Brazil’s government has spoken on its smart grid future -- and it isn’t the bonanza that the industry had been hoping for.

Instead of a 65-million smart meter rollout across the country by 2020, the Brazilian Electricity Regulatory Agency (ANEEL) announced earlier this month that it will make smart meters mandatory only for new customers starting in early 2014, and optional for any other customer who requests one.

Brazil’s utilities will still spend about $670 million per year between 2014 and 2017 to install some 4.5 million meters, Bloomberg New Energy Finance analyst Maria Gabriela da Rocha Oliveira predicted in a recent report. But that’s still going to be a lot less investment than some of the recent projections of as much as $36.6 billion in spending by 2022, as Northeast Group predicted earlier this year.

For smart meter vendors like Itron, Elster, Sensus, General Electric and Toshiba’s Landis+Gyr, the news from earlier this month must be disappointing. They’ve been partnering with Brazilian companies for years now in hopes of landing market share in a market that’s just shrunk dramatically with the stroke of a pen.

Even so, amidst dashed expectations, there remains opportunity for smart grid vendors that can serve the pressing needs of Brazil’s power sector, which faces high levels of energy theft and reliability problems, as well as pressure to bring host cities up to world-class standards for the 2014 World Cup and 2016 Summer Olympics.

In particular, Brazil’s stated preference for an “opt-in” style of deployment could require a different approach than the mass deployment of smart meters we’ve seen in the United States so far.

At least that’s how Trilliant sees it. On Tuesday morning, the Redwood City, Calif.-based smart grid networking provider announced a deal with ELO Sistemas Electronicos that will see the big Brazilian meter maker incorporate Trilliant’s communications platform into new products, both in Brazil and across Latin America.

ELO already has a similar deal with Echelon, which will see the San Jose, Calif.-based company’s powerline-carrier-based technology incorporated into its deployments. Walter Lowes, managing director of The Americas for Trilliant, said that ELO will continue to work with Echelon as part of its overall smart grid plans.

But for places where wireless communications are called for, Trilliant’s mesh networking, as well as the long-range, point-to-multipoint communications it has incorporated from its 2009 acquisition of SkyPilot, could help utilities reach all those hard-to-reach places that an opt-in style of smart meter deployment implies, Lowes noted.

In contrast, typical U.S. deployments use mesh networking to connect neighborhoods that are saturated with meters that can collect and pass along each others’ data, he noted. In other words, “If I was a mesh-only, meter-centric company, I might look for another part of the world,” he said.

That’s a not-so-subtle jab at Trilliant’s competitors, most notably fellow Redwood City, Calif.-based startup Silver Spring Networks, which recently announced a partnership with CPFL Energia, the country's biggest non-government utility, to build a "foundational smart grid networking project" across four of Brazil’s southern states.

That project is still very much underway. On Tuesday, Itron announced a 20,000-meter contract with CPFL, connected with the Silver Spring project. Brazil's big cities can still find a use for mesh technologies, though Lowes noted that in Brazil, Europe and other parts of the globe, the 900-megahertz unlicensed bands used by Silver Spring, Itron, Elster and other U.S. mesh players are often reserved for cellular or restricted use, while Trillian't s 2.4-gigahertz system runs in a more or less worldwide open frequency.

Of course, Silver Spring has also been incorporating cellular communications into its platform, which Trilliant is also looking at using in partnership with ELO. Cellular networks have been used to connect commercial and industrial smart meters for years now, with big players including Cellnet+Hunt (now part of Toshiba’s Landis+Gyr), and SmartSynch, the cellular smart meter company bought by smart meter giant Itron for $100 million earlier this year.

Likewise, Sensus, which recently bought a minority stake in Brazilian data management software provider CAS Technologia, provides a hub-and-spoke network over licensed frequencies which could fill a role similar to the role Trilliant sees for its SkyPilot technology. In the meantime, partnerships that extend to the software side of smart meter management, such as eMeter’s deal to help CPFL Energia manage its commercial and industrial customers’ smart meters, can proceed apace.

In the long run, Brazilian utilities may want the same technology that supports smart meters to also connect distribution automation deployments, or network on-site power from solar panels or backup generators, or other such smart grid tasks. Trilliant says its combination of local mesh and far-ranging SkyPilot technology can do just that -- but so do competitors like Silver Spring, Sensus and others in the smart meter space.

Tags: aes electropaulo, brazil, echelon, elo sistemas, elster, itron, landis+gyr, sensus, silver spring networks, smart grid, trilliant, utilities