The electrical power industry provides the production and delivery of electrical power (electrical energy), often known as power, or electricity, in sufficient quantities to areas that need electricity through a grid. Many households and businesses need access to electricity, especially in developed nations, the demand being scarcer in developing nations. Demand for electricity is derived from the requirement for electricity in order to operate domestic appliances, office equipment, industrial machinery and provide sufficient energy for both domestic and commercial lighting, heating, cooking and industrial processes. Because of this aspect of the industry, it is viewed as a public utility as infrastructure.
The electrical power industry is commonly split up into four processes. These are electricity generation such as a power station, electric power transmission, electricity distribution and electricity retailing. In many countries, electric power companies own the whole infrastructure from generating stations to transmission and distribution infrastructure. For this reason, electric power is viewed as a natural monopoly. The industry is generally heavily regulated, often with price controls and is frequently government-owned and operated. The nature and state of market reform of the electricity market often determines whether electric companies are able to be involved in just some of these processes without having to own the entire infrastructure, or citizens choose which components of infrastructure to patronise. In countries where electricity provision is deregulated, end-users of electricity may opt for more costly green electricity.
All forms of electricity generation have positive and negative aspects. Technology will probably eventually declare the most preferred forms, but in a market economy, the options with less overall costs generally will be chosen above other sources. It is not clear yet which form can best meet the necessary energy demands or which process can best solve the demand for electricity. There are indications that renewable energy and distributed generation are becoming more viable in economic terms. A diverse mix of generation sources reduces the risks of electricity price spikes.
Although electricity had been known to be produced as a result of the chemical reactions that take place in an electrolytic cell since Alessandro Volta developed the voltaic pile in 1800, its production by this means was, and still is, expensive. In 1831, Michael Faraday devised a machine that generated electricity from rotary motion, but it took almost 50 years for the technology to reach a commercially viable stage. In 1878, in the US, Thomas Edison developed and sold a commercially viable replacement for gas lighting and heating using locally generated and distributed direct current electricity.
The world's first public electricity supply was provided in late 1881, when the streets of the Surrey town of Godalming in the UK were lit with electric light. This system was powered from a water wheel on the River Wey, which drove a Siemens alternator that supplied a number of arc lamps within the town. This supply scheme also provided electricity to a number of shops and premises.
Coinciding with this, in early 1882, Edison opened the world’s first steam-powered electricity generating station at Holborn Viaduct in London, where he had entered into an agreement with the City Corporation for a period of three months to provide street lighting. In time he had supplied a number of local consumers with electric light. The method of supply was direct current (DC).
It was later on in the year in September 1882 that Edison opened the Pearl Street Power Station in New York City and again it was a DC supply. It was for this reason that the generation was close to or on the consumer's premises as Edison had no means of voltage conversion. The voltage chosen for any electrical system is a compromise. Increasing the voltage reduces the current and therefore reduces resistive losses in the cable. Unfortunately it increases the danger from direct contact and also increases the required insulation thickness. Furthermore some load types were difficult or impossible to make for higher voltages.
Additionally, Robert Hammond, in December 1881, demonstrated the new electric light in the Sussex town of Brighton in the UK for a trial period. The ensuing success of this installation enabled Hammond to put this venture on both a commercial and legal footing, as a number of shop owners wanted to use the new electric light. Thus the Hammond Electricity Supply Co. was launched. Whilst the Godalming and Holborn Viaduct Schemes closed after a few years the Brighton Scheme continued on, and supply was in 1887 made available for 24 hours per day.
Nikola Tesla, who had worked for Edison for a short time and appreciated the electrical theory in a way that Edison did not, devised an alternative system using alternating current. Tesla realised that while doubling the voltage would halve the current and reduce losses by three-quarters, only an alternating current system allowed the transformation between voltage levels in different parts of the system. This allowed efficient high voltages for distribution where their risks could easily be mitigated by good design while still allowing fairly safe voltages to be supplied to the loads. He went on to develop the overall theory of his system, devising theoretical and practical alternatives for all of the direct current appliances then in use, and patented his novel ideas in 1887, in thirty separate patents.
In 1888, Tesla's work came to the attention of George Westinghouse, who owned a patent for a type of transformer that could deal with high power and was easy to make. Westinghouse had been operating an alternating current lighting plant in Great Barrington, Massachusetts since 1886. While Westinghouse's system could use Edison's lights and had heaters, it did not have a motor. With Tesla and his patents, Westinghouse built a power system for a gold mine in Telluride, Colorado in 1891, with a water driven 100 horsepower (75 kW) generator powering a 100 horsepower (75 kW) motor over a 2.5-mile (4 km) power line. Almarian Decker finally invented the whole system of three-phase power generating in Redlands, California in 1893. Then, in a deal with General Electric, which Edison had been forced to sell, Westinghouse's company went on to construct a power station at the Niagara Falls, with three 5,000 horsepower (3.7 MW) Tesla generators supplying electricity to an aluminium smelter at Niagara and the town of Buffalo 22 miles (35 km) away. The Niagara power station commenced operation on April 20 1895.
Tesla's alternating current system remains the primary means of delivering electrical energy to consumers throughout the world. While high-voltage direct current (HVDC) is increasingly being used to transmit large quantities of electricity over long distances or to connect adjacent asynchronous power systems, the bulk of electricity generation, transmission, distribution and retailing takes place using alternating current.