The home electricity meter is getting a high-tech makeover, and chip makers stand to benefit.

With a shove from the Obama Administration's stimulus package, utilities are replacing rusty electricity meters in favor of digital "smart meters" as part of a much broader update of U.S. energy infrastructure. The update of meters alone could represent billions in revenue for chip makers over the next decade, though how quickly utilities will roll out the new products remains unclear.

"I think it's a growth opportunity, I think it will be sizable, but it will be fits and starts," Gartner chip analyst Stephen Ohr said. "And it will take time."

Unlike older meters that served mostly as electricity bean counters, tallying up total energy use until a utility employee read the meter, smart meters can do more. They capture information about how much power is consumed, but also when and at what price, so utilities can better manage distribution and consumers can look for savings by doing some chores when energy is cheaper, like at night.

At this point, estimates for the size of the market vary, but chip makers and analysts see the opportunity as large. Gartner expects more than 150 million smart meters to be installed worldwide in the next five years, with approximately 50% installed in North America. Between 2007 and 2012, Gartner expects smart meters to create to $2 billion in business for semiconductor makers.

Over the next decade, however, Texas Instruments Inc. (TXN) expects much more. Mark Buccini, head of TI's smart grid strategic business development, said smart meters could be a $7.5 billion market for chip makers. When including ancillary products - such as digital, connected thermostats and other devices - that number could roughly double.

Amid the total smart grid segment, "The smart meter, home area network is the biggest piece that we've identified," Buccini said.

Analog chip companies in particular - such as TI, Analog Devices Inc. (ADI), STMicronelectronics NV (STM), Freescale Semiconductor Inc. and others - will see most of the gains as the market expands. Smart meters use communications chips such as short distance radios, measurement devices, signal processors and microcontrollers to coordinate the different functions.

Meanwhile, Intel Corp. (INTC) and others will likely benefit from the need for more computing power to manage data and electricity infrastructure.

To be sure, much depends on the timetable utilities set in creating the new, smarter grid.

Of the $43 billion appropriation set out for the energy sector in the U.S. stimulus package, roughly $4.5 billion is aimed at smart grid projects. But on a national scale, most utilities are only working on pilot projects, not a full roll-out.

"Rather than the floodgates opening, maybe its more like a rising tide," said Gartner's Ohr.

In Boulder, Colo., Xcel Energy Inc. (XEL) began a program called SmartGridCity that is the first full-fledged test of a smart grid in the U.S. And earlier this month, PG&E Corp. (PCG) received approval from regulators to install communications technology in already deployed digital utility meters to allow the devices to interact via a wireless network with other meters and PG&E's computers.

Utilities are still trying to convince consumers that the costs of installing meters and, more broadly, the smart grid will be made up in cost savings generated from more efficient use of electricity.

It's a tough sell.

In Texas this month, Oncor Electric Delivery Company LLC, a Dallas-based utility, is installing smart meters, but will charge customers $2.21 a month for the next 11 years, reported the Dallas Morning News. An editorial in favor of the plan was met with some populist ire, and was followed by a story from a local NBC affiliate in which consumer were upset about the costs.

The perception is that utilities are simply passing costs on to consumers for upgrades to their infrastructure. However, as consumers become more accustomed to a simplified system, many hope they will realize the benefits in energy savings.

"The meter has to tell the consumer information that he wants to know," Ohr said. "He doesn't want to read the meter in terms of kilowatt hours or voltage or current. What the person needs to know is at this time of the day, how much does it cost to run your dishwasher?"

-By Jerry A. DiColo; Dow Jones Newswires; 201-938-5670; jerry.dicolo@dowjones.com

(Cassandra Sweet contributed to this article.)