Distributed power system is the basic architecture of current power systems and demands close cooperation among the generation, transmission and distribution systems. Excessive greenhouse gas emissions over the last decade have driven a move to a more sustainable energy system. This has involved integrating renewable energy sources like wind and solar power into the distributed generation system. Renewable sources offer more opportunities for end users to participate in the power delivery system and to make this distribution system even more efficient, the novel "Smart Grid" concept has emerged. A Smart Grid: offers a two-way communication between the source and the load; integrates renewable sources into the generation system; and provides reliability and sustainability in the entire power system from generation through to ultimate power consumption. Unreliability in continuous production poses challenges for deploying renewable sources in a real-time power delivery system. Different storage options could address this unreliability issue, but they consume electrical energy and create signifcant costs and carbon emissions. An alternative is using electric vehicles and plug-in electric vehicles, with two-way power transfer capability (Grid-to-Vehicle and Vehicle-to-Grid), as temporary distributed energy storage devices. A perfect fit can be charging the vehicle batteries from the renewable sources and discharging the batteries when the grid needs them the most. This will substantially reduce carbon emissions from both the energy and the transportation sector while enhancing the reliability of using renewables. However, participation of these vehicles into the grid discharge program is understandably limited by the concerns of vehicle owners over the battery lifetime and revenue outcomes. A major challenge is to find ways to make vehicle integration more effective and economic for both the vehicle owners and the utility grid. This research addresses problems such as how to increase the average lifetime of vehicles ...