The modern industrialized nations heavily rely on two networks or grids: The first one is the internet, representing the innovations in telecommunications. The other one is the power grid, representing the demand for energy.
In most countries, the power grid structure is based on concepts of the late 19th century and has, especially during the middle and second half of the 20th century, been growing gradually. These power grids were originally build and conceptualised as local grids. However, due to growing demand, they were expanded and became more and more complex and interwoven.
The original grid structure in many places is described as "dividing and distributing" electric power: On a bulk basis, from a comparatively little amount (i.e., ~thousands) of "central plant" generating stations, to major load centres, and from there to a large number of individual consumers, large and small.
The classical power grid has faced a number of challenges especially in later years that create the need for innovation:
Security threats arise, e.g. from cyber attacks. National strategies trying to foster alternative power generation sources make supply and maintenance of stable power significantly more complex. The call for growing efficiency seeks to lessen peak demand surges during the day so that less energy is wasted in order to ensure adequate reserves.
A smart grid in this context is the answer to these challenges. It is combining the advantages of communication technology and IT with the growing demand for energy but also an efficient use of energy.
Smart metering devices, web or mobile communication technology based power meters, communicate with larger grid structures to determine demand and supply of energy. It is a grid that gathers, distributes, and acts on information about the behavior of all participants (suppliers and consumers).
The idea is to improve the efficiency, importance, reliability, economics, and sustainability of electricity services. The smart grid is a significant innovation of the electricity services industry, but mainly a measure aiming to improve the technical infrastructure. It also contributes to ideas of common electricity markets, where electricity can be bought and sold in real-time with variable price structures.
In the circumpolar North, there are currently several initiatives under way to upgrade to a smart grid structure. In the Canadian province of Ontario "Hydro One" has launched a large scale project. In Norway, Sweden and Finland the first steps of introducing smart metering and a common electricity market are being established.