The current power grid is in the verge of being improved. Recent technological advances have made possible the creation of a new and improved grid known as the smart grid. Smart grid allows for better interaction between all parties involved in power generation, transmission, distribution and consumption. This will bring about cost savings, more efficient usage of power, less harm to the environment and reduce power outages. Effective communication is crucial in bringing this about. Opportunities and challenges in smart grid communications are discussed here.