Electrical power systems are the backbone of industry, society and current civilisation. Power engineers have accumulated the necessary skills and procedures, to enable them to operate the system in the most reliable way possible. The main principles of system operation have not changed much, despite the rapid developments in power electronics, computing, information and communication technologies. This paper surveys existing power networks and their limits in meeting modern developments and environmental concerns. There is an evaluation of the impacts of deployment of new low carbon technologies such as distributed generation and electric vehicles on existing networks, together with the main drivers for change and features of the new concept of the ‘smart grid’. The paper also examines the challenges and benefits that the ‘smart grid’ will bring, and describes the enabling technologies.