The electric power grid is spatially and temporally complex, nonconvex, nonlinear, and nonstationary system with uncertainties at many levels. The integration of renewable sources of energy, such as wind and solar farms, energy storage, and plug-in hybrid electric vehicles, further adds complexity and challenges to efficient, reliable, and safe operation of electric power grids. A smart grid is aimed at improving power system's reliability, security, sustainability, efficiency, and flexibility through distributed and coordinated intelligence at all levels of the electric power grid - generation, transmission, and distribution. The challenges faced in evolving a smart grid include variable and uncertain generation (such as wind and solar), stochastic load profiles and power flows, cyber attacks (unintentional and malicious), communication latencies and data loss, and so on. © 2012 IEEE.