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The Understand Energy Learning Hub is a cross-campus effort of the Precourt Institute for Energy.

The Grid: Electricity Transmission, Industry, and Markets

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Fast Facts About
The Grid: Electricity Transmission, Industry, and Markets

Principal Uses for Electricity: Manufacturing, Heating, Cooling, Lighting

The grid delivers electricity from generation points to demand centers. Supply and demand of electricity must be balanced in real-time to ensure system stability and reliability. A reliable grid can help prevent significant economic losses resulting from power disruptions, especially as electricity use is more widespread. In recent years the electricity grid has evolved from a centralized, one-way system to a more decentralized, flexible, two-way system. This has created challenges for electric grid reliability and increased the need for flexibility.

The electric grid is a natural monopoly because it is most efficient for one operator to provide the service. To ensure consumers are not overcharged, grid operators are overseen by a regulator. In the U.S. electricity markets strive to efficiently match supply and demand through the sale and purchase of electricity between generators, consumers, and intermediaries. The value of electricity depends on cost, availability, location, dispatchability, and flexibility.

For more information about electricity, visit our Electricity Generation and A Decarbonized Electric Power Sector pages.

The Grid. Power plant generates electricity. Transformer steps up voltage for transmission. Transmission lines carry electricity long distances. Step-down transformer reduces voltage (substation). Distribution lines carry electricity to houses. Neighborhood transformer on pole steps down voltage before entering houses and businesses where demand is.

Source: Electricity (2019)


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Largest Electricity Consumers

China 31% 🇨🇳
US 16% 🇺🇸

Electricity Demand


Least Reliable Grids

Togo 71% 🇹🇬
Libya 70% 🇱🇾
of electricity output is lost in transmission, distribution, and pilferage

Most Reliable Grids

5 countries* <3%
of electricity output is lost in transmission and distribution
*Singapore, Trinidad and Tobago, Slovak Republic, Iceland, Israel

In the US, 6% of electricity output is lost in transmission and distribution


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Largest Electricity Consumer

Texas 11%

Electricity Demand


Retail Cost

National Average 
11 cents/kWh
Most Expensive
Hawaii 30 cents/kWh
Least Expensive
Idaho 8 cents/kWh

Least Reliable Grid

3 days/year with electric interruptions
(average duration of 24 hours per interruption)

Most Reliable Grid

Washington, D.C.
<1 day/year with electric interruptions
(average duration of ~2 hours per interruption)


  • High-quality energy currency: flexible and relatively efficient for end uses
  • Important for modern quality of life, reduced indoor air pollution, and human health
  • Increase in access worldwide allows for improved education and economic activity
  • Growing demand from economic and population growth
  • Increase in electrification due to demand for decarbonization
  • As demand increases there is a need to invest in modernization of old, outdated grid infrastructure
  • Integration of intermittent renewable energy sources like wind and solar and accelerating coal and nuclear retirements requires improvements in grid management
  • Growth in distributed generation (e.g., residential rooftop solar panels) can reduce the need for grid updates by co-locating supply and demand


  • Electricity is difficult and expensive to store; must match supply and demand in real time
  • Expansion and upgrading of the grid is capital intensive and expensive
  • Grid management requires coordination among grid operators, utilities, and policymakers
  • Opposition due to land use impacts from transmission and distribution (NIMBY/BANANA*)
  • Distributed generation, particularly rooftop solar, is a challenge for grid reliability
  • Fire risk from transmission lines, especially in remote areas
  • Extreme weather events such as hurricanes, storms, and wildfires cause more grid disruptions as they become more frequent due to climate change

*NIMBY - not in my backyard; BANANA - build absolutely nothing anywhere near anything

Before You Watch Our Lecture on
The Grid: Electricity Transmission, Industry, and Markets

We assign videos and readings to our Stanford students as pre-work for each lecture to help contextualize the lecture content. We strongly encourage you to review the Essential videos and readings below before watching our lecture on The Grid: Electricity Transmission, Industry, and Markets. Include selections from the Optional and Useful list based on your interests and available time.


Optional and Useful

Our Lecture on
The Grid: Electricity Transmission, Industry, and Markets

This is our Stanford University Understand Energy course lecture on the electricity grid. We strongly encourage you to watch the full lecture to understand the role of the grid in our energy system and how electricity industry and markets work. For a complete learning experience, we also encourage you to watch / read the Essential videos and readings we assign to our students before watching the lecture.

Kirsten Stasio

Presented by: Kirsten Stasio, Adjunct Lecturer, Civil and Environmental Engineering, Stanford University; CEO, Nevada Clean Energy Fund (NCEF)
Recorded on: April 20, 2023   Duration: 76 minutes

Table of Contents

(Clicking on a timestamp will take you to YouTube.)
00:00 Introduction
18:41 What is Electricity?
26:31 How is Electricity Transmitted?
37:24 How is the Electricity Industry Structured?
58:42 How is Reliability Maintained on the Grid?
1:02:44 How is Electricity Bought and Sold?

Lecture slides available upon request.

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Additional Resources About
The Grid: Electricity Transmission, Industry, and Markets

Government and International Organizations