**2. Challenges of smart grid**

In recent years, energy systems whether in developed or emerging economies are undergoing changes due to the emphasis of renewable resources. This is leading to a profound transition from the current centralized infrastructure towards the massive introduction of distributed generation, responsive/controllable demand and active network management throughout the smart grid ecosystem as shown in Figure 1. Unlike conventional generation resources, outputs of many of renewable resources do not follow traditional generation/load correlation but have strong dependencies on weather conditions, which from a system prospective are posing new challenges associated with the monitoring and controllability of the demand-supply balance. As distributed generations, demand response and renewable energy resources become significant portions of overall system installed capacity, a smarter dispatch system for generation resources is required to cope with the new uncertainties being introduced by the new resources.

One method to cope with uncertainties is to create a better predictive model (Cheung et al., 2010, 2009). This includes better modeling of transmission constraints, better modeling of resource characteristics including capacity limits and ramp rates, more accurate demand forecasting and external transaction schedule forecasting that ultimately result in a more accurate prediction of generation pattern and system conditions. Another method to cope with uncertainties is to address the robustness of dispatch solutions (Rios-Zalapa et al., 2010). Optimality or even feasibility of dispatch solutions could be very sensitive to system uncertainties. Reserve requirements and "n-1" contingency analysis are traditional ways to ensure certain robustness of a given system. Scenario-based (Monte-Carlo) simulation is another common technique for assessing economic or reliability impact with respect to uncertainties such as renewable energy forecast. These methods and techniques are necessary as the industry integrates renewable energy resources into the power grid.
