Electricity Basics

Electricity is produced by a generator or power plant that might burn coal, capture the sun’s energy through solar panels, convert moving air into electricity through windmills or transform the movement of water into energy as hydroelectric power. PJM has a diverse generation fuel mix that includes nuclear power, natural gas, fossil fuels and renewable generation such as wind or solar.

Generation is interconnected to the transmission system, the wires that transport large amounts of (high voltage level) electricity.

Transmission is the “interstate highway” of electricity distribution. Transmission lines move power at a high voltage level – a level that is too much to be delivered directly to a home or business. In most cases, the power moving through the transmission system must be reduced to lower voltage levels by electricity distributors (e.g., substations) before it can be delivered to a residence or business.

If transmission is the “interstate highway” of the grid, distribution is like a city street. Power traveling on the distribution system is at a voltage level that can be delivered directly to a home or business. These are the lines many people see along their residential streets. Distribution is the power that turns on and runs the appliances we use every day to keep our food fresh, our clothes clean and our homes either cool or warm.

Keeping with the highway metaphor, end-use or retail customers (homes and businesses) are the last stop on the route for power distribution. Grid operators such as PJM make sure that there is enough power on the grid to meet customer demand at any given moment on any day – PJM coordinates wholesale electricity markets and directs the operation of the region’s grid that keeps the lights on for 61 million people.

In a wholesale transaction, a large volume of product is sold to an intermediary who then sells it to a customer. In this case, electricity is the product, the intermediary is, for example, a utility, and the customer is a home or business. PJM, as a regional grid operator, administers this entire wholesale process for electricity in the PJM operating region.

In a retail transaction, a product is sold directly to the customer. In the energy industry, retail transactions involve the final sale of power to end-use (retail) customers including residential homes, commercial properties and manufacturing plants.