A Smart Grid is about balancing existing power resources plus a model for how future power resources can be planned.
Let us take a city which is not yet Smart in terms of their power requirements.
They will have to produce power to meet their peak demand. This means they will be producing power which may be wasted during non peak times. The goal is to use the wasted power and increase the productivity of the city.
One of the ways is to use a Smart meter or Smart Appliance.
In simple terms a Smart Meter will switch off the appliance during peak load conditions. Customers get the benefits of better pricing whereas power companies are able to optimize their supply. As far as the Smart Appliance goes it is almost like connecting it to the home network and to the internet like our PC for optimal use.
Of course in the grand scheme of thing it will also mean better transmission practices, embedding of sensors at all power consuming point, continuous information to customers about dynamic power rates to help them plan their consumption patterns.
Looking at the future I can envisage completely automated factories running their processes during off peak times to get the benefit of lower costs. This will mean that all power produced by the power company is completely utilized.
The data generated will help analyze patterns and trends to plan for the future.
Of course at some point all transportation will be electric and the Smart Grid may even dictate traffic patterns to help optimize produced power.
It is possible this may mean lighting only when required depending on people movement by motion sensors.
The ultimate aim is of course producing power using sun, wind and the earth at the source and selling surplus to the Smart Grid.
Go ahead Google Smart Grid and IBM Smart Cities and be pleasantly surprised with what the wonderful citizens of the world have in store for us