A power grid consists of two major parts: the transmission and distribution systems. The transmission system refers to the high-voltage network infrastructure that connects the power generation facilities with the various distribution points. At the distribution points, the electrical carrier is converted to medium and low-voltage signals for the distribution systems that connect the customers. The smart power grid (or smart grid in short) refers to the next-generation electrical power grid that aims to provide reliable, efficient, secure, and quality energy generation/distribution/consumption using modern information, communications, and electronics technology. The smart grid will introduce a distributed and user-centric system that will incorporate end-consumers into its decision processes to provide a cost-effective and reliable energy supply. The modern communication infrastructure will play a vital role in managing, controlling, and optimizing different devices and systems in smart grids. Information and communication technologies are at the core of the smart grid vision as they will provide the power grid with the capability to support two-way energy and information flow, isolate and restore power outages more quickly, facilitate the integration of renewable energy sources into the grid and empower the consumer with tools for optimizing their energy consumption.

From an architectural perspective, a smart grid is comprised of three high-level layers: the physical power layer (transmission and distribution), the data transport and control layer (communication and control), and the application layer (applications and services). Each of these high-level layers breaks down further into sub-layers and more detailed market segments.