The best way to answer this question is to start by explaining the electrical grid we have in place now. Before the advent of microprocessors, both residences and businesses used far less electricity than we do now. Our current electrical grid was originally built in 1890. Over the years the grid has been updated as technology changed. However, the rate of demand has increased exponentially. Today we are faced with a grid that no longer adequately meets the needs of residences and businesses and is rife with costly disruptions and failures.
The grid of yore is a one way transmission of energy; from power plant to transmission lines, substations and transformers to your home and to businesses. Plug in your smartphone and voilà you have electricity. Through the 9,200 generating units and the 300,000 miles of transmission lines, the current grid's generating capacity is 1 million megawatts. While impressive, we have patched this antiquated system to the point where the underlying structure is no longer viable enough to meet the needs of the 21st century and beyond.
Back to the question – what is a smart grid? Watch this video to gain a better understanding from the US Department of Energy site explaining The Smart Grid Video. A smart grid not only carries electricity from a power plant to the source of need, it also carries information to and from all points of interaction. Using the binary blessing of digital technology, two–way communication can be built into the grid to give utility companies moment to moment knowledge of electrical demand and disruptions. Using automation and computers as well as existing and emerging technologies and equipment, the smart grid will also make smart utility companies, smart homes, and smart businesses to augment the entire electrical exchange making efficiency the premier benefit of the smart grid.
Between necessity and need lies invention and progress. Industry, corporate & government money, and technology are pressing forward on building a Smart Grid. However, it isn't just the U.S. that needs to build a Smart Grid; this is a worldwide necessity. A report done by Memoori Business Intelligence Ltd, titled The Smart Grid Business 2011 to 20161 found:
Although currently progress is piecemeal, it is growing and it is evolving. Corporate and industrial demand is pushing progress forward and will only increase as people continue to require more efficient and cost effective electric services.