.e., building management systems, home networking and EV chargers for the last mile, or more realistically the last few feet, of the grid. Demand response fits here, too.

The first group sells to utilities, a potentially lucrative but time-consuming and risky task. Fifteen entrants, 27 field tests and 18 months later, Gordon Ramsey anoints a single winner. The second group views the whole world as a customer base and often gets help from utilities to woo users.

Still, both sides of the market are united through their: 1) reliance on IT technologies and 2) common goal of consuming power more efficiently through dynamic monitoring and control. Some companies have even migrated between the two categories. GridPoint shifted from home energy automation, to grid software, back to homes with monitoring software and retrofits. Demand response giant EnerNoc now consults on building efficiency. Cisco has bought companies -- Richards-Zeta Building Intelligence, Arch Rock -- and developed products that span the spectrum.

If you look at it from that perspective, the pool of smart grid investors is a bit broader than you might think at first. Here is our list of the leading VCs.

A few notes. A list like this is inherently subjective, so if you're ranked lower than you feel warranted or are left out, it's my fault. We looked at the size, range and quality of the portfolios and made a professional guesstimate.

Second, we include intelligent appliances and smart fixtures along with building networking among inside-the-meter companies: their ability to accept upstream signals is really what makes the investments in meters and distribution systems worthwhile. Drywall, LED bulbs, retrofit services and other things that persistently reduce power consumption but aren't dynamically controlled are not included.

Third, please post your complaints and suggestions below and have fun at the GridWise Global Forum this week.

And they are:

1. Foundation Capital. One of the earliest, and so far one of the best, at picking winners. It invested in EnerNoc, arguably the most successful green tech IPO with VC backing to date. (The solar trio -- Suntech, SunPower and First Solar -- didn't have Sand Hill Road help.) Foundation also plunked money into Silver Spring Networks, which sources say is in the midst of prepping an IPO, and eMeter, which has managed to get its software into 30-plus utilities.

The firm only has nine cleantech investments, so one-third of the portfolio revolves around smart grid. Foundation also invested years ago in Atheros, arguably the only Wi-Fi start-up to make it big time, so the firm knows networking.

The question now is how well Silver Spring and eMeter will endure in the long run. Silver Spring has been trying to boost its margins, according to sources, before filing its S-1: a good portion of the revenue in its multibillion-dollar contracts goes to pay for meters and other equipment from third parties. Additionally, it now must contend with Cisco, the Medusa of networking. EMeter, meanwhile, has to face the other cast members of Clash of the Titans: IBM, SAP, Oracle, etc. Both companies are also reliant on utilities. EnerNoc has already begun to diversity the customer base. It will be interesting to see if these other two can.

2. Altira Group. Industrial smart grid. Buried amid investments in non-catalytic syngas (NxtGen Emissions Controls), small nuclear reactors (Hyperion Power Generation), and non-metallic composite pipe (DeepFlex), you find a large number of companies focused on establishing communications and control for energy assets. Some, such as EPS (energy management solutions for industrialists and food producers -- very interesting), GridPoint, and Tantalus Systems (two-way networking for gas, water and electricity distribution and automation) fit the classic mental image of smart grid.

Then there is Lilliputian Systems (fuel cells for remote field assets), RigNet (voice video and data for hard-to-reach offshore rigs), TransZap (gas pricing and complex data exchange over the internet), Davidson Instruments (optical communication sensors for extreme environments like turbines) Varidigm (variable speed HVAC), World Telemetry (monitoring of fuel storage locations and hazardous environments), and Energy Window (online energy procurement).

Looking at the portfolio as a whole, you see a conscious strategy of trying to weave the far-flung corners of the energy industry, and in particular some of the less glamorous and forgotten corners of it, into something close to a real-time network.

The firm also invested in Renaissance Lighting, the LED fixture company that got bought earlier this year and signaled the start of the LED buying season.

3. General Electric. The Big E has interests in wind companies like Southwest Windpower and Danotek Motion Technologies, but also in companies like home automation expert Tendril, grid software maker Consert, SynapSense, Grid Net and battery maker A123 Systems. Under the current five-year plan for ecomagination, GE wants to embed more hardware/software and intelligence into conventional power products so the line between grid and non-grid investments will begin to blur here. (Side note: GE also bought Naverus, which helps planes save fuel by better organizing flight paths. Foundation invested in Naverus.)

In July, the company unfurled the Innovation Challenge, in which $200 million will get invested into startups in grid, smart building and renewable energy. It also invested in Masdar's $265 million clean energy fund. ABB, Siemens and Bosch are cracking open their corporate wallets here, too.

4. Nth Power. A very close competitor. Where Foundation invested in commercial demand response provider EnerNoc, Nth Power invested in Comverge, with demand response services for homes. Comverge went public before EnerNoc, which a lot of people forget. Nth Power invested in Smart Synch, one of Silver Spring's more ardent competitors.

