Network of sub stations, transformers and electrical transmission lines constitutes a conventional electric grid which delivery electricity to domestic and industrial needs. Rapid industrialization and population growth resulted in peak load conditions causing failure of grid mechanism. The grid is not designed to accommodate power from various sources such as wind and solar energy. These renewable energy sources provides fluctuating power to grid and if high power is supplied results in failure. So integrating these renewable energy sources with grid operations is becoming difficult due to lack of consistency in delivering power. A need for highly reliable, compact, self-regulating smart grid system which will accommodate and adjust to fluctuating power automatically. Smart grid plays a critical role in integration of various renewable energy. Smart grid is a sum of high quality information, sensing, communication, control and technologies. If taken together results in electric power system that can efficiently integrate the job of all connected users.

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Operational efficiency, optimized voltage and power quality has improved through the use smart grid systems in renewable energy integration. There are some technical, regulatory, policy, economic challenges related to smart grid usage for renewable energy integration. The main driver which favors renewable energy integration with smart grid is the rapid industrialization and population growth which demands more power without any breakdown or failure. Balancing supply and demand during surplus conditions are one of the technical challenges for this type of system. Economic challenges are returns on investments. More returns in such projects would favor more investments and vice-versa.

The basic classification is done based on the type of renewable energy used for integration with smart grid technology such as wind, hydroelectric, biomass, geothermal, solar. This system has very low efficiency when compare to fossil fuels generation. Technological improvement and research and development activities are being looked upon to enhance the overall efficiency of this system. Wind and solar energy delivers more efficiency when compared to other renewable energy sources. Wind and solar energy integration with smart grid would deliver more overall efficiency.

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Companies involved in smart grid for renewable energy integration are Chevron Corporation, GE Energy Management, Echelon Corporation, Schneider Electric, Siemens AG, Viridity Energy, ZBB Corporation, ABB Limited, Power Analytics Corporation, Honeywell International, Inc., Toshiba Corporation, Pareto Energy Ltd. and others.