LONDON/MILAN (Reuters) - Europe’s biggest utility Enel will ramp up spending on digital networks to offer smart meters, remote home appliance controls and car charging points, the Italian company said on Tuesday.

FILE PHOTO: The logo of Italy's biggest utility Enel is seen at the Rome headquarters, Italy, March 24, 2016. REUTERS/Stefano Rellandini/File Photo

Electricity networks and telecom services are starting to converge as utilities use digital technology to more closely manage power supply and consumption in homes, offices and factories.

By remotely controlling the way power is used, they can manage peaks and troughs in demand and sell services that help customers cut their bills. They can also deal better with surges and dips in supply caused by the growing use of wind and solar energy.

Enel is building a fibre optic network in Italy to rival former monopoly Telecom Italia TLIT.MI. It is now looking at similar projects for big cities in Latin America, Chief Executive Francesco Starace said on Tuesday.

Enel will accelerate investment in smart grids and roll out new services catering to electric vehicles and connected home appliances, company officials said at a presentation.

“The unstoppable growth of renewables, digitisation of grids and regulatory change to tackle climate change are driving change from distributed generation to an energy cloud platform,” said Francesco Venturini, head of a new Enel “e-Solutions” division, Enel X.

The bet on these new services is driven by necessity as much as by choice. The rise of renewables has hit power prices and ripped up a business model that worked for more than a century - large-scale power stations delivering electricity to networks that invested just enough to cope with peak demand.

Utilities long known for delivering reliable investment returns are now breaking up, selling assets and eyeing mergers to cope with shrinking profitability.

German utility RWE RWEG.DE is looking at ways to cut its stake in retail business Innogy since it was spun off, and this could involve a deal with Enel, a banking source told Reuters at the weekend.

Starace said acquisitions by Enel would be bolt-on deals mainly in distribution and renewables. He ruled out any interest in Innogy.

“Why do we criticize large acquisitions? Because we did it in Europe and it took 10 years to get our money back.”

Enel’s heaviest investments in digital and smart grids are yet to happen -- Enel is sinking 5.1 billion euros into its Italian fibre network -- but shareholders are backing Starace for now. Enel shares have outperformed European peers over the past year.

Graphic: goo.gl/Fg5pc9

INTERNET OF THINGS

Enel expects electricity to represent 29 percent of total energy demand by 2040, up from 18 percent today, driven by the electrification of transport and heat production.

Much of the 17 billion euros ($20 billion) Enel plans to invest over the next two years in its established markets will go to grids and renewable energy and installing so-called smart meters in homes to take advantage of the “Internet of Things” -- connecting appliances from washing machines to refrigerators to the Internet to improve their performance.

“We will invest in mature markets due to the attractiveness of technology in those markets,” Starace said in London, unveiling Enel’s 2018-2020 strategy.

The company plans to spend 800 million euros by 2020 to install new services like electric vehicle (EV) charging points, software platforms and public lighting.

Enel said it would cut investment in South America, a region it said could face more risks - a shift for a company that has long emphasized emerging markets as key to its future.

($1 = 0.8526 euros)