The invention is a means to quantify grid observability (the ability to determine a set of operating parameters such as voltages, currents, and real and reactive power flows) from a set of (possibly sparse) grid sensor readings and a distribution grid system model and to determine the "islands of observability" where such determination is possible, and by exclusion, where it is not possible (resulting in deficiencies in grid observability that may have to be remedied for proper grid operation). The primary innovations here are in the means to determine the relationships among the sensors and the grid parameters needed for observability for three phase unbalanced distribution circuits, given the sensor placement and grid system model (topology and admittance matrix, or just the topology alone); taking into account grid model uncertainty and communication system characteristics (transportability), and further to determine zones where full observability is possible("islands of observability") and where it is not; to allow for interactive placement of sensors with continual re-calculation of observability indices and observability islands, to provide automatic allocation of sensors to a grid model via sensor allocation strategies, again with calculation of indices and islands, and finally to automatically optimize sensor allocation and placement.