How do large corporations and homeowners calculate their water requirements?

They guess, according to Chris Spain, chief strategy officer and co-founder of HydroPoint Data Systems. Most commercial buildings and homeowners manage their sprinklers on simple timers. To figure out when and for how long to water certain patches of lawn or strands of trees, they just sort of shrug their shoulders and pick a watering schedule that sounds good.

HydroPoint is hoping to change that and, in the process, help jumpstart a demand response/smart grid market in a similar way that companies like EnerNoc, Comverge and Silver Spring Networks helped turn smart grid from an obscure outpost in greentech into a growing industry. Others in the industry include PureSense and Accuwater. Silver Spring and other smart meter companies will likely move into the space as well.

If anything, there's enough waste and inefficiency out there to get potential customers interested in reducing water consumption. Spain is a treasure trove of eye-popping water stats. The Environmental Protection Agency has estimated that approximately 71 percent of the runoff from commercial and residential landscaping could be eliminated through better landscape irrigation planning. Some communities such as Newport Beach have imposed restrictions on landscaping to reduce selenium from leeching from the soil into the bay.

Plants hate overwatering too. "Eighty percent of all landscape assets are lost to overwatering. Plants get deeper root structures if you let them deplete," Spain said. "Trees topple over next to lawns because of overwatering."

Landscaping currently exacerbates droughts and shortages. Fifty percent of urban water use goes to landscaping. At the same time, thirty-six states will face water scarcity issues in the next few years. Water bills, meanwhile, continue to climb. In the past five years, water costs have risen 29.7 percent nationwide. Water costs alone rose 11 percent to 14 percent in Los Angeles last year alone, he said.

There's even an energy conservation play. Roughly 19 percent of the energy in California is consumed in processing and delivering water. Therefore, if you can reduce water consumption, you can also reduce greenhouse gases. An Obama-friendly employment angle? Yes. 50,000 landscaping companies employ 10.5 million people. It was part of the testimony Spain gave to Congress earlier this month.

"Those jobs are at risk if there are not landscapes," he said. "there are clean and green technologies that stand on their merits regardless of the environmental benefits."

HydroPoint's system essentially replaces traditional timers with its WeatherTrak, a controller that regulates watering through environmental conditions. Customers fill out a questionnaire about their grounds – slope, sprinkler placement, sun exposure, type of landscaping, etc. HydroPoint then devises a watering strategy and places one or more WeatherTrak controllers on the grounds. HydroPoint gathers weather data from satellites and automatically feeds it to the controllers, which adjust watering patterns to suit evaporation rates and the weather.

The WeatherTrak thus acts almost like a smart meter, but instead of curbing demand up or down with impending brown-outs or escalating power prices, it changes watering pattern to suit the conditions in the sky and the extrapolated evaporation rate.

The cost of the hardware and services varies by site, but payoff comes in around 20 to 36 months, he said.  Irrigation efficiency systems can likely become widespread without ongoing subsidies. Temporary tax cuts and rebates might be enough to get it moving, he said.

In 2009, customers using HydroPoint's system will save 11.3 billion gallons nationwide and 45 million kilowatt hours of energy. Large users include Wal-Mart and Kohl's.

The company is not pursuing agriculture deals. Only around 30 percent of the crops in the U.S. are actually artificially irrigated, said Spain, so the market isn't as large as one might think. HydroPoint also does not use soil sensors, which are used by some competitors, to gauge moisture. A site analysis combined with weather adjustments can achieve about a 95 percent efficiency compared to a sensor system. It isn't economically worth it to get that extra 5 percent by fiddling with extra hardware in the field.

The economic crisis and opportunities in water have begun to attract more VCs. Several desalination and purification companies like Miox, Energy Recovery, Oasys and HaloSource have nabbed VC funds (see Forward Osmosis: Can a Startup Reverse Desalination?). (In general, water companies like HydroPoint and Miox attract more interest from investors because their technologies are purchased mostly by the private sector, not slow-moving, cash-strapped municipal water agencies.) But even with the current crisis, it's tough to keep people's attention.

"There a history of human denial," he said. "Water has always been the ugly duckling of resources. People leave half drunk glasses of water around their house. But how many leave half drunk glasses of soda?"