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The power grid transmits and distributes electrical power generated from primary fossil or renewable energy resources, such as coal or wind. Computers and networks manage, monitor, protect, and control the continuous real‐time delivery of electrical power. Figure 1.18 depicts a view of key characteristics of Smart Grid compared with traditional power grid.

Figure 1.18 Smart Grid characteristics vs. traditional power system.

Source: [Bartz/Stockmar]. Licensed under CC BY‐SA 4.0.

A Smart Grid system may include IT, which is a discrete system of electronic information resources organized for the collection, processing, maintenance, use, sharing, dissemination, or disposition of information. A Smart Grid system may also consist of operational technologies (OT) or ICS, which comprise several types of operational and control systems, including SCADA systems, DCS, and other control system configurations such as skid‐mounted PLC that are often found in the industrial sectors and critical infrastructures [NISTIR 7628r1].

The Smart Grid has great potential for driving innovation in the ways electricity is produced, managed, and consumed. As described in [OECD 2012b], applications of ICTs and especially the opportunities provided by the Internet can help sustain electricity supply while limiting environmental impacts. In a Smart Grid, ICTs estimate the operational state with the vision of surviving a cyber incident while sustaining critical energy delivery functions and optimized power flow for economic and efficient generation dispatch. ICTs are seen as promoting a wider integration of renewable energy sources, promoting low‐carbon transport options including EVs, and inducting structural shifts in electricity consumption [OECD 2012d].

The Smart Grid is a particular application area expected to help tackle a number of structural challenges that global energy supply and demand are facing. Technologies and the use of data enable improved and more accurate information about the availability, price, and environmental impacts of energy, thereby empowering producers and consumers to make more informed energy conservation choices.

The Internet especially gives rise to a new generation of businesses providing services around electricity, adding further value and innovation to the energy sector value chain. The transition to a modern grid requires the adoption of advanced technologies, such as smart meters, automated feeder switches, fiber‐optic and wireless networks, storage, and other new hardware. These devices require a new communication and control layer to manage a changing mix of supply resources and provide new services.

Figure 1.19 shows a simplified view of the energy sector value chain. However, information gaps may affect the Smart Grid outcomes.

Figure 1.19 Stylized electricity sector value chain.

Source: [OECD 2012b]. © 2012, OECD.

Figure 1.20 depicts an overview of the ICTs for different domains (generation, transmission, distribution, customer) and customer areas (industrial, building, residential).

Figure 1.20 ICT application domains in the Smart Grid.

Source: [OECD 2012b]. © 2012, OECD.

ICTs and Internet applications are essential to modernization of the electric power grid in every domain. A summary of electricity challenges and ICTs addressing these challenges is shown in Table 1.3.

Table 1.3 Electricity sector challenges and potential ICT applications.

Source: [OECD 2012b]. © 2012, OECD.

Electricity sector challenges	ICT applications
Generation
Renewable energy generation	Smart meters Vehicle‐to‐grid (V2G) and grid‐to‐vehicle (G2V)
Distributed, small‐scale electricity generation	Virtual power plants Vehicle‐to‐grid (V2G) and grid‐to‐vehicle (G2V) Smart meters
Transport (transmission and distribution)
Transmission and distribution grid management	Sensor‐based networks Embedded systems and software Integrated software systems and application programming interfaces (APIs) Smart meters Communication protocols, including machine‐to‐machine communications (M2M)
Storage
Storage capacities (physical and logical)	V2G, G2V and vehicle‐to‐home (V2H) Smart meters End‐user interfaces
Retail
Dynamic and real‐time pricing for electricity consumption and distributed generation	Smart meters End‐user interfaces
Consumption
Electricity conservation and energy efficiency	End‐user interfaces Smart meters Electricity data intelligence
Demand management (automated)	End‐user interfaces Smart meters Communication protocols including M2M Smart building technologies Smart electronic devices Data centers and cloud computing
Integration of electric vehicles and renewable sources	End‐user interfaces Smart meters V2G, G2V Communication protocols including M2M Integrated software systems and APIs
Facilitate access to electricity in developing countries (electrification)