Smart grid is an idea of upgradation of the traditional electric grid infrastructure. The efficiency of the existing electrical grid can be automated by integrating with innovative technical equipment such as:?high-tech forecasting system, digital sensors, advanced two-way communication and two-way power flow systems. Smart grid establishes an interface between utility and consumer which helps to use energy, based on the preferences of price, eco-friendly and without technical system issues. It empowers the grid to be more secure, reliable and efficient. The peer-reviewed articles and published government reports have been reviewed, based on the analysis of technical characteristics of power generation systems, eco-friendly sources of power generations, cost reduction, functionality and design of traditional grid versus smart grid. Furthermore, the innovative technologies that enable the grid to integrate with decentralized power generation system efficiently have been considered. This paper claims that in this modern era, it is arduous for traditional grid to fulfill the rising demand of electricity, along with sustainable, eco-friendly and stable power supply, as it cannot be efficiently integrated with decentralized and localized power generation systems and renewable energy sources. The result of this paper shows that decentralized and localized power generation systems are located close to end-users which decrease the transmission and supply cost of electricity. Innovative technologies allow the decentralized and localized power generation systems to be integrated with renewable energy sources which help to reduce the cost of utility services and provide clean energy. Moreover, technological advancement played a decisive role in enabling the electrical system to be more efficient. Electrical reliability can be improved,?greenhouse gas emissions can be reduced, renewable energy sources can efficiently be integrated,?and?rising demand for electricity can be met by embedding advanced applications and technological equipment in the electrical grid.
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