(Source: OSI Solutions)
A smart grid delivers electricity from suppliers to consumers using digital technology with two-way communications to control appliances at consumers' homes to save energy, reduce cost and increase reliability and transparency. It overlays the electrical grid with an information and net metering system, and includes smart meters. Such a modernized electricity network is being promoted by many governments as a way of addressing energy independence, global warming and emergency resilience issues.
The smart grid is made possible by applying sensing, measurement and control devices with two-way communications to electricity production, transmission, distribution and consumption parts of the power grid that communicate information about grid condition to system users, operators and automated devices, making it possible to dynamically respond to changes in grid condition.
A smart grid includes an intelligent monitoring system that keeps track of all electricity flowing in the system. When power is least expensive the user can allow the smart grid to turn on selected home appliances such as washing machines or factory processes that can run at arbitrary hours. At peak times it could turn off selected appliances to reduce demand.