Abstract-In this paper, we propose device-to-device (D2D) communication over dedicated cellular resources, i.e., D2D-overlay mode, as a key enabling technology for reliable information exchange in power distribution grids. Motivated by the stringent requirements of substation automation traffic, we jointly address two fundamental issues: i) the seamless transition from cellular (i.e., communication via the base station) to D2D-overlay mode for smart grid entities upon detection of a surge of channel access attempts, and ii) the efficient orthogonal resource partition for cellular and D2D links. An analytical framework capturing the event-driven nature of substation automation traffic and both phases of uplink communication is introduced and the joint problem of mode selection and resource allocation (MSRA) is formulated as a sum-rate maximization problem. A dynamic heuristic MSRA mechanism is then proposed that adaptively allocates uplink resources for D2D links to prevent spectrum under-utilization and guarantees a minimum rate requirement for cellular users. The performance of our proposed scheme is evaluated through extensive simulations under different performance criteria and numerical results demonstrate the rate gains of a dynamic switch between D2D-overlay and conventional cellular mode for substation automation traffic.