The Grid: Electricity Transmission, Industry, and Markets
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Before You Watch Our Lecture
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Our Lecture
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Additional Resources
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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.
Source: NEED.org Electricity (2019)
World
Largest Electricity Consumers
China 31% 🇨🇳
US 16% 🇺🇸
Electricity Demand
Increase:
⬆2.3%
(2016-2021)
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
US
Largest Electricity Consumer
Texas 11%
Electricity Demand
Increase:
⬆1.1%
(2016-2021)
Retail Cost
National Average
11 cents/kWh
Most Expensive
Hawaii 30 cents/kWh
Least Expensive
Idaho 8 cents/kWh
Least Reliable Grid
Louisiana
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)
Drivers
- 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
Barriers
- 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.
Essential
- Electricity. NEED.org. 2023. (7 pages)
An excellent introduction to and overview of electricity, with a US focus. - How Electricity Gets to You. Wendover Productions. December 2, 2021. (17 min)
A fun look at how the electricity we use is generated and transmitted. - The ‘Duck Curve’ Is Solar Energy’s Greatest Challenge. Vox. May 9, 2018. (4 min)
Explains how the introduction of renewable electricity sources has changed electric load curves, creating challenges for solar energy growth. - Math Review Sheet - Electrical Resistance and Losses. Stanford Understand Energy. 2018. (2 pages)
Discusses the dynamics of losses related to electrical resistance of conductors that occur in both transmission
lines and transformers. - Why Wind and Solar Power Are Such a Challenge for Energy Grids. Vox. June 19, 2015. (4 pages)
Examines the question of how much wind and solar the US can integrate into its energy system given current energy infrastructure and institutions.
Optional and Useful
- Electricity Explained: How Electricity Is Delivered to Consumers. EIA. October 11, 2019. (2 pages)
A concise overview of the US electric grid system. - Why Are Birds Not Electrocuted on Power Lines?. NakedScientists. January 6, 2011. (4 min)
A simple explanation of why birds are able to sit on high-voltage wires. - Texas’s Power Disaster Is a Warning Sign for the US. Vox. March 4, 2021. (7 min)
Why Texas's February 2021 power failure serves as a warning of what the rest of the US will face as extreme weather becomes more frequent. - Why the US Isn’t Ready for Clean Energy. Vox. September 21, 2021. (7 min)
Why the US needs to start building more high-voltage transmission projects now to accommodate wind and solar.
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.
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.
Additional Resources About
The Grid: Electricity Transmission, Industry, and Markets
Stanford University
- Energy Modeling Forum
- John Weyant - Integrated modeling, energy markets
- Program on Energy and Sustainable Development
- Frank Wolak - Electric grid, energy market design
- Mark Thurber - Energy markets
- Electrical Engineering Department
- Stephen Boyd - Electric grid
Fast Facts Sources
Largest Electricity Consumers: World 2021 (International Electricity Net Consumption, EIA), U.S. 2021 (State Electricity Profiles, EIA).
Electricity Use by Sector: World 2019 (World Electricity Final Consumption by Sector, IEA), U.S. 2022 (Monthly Energy Review, June 2023, EIA, Table 7.6 Electricity End Use).
Electricity Demand: World 2016-2021 (International Electricity Net Consumption, EIA), U.S. 2016-2021 (Monthly Energy Review, June 2023, EIA, Table 7.6 Electricity End Use).
Grid Reliability: World 2014 (Electric Power Transmission and Distribution Losses, OECD/IEA), U.S. 2021 (Distribution System Reliability, EIA, Table 11.3 Reliability Metrics Using Any Method of U.S. Distribution System by State).
Retail Cost: U.S. 2021 (State Electricity Profiles, EIA).
More details available on request.
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