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This paper investigates the impact of renewable energy integration in the future smart grids in Europe, simulating the performance of the whole energy system so that renewable energy sources are matched to varying service demands. There are energy challenges and complexity issues associated with demand side management arising from the connection between micro-generation output, grid loads, the weather combined with transmission and distribution of energy throughout the network. Some issues of balancing demand and supply in energy networks are discussed. This helps to explore options for most reliable network configuration over the coming decades to ensure flexibility and to integrate unpredictable demands with a range of supplies under different conditions. It covers all sectors and includes demographic and technological developments. This could aid policy formulation in the European Union.