Combined with SuperHuman+Ironman+Hardcore mods instant grenades it's not very OP. Soldier with zero activated grenades transforms into kamikaze and very dangerous to your soldiers around. Mistake can cost you an additional casualties without any way to revert action. Without activation you should spend a lot of TU, so you can't toss a lot of grenades by one soldier. Grenadier mostly useless when you assault inside in UFO or enemy base.
Smoke grenades will be a usefulness item that prevents you to lose your soldiers so easily in hardcore playing style until you meet a melee based units with a lot of TU like chryssalid, so it's also not a panacea anyway.
I have to admit they are somewhat cheaty.
Game don't has a special AI behavior in order to use an instant grenades as advantage for aliens, like increased chance to toss a deadly alien grenade instead of shooting especially on reaction-fire.