Increasing demands on the antiquated electric power industry in the United States has caused many to question the long term viability of such a system in light of the forecasted increasing demand for power. The current grid system relies on a three step system, with electricity being generated at power stations, transported over a network of cables, and finally distributed to consumers through local transformers. However, problems are present within each step of this system; power stations are plagued by rising fossil fuel prices and the system's inability to integrate renewable energy sources. A portion of the energy is then lost as it is transmitted to local transformers where operation managers carefully dispatch the appropriate amount of energy according to consumer demand. Under this system, consumers are effectively removed from the electricity market as well as discouraged from implementing energy conservation and efficiency measures. The Smart Grid system has been proposed as a solution to the many problems associated with the current system of electricity. Key aspects of the Smart Grid include a smart distribution system, deployment of sensors and software allowing the incorporation of renewable energy, smart meters, in-home displays, and dynamic pricing. Accompanying the transition to a system which incorporates renewable resources, smart meters, which allow consumers to shift their consumption to times when energy prices are low according to a dynamic pricing model, and in-home displays will be a net increase in jobs, increased electricity reliability, a decrease in carbon dioxide emissions, and reduced dependence on foreign fossil fuels.

Under the Federal Power Act, the Federal Energy Regulatory Committee (FERC) is responsible for electricity sales at the wholesale level while states regulate sales at the retail level. The passage of the Energy Policy Act and Energy Independence and Security Act were the first steps toward creating a Smart Grid, both of which urge states to deploy smart meters, increase renewable energy use, and implement dynamic pricing systems. Under these Acts, regulation at the federal level is executed by the FERC, while states rely on State Utility Commissions. However, movement toward the Smart Grid has resulted in regulations being increasingly decided by market forces.

The benefits of a transition to the Smart Grid far outweigh any costs. Not only will the U.S. significantly cut carbon dioxide emissions by increasing inputs from renewable energy sources and assisting consumers in conserving energy, but it also will provide a net gain of green jobs, increase reliability of the current grid, and increase energy independence. However, certain measures must be employed to speed the deployment of Smart Grid technologies. Such measures include tax incentives to reduce investment costs as well as increased funding allocated to states so that they may update infrastructure, deploy technology, and gain expertise in Smart Grid energy systems. Finally, future policies will need to elucidate the role of the FERC in regulating deregulated markets to protect consumers from market abuses. Such incentives and policies will assist the United States in the inevitable transition to a smarter grid.