Understanding smart grids

A smart grid is the superposition of one physical electricity network on an information system. "Digitalization" (the growing application of information and communication technologies across the economy) enables electricity to break away from exclusive and centralized generation, opening it up to the increased integration of small-scale renewable sources in distribution networks. Digitalization also facilitates two-way communications between clients and providers, transforming them -progressively into "prosumers". This suggests a new electricity system requiring changes in regulatory and technical norms. Transmission improves, losses decrease, renewables can be better integrated, and demand peaks can be smoothed. On the other hand, there is an important need for investments in smart meters, and IT technology, as well as concerns over the correct treatment of clients' data. The massive introduction of dynamic tariffs is a consequence of smart grid development.