A smart utility network (SUN), as defined in the IEEE 802.15.4g standard, is an emerging technology enabling reliable data transmissions in smart grid (SG) neighbourhood area networks. However, a SUN operates on unlicensed bands that are overlapped with most of the channels of wireless local area networks (WLANs). Thus, it is critical to investigate the coexistence issues for SUNs and WLANs in SG. This article aims to propose a dynamic spectrum sharing (DSS) coexistence scheme working with cognitive radio techniques, including the designs of network topology and channel detection/allocation schemes. We also establish Markov chain models based on channel state transitions for the proposed schemes, which are used to analyze network performance from the viewpoint of SUN services. The analytical results show that a channel reservation strategy is critical to ensure satisfactory performance of SUNs.