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This paper presents the design and development of a hardware-based laboratory smart grid test-bed. This system is developed at the Energy Systems Research Laboratory, Florida International University. The hardware/software based system includes implementation of control strategies for generating stations, and power transfer to programmable loads in a laboratory scale of up to 35 kilowatts in ac power and 36 kW in renewable sources and energy storages. Appropriate software was developed to monitor all system parameters as well as operate and control the various interconnected components in varying connectivity architectures. The interconnection of alternate energy such as wind emulators, PV arrays, and fuel cell emulators are implemented, studied and integrated into this system. Educational experiences were drawn during the design and system development of this laboratory-based smart grid. The real-time operation and analysis capability provides a platform for investigation of many challenging aspects of a real smart power system. The design, development, and hardware setup of this laboratory is presented here in Part I of this paper. This includes component development, hardware implementation, and control and communication capabilities. Part II of the paper presents the implementation of the monitoring, control, and protection system of the whole setup with detailed experimental and simulation results.