The smart grid industry will evolve a lot like the networking industry did in the 1980s and 1990s, say advocates. So that's going to mean a lot of acquisitions.

The trend has already begun. SmartSynch, which specializes in advanced metering and demand response hardware and software, snapped up Applied Mesh Technologies yesterday for an undisclosed amount of money. Applied Mesh largely sells services to industrial customers to manage power consumption.

In late September, GridPoint, which makes software that allow utilities to manage power distribution, bought V2Green the same day it announced $120 million in funding. V2Green makes software that lets utilities manage how and when plug-in cars get charged.

Why will more transactions probably occur? In some ways, it reflects the nature of the market and the existing infrastructure. The power grids in the U.S. and pretty much every other nation on the planet were not designed to accommodate communications. The grid was made to deliver power from power stations to homes and offices. Utilities generally only knew when a region lost power when irate customers called to complain about an outage. The first wave of smart grid companies, such as Comverge, had to devise complete solutions-hardware and software-to add communications, monitoring and control capabilities (see Smart Grid Models Taking Shape). 

The sudden spurt of growth in smart grid equipment in the last few years, however, has prompted companies in the space to adopt wide-based standards and specialize in niche areas of the market. EnerNoc, one of the earlier successes in smart grid, is shifting from being a full-service vendor to almost functioning as a software-as-a-service company. In the future, it will mostly provide demand response services to industrial clients and run its services in standardized hardware from companies like SmartSynch or Silver Spring Networks. (SmartSynch and Silver Spring, by the way, were two of the earlier companies to adopt generally accepted cellular protocols over proprietary standards.)

History, however, shows that consolidations and acquisitions quickly follow when there's a rapid uptick of demand, the adoption of standards and a bloom of new companies. In networking, Cisco gobbled up dozens of companies a year during the 1990s. Oracle continues to scour the world for small software companies. The PC market shrunk to a few major players in the same period.

Several smart grid companies have also received millions in funding. Earlier this year, Trilliant, a company that has actually been around for several years, received $40 million to help it expand. Silver Spring said in October it raised $75 million.

If anything, companies shopping in the smart grid space will have their choice of companies. In the past two years, several companies – GainSpan, Tendril and Greenbox to name a few – have entered the market. 

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