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The complexity of most power grid simulation algorithms scales with the network size, which corresponds to the number of buses and branches in the grid. Parallel and distributed computing is one approach that can be used to achieve improved scalability. However, the efficiency of these algorithms requires an optimal grid partitioning strategy. To obtain the requisite power grid partitionings, the authors first apply several graph theory based partitioning algorithms, such as the Karlsruhe fast flow partitioner (KaFFPa), spectral clustering, and METIS. The goal of this study is an examination and evaluation of the impact of grid partitioning on power system problems. To this end, the computational performance of AC optimal power flow (OPF) and dynamic power grid simulation are tested. The partitioned OPF‐problem is solved using the augmented Lagrangian based alternating direction inexact Newton method, whose solution is the basis for the initialisation step in the partitioned dynamic simulation problem. The computational performance of the partitioned systems in the implemented parallel and distributed algorithms is tested using various IEEE standard benchmark test networks. KaFFPa not only outperforms other partitioning algorithms for the AC OPF problem, but also for dynamic power grid simulation with respect to computational speed and scalability.