Overview of the Electric Grid


Electric power is essential to modern society. Economic prosperity, national security, and public health and safety cannot be achieved without it. Communities that lack electric power, even for short periods, have trouble meeting basic needs for food, shelter, water, law, and order.

In 1940, 10% of energy consumption in America was used to produce electricity. In 1970, that fraction was 25%. Today it is 40%, showing electricity’s growing importance as a source of energy supply. Electricity has the unique ability to convey both energy and information, thus yielding an increasing array of products, services, and applications in factories, offices, homes, campuses, complexes, and communities.

The economic significance of electricity is staggering. It is one of the largest and most capital-intensive sectors of the economy. Total asset value is estimated to exceed $800 billion, with approximately 60% invested in power plants, 30% in distribution facilities, and 10% in transmission facilities.

Annual electric revenues – the Nation’s “electric bill” – are about $247 billion, paid by America’s 131 million electricity customers, which includes nearly every business and household. The average price paid is about 7 cents per kilowatt-hour, although prices vary from state to state depending on local regulations, generation costs, and customer mix.

There are more than 3,100 electric utilities:

* 213 stockholder-owned utilities provide power to about 73% of the customers
* 2,000 public utilities run by state and local government agencies provide power to about 15% of the customers
* 930 electric cooperatives provide power to about 12% of the customers

Additionally, there are nearly 2,100 non-utility power producers, including both independent power companies and customer-owned distributed energy facilities.

The bulk power system consists of three independent networks: Eastern Interconnection, Western Interconnection, and the Texas Interconnection. These networks incorporate international connections with Canada and Mexico. Overall reliability planning and coordination is provided by the North American Electric Reliability Council, a voluntary organization formed in 1968 in response to the Northeast blackout of 1965.
Electric Generation

America operates a fleet of about 10,000 power plants. The average thermal efficiency is around 33%. Efficiency has not changed much since 1960 because of slow turnover of the capital stock and the inherent inefficiency of central power generation that cannot recycle heat. Power plants are generally long-lived investments; the majority of the existing capacity is 30 or more years old.

The roughly 5,600 distributed energy facilities typically combine heat and power generation and achieve efficiencies of 65% to 90%. Distributed energy facilities accounted for about 6% of U.S. power capacity in 2001.

The profile of the electric power generation industry is changing rapidly, however. A shift in ownership is occurring from regulated utilities to competitive suppliers. The share of installed capacity provided by competitive suppliers has increased from about 10 percent in 1997 to about 35 percent today. Recent data suggest this trend is slowing.

Also, cleaner and more fuel-efficient power generation technologies are becoming available. These include combined cycle combustion turbines, wind energy systems, advanced nuclear power plant designs, clean coal power systems, and distributed energy technologies such as photovoltaics and combined heat and power systems.

Because of the expected near-term retirement of many aging plants in the existing fleet, growth of the information economy, economic growth, and the forecasted growth in electricity demand, America faces a significant need for new electric power generation. In this transition, local market conditions will dictate fuel and technology choices for investment decisions, capital markets will provide the financing, and Federal and state policies will affect siting and permitting. It is an enormous challenge that will require a large commitment of technological, financial, and human resources in the years ahead.
Electric Transmission

Even with adequate electric generation, bottlenecks in the transmission system interfere with the reliable, efficient, and affordable delivery of electric power.

America operates about 157,000 miles of high voltage (>230kV) electric transmission lines. While electricity demand increased by about 25% since 1990, construction of transmission facilities decreased about 30%. In fact, annual investment in new transmission facilities has declined over the last 25 years. The result is grid congestion, which can mean higher electricity costs because customers cannot get access to lower-cost electricity supplies, and because of higher line losses. Transmission and distribution losses are related to how heavily the system is loaded. U.S.-wide transmission and distribution losses were about 5% in 1970, and grew to 9.5% in 2001, due to heavier utilization and more frequent congestion. Congested transmission paths, or “bottlenecks,” now affect many parts of the grid across the country. In addition, it is estimated that power outages and power quality disturbances cost the economy from $25 to $180 billion annually. These costs could soar if outages or disturbances become more frequent or longer in duration. There are also operational problems in maintaining voltage levels.

America’s electric transmission problems are also affected by the new structure of the increasingly competitive bulk power market. Based on a sample of the nation’s transmission grid, the number of transactions have been increasing substantially recently. For example, annual transactions on the Tennessee Valley Authority’s transmission system numbered less than 20,000 in 1996. They exceed 250,000 today, a volume the system was not originally designed to handle. Actions by transmission operators to curtail transactions for economic reasons and to maintain reliability (according to procedures developed by the North American Electric Reliability Council) grew from about 300 in 1998 to over 1,000 in 2000.

Additionally, significant impediments interfere with solving the country’s electric transmission problems. These include: opposition and litigation against the construction of new facilities, uncertainty about cost recovery for investors, confusion over whose responsibility it is to build, and jurisdiction and government agency overlap for siting and permitting. Competing land uses, especially in urban areas, leads to opposition and litigation against new construction facilities.
Electric Distribution

The “handoff” from electric transmission to electric distribution usually occurs at the substation. America’s fleet of substations takes power from transmission-level voltages and distributes it to hundreds of thousands of miles of lower voltage distribution lines. The distribution system is generally considered to begin at the substation and end at the customer’s meter. Beyond the meter lies the customer’s electric system, which consists of wires, equipment, and appliances – an increased number of which involve computerized controls and electronics which ultimately operate on direct current.

The distribution system supports retail electricity markets. State or local government agencies are heavily involved in the electric distribution business, regulating prices and rates-of-return for shareholder-owned distribution utilities. Also, in 2,000 localities across the country, state and local government agencies operate their own distribution utilities, as do over 900 rural electric cooperative utilities. Virtually all of the distribution systems operate as franchise monopolies as established by state law.

The greatest challenge facing electric distribution is responding to rapidly changing customer needs for electricity. Increased use of information technologies, computers, and consumer electronics has lowered the tolerance for outages, fluctuations in voltages and frequency levels, and other power quality disturbances. In addition, rising interest in distributed generation and electric storage devices is adding new requirements for interconnection and safe operation of electric distribution systems.

Finally, a wide array of information technology is entering the market that could revolutionize the electric distribution business. For example, having the ability to monitor and influence each customer’s usage, in real time, could enable distribution operators to better match supply with demand, thus boosting asset utilization, improving service quality, and lowering costs. More complete integration of distributed energy and demand-side management resources into the distribution system could enable customers to implement their own tailored solutions, thus boosting profitability and quality of life.

North America’s world-class electric system is facing several serious challenges. Major questions exist about its ability to continue providing citizens and businesses with relatively clean, reliable, and affordable energy services. The recent downturn in the economy masks areas of grid congestion in numerous locations across America. These bottlenecks could interfere with regional economic development. The “information economy” requires a reliable, secure, and affordable electric system to grow and prosper. Unless substantial amounts of capital are invested over the next several decades in new generation, transmission, and distribution facilities, service quality will degrade and costs will go up. These investments will involve new technologies that improve the existing electric system and possibly advanced technologies that could revolutionize the electric grid.sites.energetics.com

Want to keep up to date with all our latest news and information?
Subscribe to receive FREE TIPS, all new Radio/Podcast Episodes and Videos that will help you start Dropping your Energy Bill!
Enter your email below to join a world of new knowledge and savings!