* Utilities' investment plans http://tmsnrt.rs/2jXHmvv
* IT, software vital in grid modernisation
* Large tech, industrials seek smart-tech takeovers
* Itron, Silver Spring could be targets -sources
By Christoph Steitz
FRANKFURT, Feb 10 (Reuters) - Europe's top utilities are planning to invest tens of billions of euros over the next three years to catch up with the green energy revolution, driving a flurry of takeovers by tech and engineering firms of niche, smart-energy innovators.
Upgrading power and gas networks used to be a hardware-based affair as long as steady baseload energy sources, such as coal and gas, accounted for most power generation.
But the rise of solar and wind power increased the need for intelligent IT systems that can balance out demand and supply swings while meeting energy and carbon emissions targets.
This has led industrial conglomerates and technology companies to seek out small targets to complement their offering to utility clients in the wake of Google's landmark purchase of smart thermostat maker Nest Labs in 2014.
"Everywhere in the supply chain of power there is disruption going on," said Bruce Jenkyn-Jones, co-head of listed equities at Impax Asset Management, which focuses on investments in environmental markets and resource efficiency.
M&A activity is well under way in storage and smart meters, which are key in securing access to customers and, more importantly, their data, to help the utilities tailor their power purchases and save costs.
Three major German meter makers -- Techem, Ista and Qundis -- are up for sale and deals last year included Fortis buying meter maker ITC for $11.3 billion.
France's Total has snapped up battery maker Saft Groupe for 950 million euros ($1.02 billion), while Oracle took over Opower, a maker of utility software.
Other niche players under the spotlight include U.S. smart meter maker Itron, power chip maker Monolithic Power Systems and data networks provider Silver Spring Networks, investment banking and industry sources said.
Itron, which makes more than a third of sales in Europe, declined to comment, as did Silver Spring Networks. Monolithic Power was not immediately available for comment.
WHAT'S IN A GRID?
Consolidation has been driven by big power firms in Europe -- including Italy's Enel and Germany's Innogy .
Together, major European utilities will spend at least 40 billion euros by 2020 to upgrade their networks, according to ongoing investment plans, including replacing old cables, buying new smart meters and putting new IT in place.
The spending spree follows a decade of crisis, during which rival renewable capacity pushed many of their coal- and gas-fired power plants out of the market.