It also put money into SynapSense, which now wants to take its data center monitoring equipment into building management. Severon, another Nth Power company that specialized in transformer technology, got sold to BPL Global.

5. New Cycle Capital. The Cinderella Story in smart grid! Tiny New Cycle, whose office is actually a condominium, has plunked cash into fast-rising People Power (home energy networks and intelligent appliances), Renewable Funding (PACE consulting and services) and OPower (behavioral conservation programs.)

OPower has signed deals with 37 utilities and garnered a cumulative $30 million in revenue. And, unlike many other greentech companies, OPower doesn't need a factory because it runs a software-as-a-service program that encourages customers to conserve power. This is the sort of low-capital, high-margin company that VCs have in mind when they invest. Who knows: it could be the most profitable company in green.  People Power, meanwhile, is allegedly attracting a number of OEMs.

Renewable Funding doesn't have much to do directly with smart grid, but PACE loans -- when they invariably come back -- will be used to buy networked air conditioners and other devices that will let demand response services sing. New Cycle is three for three.

6. VantagePoint Venture Partners. VantagePoint tries to squeeze an investment into each sub-segment of each market. Look at LEDs. It has investments in iWatt (ICs for power supplies), Bridgelux (LEDs), glo (next-gen LEDs) and SuperBulbs (bulbs built around LEDs). If you want to analogize to music, this is ostinato investing.

The smart grid investments span a similar range. The firm put money into Adura Technologies, which makes software and hardware for managing commercial buildings, as well as Tendril, which produces similar products for home area networking. In smart grid proper, it has an investment in Trilliant, a Silver Spring competitor, Premium Power (zinc bromide flow batteries), and Better Place (EV charging and battery leasing), along with E-Moli (lithium ion batteries) and Amprius (battery components) that could serve microgrid storage functions.

 

7. Claremont Creek Ventures: Adura Technologies, EcoFactor (home energy management) Sentilla (energy management for data centers). EcoFactor, whose HAN doesn't require a smart meter, won the Cleantech Open last year, while Adura won the alumni award.

If you're imaginative, you could add Alphabet Energy to the list. The company has devised silicon nanowire semiconductors for converting waste heat into electricity. In a sense, it's the three yards just beyond the smart grid, turning heat that was purchased as electricity back into electricity. These companies constitute the bulk of Claremont's investments. I couldn't find a biofuel or CIGS company in the bunch.

Claremont also gets hats off for finding portfolio companies in their early stages and at universities. The firm keeps office hours at UC schools.

8. Draper Fisher Jurvetston. You've got a little bit of everything in this portfolio. There are companies like EnerNoc (they "discovered" EnerNoc before Foundation did, I'm told) and Tesla Motors that have gone public, along with the obligatory Massachusetts companies like Luminus Devices and Konarka that have burned through tens of millions of dollars on far-reaching technology that somehow still seems to be creeping out the door.

In smart grid, EnerNoc is the only huge victory for DFJ, but the portfolio includes a lot of diversity: flow batteries from Deeya Energy and Prudent Power, building management from Scientific Conservation, data center management from Power Assure, power line technology from Miartech, and component-level startups like NanoTune and Enovate.

Rockport Capital has a similarly diverse portfolio and a strong history too.

9. Good Energies. A number of intriguing investments inside the meter including Tendril, Power Assure, Sage Electrochromics (networked windows). Kudos for two air conditioning companies in Ice Energy and Microstaq: A/C represents one of the few relatively untapped segments of green.

10. Khosla Ventures. Most of you reading this have probably seen Vinod Khosla on stage in a beige turtleneck pointing out how other people have been idiots by investing into the smart grid. He's on the list mainly because he's served as a reality check on far-flung expectations in this industry -- and for the sheer shock value.

His Khosla-ness, however, is also known to change his mind. He's disparaged electric cars and yet invested in Sakti3 and Pellion, which hope to make batteries for electric cars and hybrids.

The same could occur with inside-the-meter companies. The firm has an investment in LightSail, a stealthy outfit in power storage, and Soladigm, which makes electrochromic windows that hook into building management systems. Expect to see more investments in the last mile of the smart grid. Very adept at getting state politicians, like Republican Haley Barbour, behind green. A lot of portfolio companies have state grants.

Honorable Mentions: CMEA (with CNano, A123 and Contour, this firm is officially bonkers for batteries); Kleiner, Perkins Caufield and Byers (lots of bets on the Keno card -- the most impressive might be Hara); The Westly Group (Eka Systems, Scientific Conservation); Battery Ventures (Redwood Systems and Viridity -- expect Battery to be one of the leaders in linking the grid and data center power demand); DCM (great selection of green IT companies that will impact the smart grid -- see Sandforce); and Mohr Davidow (for having absolutely nothing in the portfolio that even comes close to the grid).

Tags: adura, altira group, better place, building management, comverge, demand response, elster, energy efficiency, enernoc, eps, ev charging, foundation capital, general electric, good energies, grid net