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The Future Internet vision is tightly linked to the transition from a passive system in which users initiate activities to a proactive environment in which software agents find, organize and display information and services on behalf of users. Such applications must be highly proactive and support real-time contextualizations and dynamic situation sensing, processing and reaction. In this paper we discuss situation management as a framework especially useful in domains in which there is the need to automatically and continuously identify and act on complex, often incomplete and unpredictable, dynamic situations. We focus on applying situation management methods in demand response, an element of the emerging smart power grid. We outline an intelligent situation management approach and present an event-based software architecture for supporting demand response aspects of the smart grid.