Echelon Corp. (NSDQ: ELON) has released a new version of LonWorks, its widely used technology for building automation to better integrate it into the company's smart grid efforts.

Now the question is, will utilities pick up on it?

Echelon's "LonWorks 2.0" platform announced Tuesday is meant to ease the integration of energy monitoring and control systems and devices into existing LonWorks networks, said Steve Nguyen, director of corporate marketing.

Hundreds of thousands of buildings are now using LonWorks as part of building management systems installed by Honeywell, Siemens and other big players in the field. LonWorks 2.0 promises to add a host of new products that can be integrated with existing and new systems, adding improvements that will cut the costs of installing those products by as much as 50 percent compared to the old systems, Nguyen said.

How the new and improved LonWorks platform might help the company's smart grid efforts remains to be seen.

Echelon's smart meter business – called Networked Energy Services – is based on smart meters that communicate data over power lines to concentrators that use IP-based communications networks to get information back to utilities.

Echelon's system has been widely adopted in Europe, with 1.5 million of its smart meters installed and 90 pilot projects underway, Nguyen said. Echelon also provided power line networking to a 27 million home smart meter project with Italian utility Enel (see Will Smart Grid See a Push for Power-Line Networking?).

But Echelon's system has been less popular in the United States, where most utilities have opted for radio mesh or other wireless communications to connect smart meters, citing the higher costs associated with power line networking (see SCE Preps $1.63B Smart-Meter Program and Smart Grid: A Matter of Standards).

While Echelon is working with several U.S. utilities to control streetlights, including major California utility Pacific Gas & Electric, so far Duke Energy is the only U.S. utility to use Echelon for a major smart meter deployment.

The Charlotte, N.C.-based utility is working with Echelon in a project in Cincinnati, that has seen 60,000 smart meters installed so far, said David Mohler, Duke's chief technology officer.

Duke also is seeking regulatory permission to bring smart meters to more than 800,000 homes in its service area in Indiana. Nguyen said Echelon hopes to work on that project as well.

Duke plans to spend $1 billion to bring smart meters to its entire 4 million-household area in the next five years, so Echelon will likely be seeking to prove itself in the utility's initial deployments to get involved in those larger projects, according to a January research note from Deutsche Bank Securities analysts.

Could LonWorks 2.0 help Echelon win those contracts? It's hard to say, but given that LonWorks is already deployed in a large number of commercial buildings, "In the back of our mind is the idea of being able to connect some of that stuff" to Duke's smart meter network, Mohler said. The utility hasn't made any hard plans to do that yet, he added.

But Echelon would like to see Duke and other utilities look to commercial buildings as the target for energy savings, Nguyen said.

"That's really and truly the most near-term alternative energy in the market," as compared to homes, he said. The Department of Energy estimates that 70 percent of all electricity in the United States is consumed in commercial buildings, and 70 percent of that is consumed by lighting and heating, ventilation and air conditioning, he said.

While Nguyen wouldn't say what new products are coming out in conjunction with LonWorks 2.0, he did say the first would be aimed at the commercial market.

Bringing out a new version of LonWorks could be another way to "kickstart" Echelon's smart meter business in the United States, said John Quealy, managing director in equity research for Cannacord Adams.

"Echelon is at the nexus of two trends – utility communications and building communications," Quealy said. "But so far they haven't capitalized on it as such."

The company saw a slowdown in business in 2008, with a net loss of $25.8 million on revenues of $134 million, compared to a loss of $15.7 million on revenues of $137.6 million in 2007.

But the continuation of Duke's smart meter deployments, as well as the federal stimulus package signed into law this month, could boost Echelon's business in the long term, Quealy said (see Obama Signs Stimulus Package).  

The bill contains $11 billion to modernize the nation's electricity grid, along with $4.5 billion in grants for smart grid technology deployments. It also has $5.5 billion for improving the energy efficiency of federal buildings, a market where Echelon's LonWorks has some penetration given that the U.S. Army uses it, Nguyen said.

Of course, others are looking to capitalize on making commercial buildings more efficient as well, including the companies that install LonWorks in their building control systems. Honeywell and Siemens are among those increasingly using their own proprietary networks in place of LonWorks, according to Deutsche Bank Securities' January research note.

And then there's Cisco Systems, which last month announced it was getting into the commercial building energy management business with its EnergyWise product running over its own networks. Schneider Electric – another huge building automation systems installer –has agreed to work with Cisco on that effort (see Cisco Jumps Into Energy Management for Computers, Buildings).

As for home energy monitoring and control systems, Echelon is already working with Samsung electronics for devices that monitor energy use in apartments in China and Korea, Nguyen said. Apartments are natural venues for power line communications, since the distances between meters (often located in the basement) and apartments above make wireless communications difficult.

Whether Echelon's power line signaling technology for carrying data from a smart meter over a building's electrical wiring will win out over competing standards is an open question. Another power line carrier technology is being developed by the HomePlug Powerline Alliance, a group of companies that is working with the ZigBee Alliance to integrate their efforts to bring communications technology into homes.

Given that ZigBee is emerging as a front-runner in the race to become the meter-to-home wireless communications protocol of choice for home energy management systems, that partnership could give HomePlug an advantage over Echelon's technology.

But Nguyen pointed out that Echelon's technology is the de-facto standard for building controls and power line carrier technology in Europe. The company's technology has also been accepted by a host of standards bodies including the International Organisation for Standardisation (ISO) and the International Electrotechnical Commission (IEC), he said.

As for using ZigBee instead of power line signaling, Echelon's smart meters can be retrofitted to carry ZigBee radios, Nguyen said, though no customers have done so yet.