Italian electric grid operator Enel Distribuzione says it has begun the installation of one of the first "smart grids" in Europe in a pilot project.

To be deployed in Isernia in the Molise region of central Italy, the company says the $14 million project will allow it to "optimally regulate the bi-directional flow of electricity generated from renewable resources on low and medium-voltage networks and will enable new uses of energy."

Smart grids are a means of enabling the integration of thousands of small-scale sources of renewable energy into the electricity transmission systems of Europe.

These sources of "distributed generation" for the most part arise from solar and wind sources, which vary and fluctuate randomly due to weather conditions or the alternating of day and night. With smart grids, technology is used to more evenly distribute the power and smooth out the spikes in generation.

In statement issued Friday, Enel said several thousand of its customers will take part in the Isernia project, which is linked to a substation in Carpinone, Italy.

It said the advanced technology to be deployed in its "intelligent system" will include devices for estimating electricity generated from renewable resources, special sensors to monitor grid volumes and new ways to regulate input flows.

Also included will be storage technologies using Siemens-built lithium ion batteries to modulate flows of electricity, as well as recharging stations for electric vehicles and the installation of nearly 8,000 "smart info" devices in homes to allow customers to monitor consumption.

The devices will allow users to track changes in the price of energy based on time slots, with the goal of promoting efficient use and increasing active customer participation in the management of the system.

Enel said it will monitor the process by using a WiMax broadband connection and a fiber-optics communications infrastructure integrated with the electronic meters.

Isernia was chosen because its geography and climate "offers the perfect setting to fully exploit solar, hydroelectric and biogas efficiently integrate renewable energy sources into the distribution network."

The project was the winner of a competition conducted by Italian regulator AEEG to award financial incentives for innovative smart grids that sought to promote the involvement of both distributors and customers - also known as prosumers (producer-consumers).

The use of Siemens equipment in the effort mirrors another recent commitment the German engineering company made to a smart grid demonstration project.

The company last month said it would take part in the EU-sponsored EcoGrid effort, in which a prototype smart grid will be installed and put into operation on the Danish island of Bornholm in the Baltic Sea.

Jan Mrosik, chief executive of Siemens' Smart Grid Division, said the company will install one of its decentralized energy management systems and integrate it with other technology that enables users to regulate power consumption at the building level.

"We're thus underscoring our comprehensive technical competence in optimizing the balance between fluctuating renewables-based power supply and the intelligent control of power consumption within a smart grid," Mrosik said.

The company says it has high hopes for the EcoGrid project because power loads will be adjusted automatically based on momentarily available power generated by renewables.