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What Is The Grid? A Beginner’s Guide To The Electric Grid

The words "What Is The Grid?" over an image of the United States with a conceptualized version of the electricity grid, symbolizing what the electric grid is, and how the modern energy grid creates and distributes power.
PublishedAugust 10, 2022
UpdatedMay 7, 2024
AuthorCory O'Brien HeadshotCory O'BrienSenior Director - Growth MarketingEditorRyan Barnett HeadshotRyan BarnettSVP, Policy & New Market Development
In this article
What Is The Grid?
How The Power Grid Works
Off-Grid Power and Microgrids
The Grid and Solar Energy
Want To Switch From Grid Power To Solar Energy?

Most people have an idea of what “the grid” is, but often only in a very general sense. While it can be easy to identify grid components such as power lines and electrical equipment, understanding the inner workings of the electric grid may seem mysterious when trying to envision a national network of energy generators, wiring, homes, and buildings.

To put it into simple terms, let’s explore what the grid really is, how the electric grid works, why the grid is used, how the modern electricity grid functions to create and distribute power across North America, and how home solar integrates into the grid.

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My electric bill is $290/mo

What Is The Grid?

The grid is a massive, interconnected network of electrical transmission equipment that creates and supplies new electricity to end consumers. Also known as the “electric grid”, “electrical grid”, “electricity grid”, or “power grid”, the national grid supplies electricity to users in homes, commercial buildings, and large industrial operations alike.

Where Is The Grid?

Take a look around… the grid is everywhere!

Here in the United States, the North American power transmission grid stretches across the entire country, from the shipping docks in Alaska to the last bar in the Florida Keys, with millions of interconnection points in between.

As the sum of many different individual parts, the national grid is made up of several regional grids that have been interconnected to form a network between populated areas of the United States, Canada, and parts of Mexico.

Why Do We Need The Electrical Grid?

If you’ve ever plugged something into an electrical outlet at home, then you know exactly why we need the electrical grid. From cell phones to kitchen appliances and even HVAC devices, electricity is a necessity of modern life. Today, we use the energy grid to power nearly every aspect of our society, including transportation, manufacturing, entertainment, and more.

That’s why we need the electrical grid – so that access to electricity is safe and available for everyone. While it is possible to live off of the grid and generate your own electricity, the national grid seamlessly connects energy-generating power plants with the people and organizations that need it to electrify their lives. Over a century in the making, the North American electricity grid has grown and expanded to millions of users from its New York City origins.

Who Manages and Maintains The Electricity Grid?

Serving over 100 million customers, the national power grid is managed and maintained by over 500 private and public entities across the United States. While the federal government owns and operates many public facilities, the majority of the power that is generated and disturbed through the electrical grid is owned by privately-owned, investor-led, or cooperative utilities.

To keep the grid running efficiently, regional transmission organizations (RTOs) and independent system operators (ISOs) are responsible for overseeing electrical activity, developing plans, and implementing emergency procedures. While the federal government regulates interstate electricity distribution systems through the Federal Energy Regulatory Commission, state and local grid operations are typically controlled by public utility commissions or electricity reliability companies.

How The Power Grid Works

Despite all of its complexities, the essential operations of the energy grid can be broken down into three simple steps: generation, transmission, and distribution. While the shape of the modern power grid is being transformed by new sources of energy, the primary function of an interconnected grid to share resources between connected electricity users will always remain the same.

Electricity Generation To The Grid

For electricity to enter the grid, it must first be generated by a source of fuel. In the 2020s, usable power is created in many different forms at various capacities across the globe.

According to the US Energy Information Administration's short-term energy outlook, the annual electricity generation in the United States in 2021 consisted of approximately 38% natural gas, 22% coal, 14% renewable energy sources (wind, solar, and biomass), 19% nuclear, and 6% hydropower.

A chart showing the U.S. Electricity Generation By Source for All Sectors from 2012 through 2023, comparing the percent share of natural gas, coal, nuclear, renewables like solar power and wind, hydropower, and other sources.

Power Plants: Power plants create what is called “large-scale” or “utility-scale” volumes of electricity. Although your mind may be automatically imagining large concrete towers emitting dark gray smog, power plants come in many shapes and sizes.

Beyond the coal-fired and natural gas-fired facilities commonly associated with the term “power plant”, massive amounts of electricity are also generated daily with hydroelectric dams, in multi-megawatt solar farms, and over rolling hills dotted with wind turbines.

Distributed Generation: Distributed or dispersed electricity generation, also known as “small-scale” power production, is a minor but growing sector of the grid’s energy portfolio. Instead of large power plants, the goal of distributed electricity production is to use many smaller points of generation to create and use new power as close to its original source as possible.

Today, it is now easier than ever for homeowners and businesses to generate their own electricity that can also be safely fed into the grid through solar panels and utility interconnection. In its energy outlook, the EIA predicts that residential rooftop solar will account for nearly two-thirds of the growing distributed electrical power generation capacity over the next two years.

Electricity Transmission Across The Grid

After grid power is produced, it must then be delivered to wherever it is needed. Here, new batches of bulk energy are transmitted to smaller substations through transformers that modify the electricity so it can travel over long distances and at high voltages. These transmission lines are the backbone of the North American electric grid.

