The creation of a new smart grid to bring the U.S. power delivery system into the 21st century got a major boost in the stimulus bill that was signed into law this week.

All the power industry needs to figure out is what exactly a smart grid is.

Experts and companies visualize a network that will wring new efficiencies and capabilities out of thousands of miles of power lines and power stations. But figuring out how to make that come true remains a key dilemma.

There's no smart grid store, Scott Lang, chief executive of Silver Spring Networks, a privately held software maker, told a clean technology conference this week. You're building platforms that are going to migrate and evolve over time.

As part of the $787 billion stimulus package, the U.S. government will spend $11 billion to help upgrade the nation's electrical system. That includes creating network standards that link everything from power plants and electrical substations down to appliances in individual households.

That could open the door to more development of wind and solar power, the rollout of smart appliances that turn themselves on and off, and eventually the deployment of a fleet of electric hybrid cars.

If we don't have a smart grid, then we will not be able to enable those things. You will not be able to see the smart grid but you will see the effects, said Arshad Mansoor, vice president of power delivery and energy utilization at the nonprofit Electric Power Research Institute.

For utilities, figuring out which technologies to develop can be a challenge for an industry that still depends on a decades-old system to get electricity from the power plant to homes and businesses.

Our customers are still amazed we can't tell if they're out of power unless we receive a phone call, Michael Carlson, an executive at utility owner Xcel Energy Inc (XEL.N: Quote, Profile, Research, Stock Buzz), told the clean technology conference.

Utility owners like Xcel and others have launched pilot programs for smart meters, made by companies such as Itron (ITRI.O: Quote, Profile, Research, Stock Buzz) and General Electric Co (GE.N: Quote, Profile, Research, Stock Buzz), that allow households to more closely monitor their usage while also sending data back to their power providers.

Building those links will require large investments, as well as the cooperation among companies to create a open source system that allows the technology to developed by many players.

We need to make sure we can grow as the needs of the utilities grow, said Vic Richey, ESCO Technologies Inc (ESE.N: Quote, Profile, Research, Stock Buzz), a maker of technologies that link utilities and consumers.

For large commercial users, companies such as EnerNOC Inc (ENOC.O: Quote, Profile, Research, Stock Buzz) and Comverge Inc (COMV.O: Quote, Profile, Research, Stock Buzz) offer demand response programs that pay businesses to reduce their consumption during peak hours when utilities supplies are stretched.

Utilities pay more for peak hour power, and allowing them to shift that power load to hours when prices are cheaper can trim their costs substantially. Part of those savings are then passed on to EnerNOC and Comverge customers.

It's really the killer application of the smart grid, EnerNOC Chairman and Chief Executive Tim Healy told the conference.

While current demand response systems are small compared to the size of the overall power market, they are expected to grow sharply, presenting a problem for utilities which must sort through a massive amount of data if they are to harness the technology.

Wind power and solar energy also present problems to grid managers who need to accurately balance supply and demand each minute, since output from those energy sources can change quickly depending on the weather.

A recent report commissioned by several regional grid operators, which coordinate power flows across several utilities, showed building a new power line network to accommodate a five- to 20-fold increase in wind power could cost as much as $80 billion over the next 15 years.

(Reporting by Matt Daily; editing by Richard Chang)

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