Not a week after word spread that Bill Gates had invested in Varentec, a company that specializes in "edge of network" technology, utility industry analysts already are avowing that Grid Edge platforms will be "the next big thing" in electric power transmission.

Indeed, for electric utilities that have been trying to harden their infrastructure -- to make it more reliable, even during severe weather events -- Grid Edge may offer a better option than the smart grid 1.0.

Smart grids are utility networks that have been upgraded and configured to transmit not just electricity, but also two-way, actionable communications from the base station to the end user and back again.

The difference between the smart grid as we know it now and as it would be with Grid Edge is that:

  • Using smart grid 1.0, a utility can remotely monitor network data for surges, outages, and other events -- and, if an issue is discovered, can relay commands from the base station (or, if necessary, service teams) to make rapid repairs. Sometimes, problems can be fixed before customers report them.

  • With Grid Edge, equipment installed along the periphery of the network autonomously identifies and self-corrects problems on-site, in real time -- without requiring intervention by professionals at the utility's base station.

Thus, while the smart grid 1.0 fixes problems from the inside out, Grid Edge would restore service from the outside in -- providing a quantum leap in customer service.

To remain relevant and competitive, current smart grid vendors -- among them ABB (NYSE:ABB), General Electric (NYSE:GE) , IBM (NYSE:IBM),  and Siemens (NASDAQOTH:SIEGY) -- may have to make market adjustments, including partnerships, acquisitions, and advances of their own.

Each of them currently is offering a platform that manages fault detection, isolation, and restoration centrally. However, with nearly 60% to 70% of energy losses on the grid occurring during transmission and distribution, their customers, the global utilities, may want to explore the advantages of Grid Edge. After all, Bill Gates usually knows a good thing when he sees it.

Stepping into this mix in order "to further define the space and drive the conversation" -- and (let's be serious) to get a jump on a trend that will affect the industry worldwide -- Boston-based Greentech Media, a research and publishing house, has just announced the establishment of a Grid Edge Executive Council.

Shifting the Smart Grid Paradigm

But let's go back to see how all of this began. On Sept. 30, Varentec, a Silicon Valley-based start-up, announced that it had received an $8 million infusion of Series B funding from Gates and Khosla Ventures, a Menlo Park, Calif., venture capital firm in which the Microsoft co-founder participates as a limited partner.

The eponymous firm is run by Vinod Khosla, who, like Gates, knows a thing or two about disruptive technologies. Khosla co-founded Sun Microsystems, the computer company acquired in 2010 by Oracle for $7.4 billion.

Not only does the association with these two iconic investors elevate Varentec to sudden (and welcome) prominence, but it augurs a shift in the smart grid paradigm -- away from centrally configured electricity transmission and base station controls, and toward distributed generation and load management.

Deepak Divan, president and CTO of Varentec, commented that he felt "validated" by the Series B funding from his high-profile backers, and noted that the infusion of funding would "allow us to commercialize our cutting-edge technology."

Specifically, rather than placing nodes from end to end of the electric grid to send data back to a central base station, Varentec's breakthrough digital technology places inverter-like controllers (which the company calls "power routers") at sites where energy management is needed most. With that, events on the grid can be addressed in real time, without the need for feet on the ground or a procedure implemented by the back office.

This so-called edge-of-network routing system becomes particularly valuable when forms of distributed energy, such as wind and solar generation, are tied to the grid, because their input can be intermittent and unpredictable -- for example, when the wind dies down or the sun goes behind a cloud. Grid Edge can help a utility to regulate the power load and respond to other transmission-related events quickly -- to the advantage of both the company and its customers.

What's more, experts now are saying that Grid Edge technology will be far more resilient against failure of today's dilapidated, centralized power infrastructure, which is vulnerable to accidents and cyber attacks, and is subject to cascading failures.

On the cusp of a major transition

In recognition of this new power prototype, Greentech Media has released a free report, "The Grid Edge: Utility Modernization in the Age of Distributed Generation," and is inviting "leaders from across the industry to discuss the future of the electricity market" as members of its new Grid Edge Executive Council.

"We are on the cusp of a major transition to a next-generation, distribution, intelligent energy system," said Greentech president Rick Thompson. "This conversation moves the concept of a smart grid to an entirely new level."

The transition is expected to benefit a broad swath of industry players. Greetech's analysts see growth opportunities for a number of renewable energy sectors and suppliers, among them:

  • Photovoltaic solar manufacturers and installers, which the researchers say will benefit as the technology becomes more cost-efficient and inverters become cheaper, more intelligent, and more grid interactive;
  • Open automated demand response applications (OpenADR 2.0), which will enable utilities and their customers to remotely control the power load;
  • Sensors and synchrophasers, which will alert utilities to faults and facilitate rapid response to fast-transient processes;
  • Cloud infrastructure, which will reduce the need for local servers; and
  • Energy storage at the Grid Edge, which will provide backup during fluctuations in capacity and power blackouts.

Of course, turning the electric utility industry in a new direction -- especially when many utilities worldwide already have deployed centralized demand response operations -- is a little like turning around an ocean liner in mid-stream.

However, with proponents like Gates and Khosla already signed on for the Grid Edge transition, can others be far behind? Look for stocks in these sectors to surge in value as the Grid Edge gives them an undeniable advantage of their own in the growing clean technology market.

Fool contributor Cheryl Kaften has no position in any stocks mentioned. The Motley Fool owns shares of General Electric Company and International Business Machines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.