Silver Spring Networks, a start-up whose core strength is building network interface cards that connect smart meters in homes and businesses with the network infrastructure of utlities, has been doing fairly well. And it looks to be doing even better now that the U.S. Department of Energy has outlined plans to disburse $5.7 billion in federal stimulus funds on smart grid initiatives across the country.  In April FPL Group, a Florida Utility, announced plans for a $200 million rollout of one million smart meters in the Miami area. The key vendors in the deal include GE, Cisco and Silver Spring. If successful, FPL will roll out the smart meters to the rest of its 4.5 million customers. That’s a lot of business for Silver Spring. Then this month Com Ed, Chicago’s electric utility, announced its own smart grid pilot and chose GE and Silver Spring for the project.

Meanwhile, Cisco has aggressively expanded its smart grid plans. Last month Cisco told me it plans to take a four-pronged approach to attacking the smart grid market and winning some stimulus dollars for itself (and hopefully some channel partners). It will be rolling out products in four categories:

1. Transmission and distribution networks, where energy is produced and distributed.
2. Neighborhood area networks, where energy is distributed locally to homes and businesses.
3. Home and business energy management products, such as products that intelligently manage the consumption of energy within a building.
4. Data infrastructure to manage all of the above.

Although back in April Cisco and Silver Spring were part of the same deal with FPL, the two companies will increasingly compete head to head, it seems. This month North Carolina-based utility Duke Energy announced a new deal with Cisco for its own smart grid project.  As Katie Fehrenbacker of earth2tech.com wrote, this deal illustrates the shift in Cisco’s smart grid strategy that I outlined above. In the FPL deal, Cisco was focused on the consumer side of smart grids. This Duke Energy deal encroaches on Silver Spring’s territory on the utility side.

Silver Spring has undoubtedly recognized this threat and it is taking steps to counter Cisco’s moves.  Late last week Greentechmedia.com reported that Silver Spring had hired away Judy Lin, vice president of Cisco’s Ethernet Switching Technology Group. I haven’t seen any official confirmation of this report yet, but just last month Lin was quoted in a San Francisco Chronicle story about Cisco’s foray into the smart grid market.  Less than 30 days later reports surface that she has been hired by a rival start-up.  Clearly, Silver Spring is looking to beef up its Ethernet capabilities as it prepares to compete head to head with a company that dominates so many markets, from switching and routing to unified communications, wireless networking and video conferencing.

VARs and system integrators who are looking to build a smart grid practice will probably see Cisco as a natural partner, but Silver Spring might be a good prospect as well.