AUSTIN, Texas–Necessity, as we know, is the mother of invention. So too is transformation, as city officials here are realizing.

Austin Energy, the big utility here, provides power for millions of Texans, but it's realizing that being a power provider is a limiting business model long term. Indeed, the company's tagline today is "More than electricity."

To that end, it's working with local officials and the University of Texas here on the novel Pecan Street project to build a smart-home infrastructure on the site of the city's old airport.

It's an endeavor born in part because city officials have realized they're watching  transformation happen before their eyes, according to Mike Dow, smart energy business development manager for Freescale, a Pecan Street participant.

A third of the city's budget comes from Austin Energy, Dow said. But as more commercial companies and neighborhoods peel away from the grid, the income for Austin Energy drops.

"There are a lot of disruptive things happening, and they've got to adapt to it…and luckily Austin Energy is very forward looking," Dow said.

What's in it for semiconductor vendors? Derek Phillips, Freescale's director home energy management, said plenty.

Vendors get to help spec out the future home, in essence, as part of the smart home project.

He waves his smart phone in the air: "This is a device people want. They want to be able to reuse this in other places. Now through apps…you can control things you never thought possible before."

Here are two segments in which Dow and Phillips talk about smart-home technology and the Pecan Street project:

Part 1:

Part 2: