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Tickers in this Article: ETN, JCI, ELON, ENOC, HON, GE, COMV, ITRI
With the Department of Energy finally starting to hand out the nearly $4 billion in Smart Grid grants, leaders of the ambitious project are beginning to take shape. The nationwide undertaking will incorporate an interconnected grid system monitored over the internet. The system will improve the energy efficiency and reliability of the grid by lowering peak demand and ultimately reducing energy consumption. With the venture's lofty goals, both larger and smaller firms have plenty of room in which to operate. With the first wave of grant checks being cashed, we can already spot a trend. IN PICTURES: How To Make Your First $1 Million

Smart Partnerships
By looking at what deals have already been inked, we can see what the future holds for the smart grid. At the core of these deals is a smaller firm, usually with some cutting-edge software or meter device, pairing up with a larger, more established firm to better utilize and distribute that product.

Echelon Corp. (Nasdaq: ELON) recently partnered with Eaton (NYSE: ETN) to market a combination of Echelon's Networked Energy Services (NES) smart meter system and Eaton's home automation system to utilities and electricity providers in Europe and Africa. The collaboration will provide a complete solution that will extend the smart grid into homes and comply with recent European Union announced goals of increasing energy efficiency by 20 percent by 2020.

General Electric's (NYSE: GE) Consumer and Industrial division has teamed up with private firm Tendril to develop technology that will essentially allow utilities to turn GE dryers, refrigerators, washing machines and other appliances off or on to curb power consumption. GE hopes to begin a full-scale trial in the fourth quarter of 2009.

Demand response contributor Comverge (Nasdaq: COMV) and dominant smart meter manufacturer Itron (Nasdaq: ITRI) have created a technology that gives homes the ability to reduce their electrical demand by turning down devices in use when utilities need electrical energy the most.

Large Cap And Small Cap Leaders
Both Johnson Controls (NYSE: JCI) and Honeywell International (NYSE: HON) offer a way to play the building automation angle similar to Eaton. While Johnson Controls has struggled due to its ties to the automotive industry, those ties may make it a better overall "green" pick than Honeywell. As one of the largest battery manufacturers in the world, the company has been receiving much praise for those efforts. Energy storage is a major component of the smart grid concept, and Johnson is working to create better lithium and advanced batteries for cars and the grid.

As demand response becomes more of a reality, small cap EnerNOC (Nasdaq: ENOC) could see its business grow alongside any future partnerships. Aside from demand response, the company has recently moved into green house gas management, which could be quite a profit maker as the U.S. Environmental Protection Agency has issued a ruling that will require thousands of manufacturing firms to start reporting their green house emissions individually in 2011.

Bottom Line
The smart grid is finally coming to fruition. While the finalized nature of the grid is still some time away, some new partnerships could be profitable for years to come. Both Johnson Controls and Honeywell offer a play on the building automation side, while EnerNOC offers a play on the smart meter side. (For additional reading, see Build Your Portfolio With Infrastructure Investments)

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