A smart grid uses digital technology to make the flow of electricity from power plants to consumers more efficient.
Fool Rich Duprey does a good job explaining the smart grid in a 2009 article: "The promise of the Smart Grid is the development of a two-way communication system enabling utilities and grid operators to better manage and monitor the flow of electricity usage and channel it to where it's most needed. At the same time, consumers can take matters into their own hands -- through smart meters or appliances and electronic devices that can communicate with the grid -- to save money and make better energy decisions."
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