In a world increasingly concerned about the cost, availability and environmental consequences of conventional energy supplies, the electrical power industry stands on the cusp of a profound transition. Presently, the power industry has to cope with a growing electricity demand using an ageing electricity infrastructure. This in parallel with the transition towards generation through intermittent and decentralized sources of clean(er) energy poses landmark challenges for the sector. Consumers are becoming “Prosumers”, by using energy from the grid at one time, while feeding in at another. Further, the supply-side controllability decreases since part of the installed capacity is intermittent and dependent on external conditions such as weather (wind, sun) or local heat demand (cogeneration).

If energy supply and demand responded to real time and varying energy prices, a huge potential for controllability gains on the demand side would be generated. For instance, charging of the batteries of electric or plug in hybrid vehicles would create a price sensitive outlet for off peak demand. To address these challenges in a cost-effective manner, the Smart Grid requires a scaleable two-way coordination mechanism that is able to communicate and optimize over a multitude of small to medium-sized controllable generators and loads, with the Smart Meter acting as the key enabler.