Transmission lines are very thick and typically supported by large metal towers. Critically, they are bi-directional, which allows for the energy to be transported back and forth. While they are easy to spot when installed overhead, many electrical transmission lines are also safely buried underground.

Electricity Distribution From The Grid

Finally, after reaching a local substation and passing through a switch tower, grid energy is then distributed to end users through smaller electrical power lines. At lower voltages, and with thinner sizes compared to transmission lines, distribution lines are more likely to be supported by wooden poles and can only move electricity in one direction, away from a central location.

In the final stage of the energy supply chain, the electricity distributed to a home or business is recorded by the property’s electrical meter. At this point, the electricity is sold to the end consumer at a residential or commercial rate by the local power company.

See how much you can save by going solar with Palmetto

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Off-Grid Power and Microgrids

Of course, electricity can be created and used outside of the national power grid. From small, handheld devices to generator-backed facilities, people can also power their lives “off of the grid” with battery storage and ongoing access to new power.

At scale, small communities, medical campuses, and other organizations are now creating what are known as “microgrids” which can create, store, and continuously use electricity independently of the national grid. Designed to be self-sufficient, microgrids are interconnected with the electrical grid, but able to disconnect from neighboring infrastructure to remain online in the event of an electrical outage nearby.

As “hybrid” grid and off-grid systems are typically installed for energy resilience, microgrids can be used to support singular households or entire neighborhoods when local grid power is unavailable throughout power outages and emergency scenarios. Backed by large electrical storage batteries, microgrids require disputed power generation to function, such as wind or solar energy.

The Grid and Solar Energy

Understanding the basic relationship of how solar and the grid work together is critical when installing a personal energy system. While some people fear that widespread adoption of rooftop solar could damage the grid, solar power has been proven to reduce grid stress, smooth energy demand curves, and lower the cost of upgrades and maintenance associated with new power generation and transmission systems. Together, solar energy and the grid are supporting the smart grid of the future that we need to respond to quickly changing electric demand.

If I Go Solar, Will I Stay Connected To The Grid?

Yes, if you purchase or lease a solar panel and inverter system and install it on your property, you will stay connected to the power grid. By doing so, home and property owners can install a solar energy system to generate electricity throughout the day, and continuously have access to reliable grid power at night or whenever new energy production is unavailable.

Net Metering: Available in most parts of the country, net metering (or net energy metering) allows solar panel owners to generate bill credits for the excess electricity produced by their system and sent into the utility grid. With this, home and business owners do not necessarily need to invest in energy storage, as they are compensated for some or all of their personal power production.

When connected to the grid through a net metering program, most solar energy systems are designed to produce approximately the same amount of electricity that a property will consume that year. As such, the seasonality of solar energy production and daily electricity habits can be balanced in a way that a home will create about the same amount of power it consumes, only paying for small bits of grid power when necessary.

Can I Go Off The Grid With Solar Panels?

Yes, by adding a battery backup system, it is possible to go off of the grid with solar panels. (However, this is not very common for the typical solar-powered home.) Essentially establishing your own personal microgrid, solar panel, and electricity storage systems help fortify access to ongoing energy with lower dependence on grid-supplied power. Residential and commercial solar batteries typically use lithium-based chemistry to efficiently charge and discharge electrical power.

Time of Use Metering: Battery storage can significantly help solar energy users avoid any Time of Use (TOU) metering rates, in which utilities supply energy at higher costs due to periods of increased energy demand. TOU rates are typically scheduled in the morning and afternoon, and can apply to ongoing schedules as well as temporary periods of increased local energy consumption.

For instance, if a storm is keeping people at home and also limiting solar power production, using the energy stored within a battery can prevent a property owner from purchasing high-demand, high-price grid electricity. Likewise, TOU rates often extend into the early evening, when the daily solar potential has already peaked.

How Much Of The Grid Is Solar?

Despite the rapid acceleration of the industry, solar power still only accounts for just over 3% of the United States' power generation in the early 2020s. However, just as the sun reliably rises and sets each and every day, the amount of grid energy supplied by solar resources continues to increase.

As a relatively inexpensive way to generate decades of electricity, solar panel installations accounted for 44% of new U.S. electric generation capacity as of halfway through 2022. Easily scalable for residential, commercial, and industrial use, solar can be delivered anywhere in the world where the sun shines, for electricity users of every capacity.

Want To Switch From Grid Power To Solar Energy?

Palmetto customers know that going solar can save homeowners money on long-term grid electricity expenses. Find out how much you can save with your personal rooftop energy system when you use our Free Solar Estimation Tool to instantly see your potential solar savings.

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My electric bill is $290/mo
About the AuthorCory O'Brien HeadshotCory O'BrienSenior Director - Growth Marketing

Cory brings over 8 years of solar expertise to Palmetto, and enjoys sharing that knowledge with others looking to improve their carbon footprint. A dog lover residing in Asheville, NC with his wife, Cory graduated from UCSB. If you run into him, ask him about the company he founded to rate and review beer!

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