In a 2015 publication, the Institute for Energy Research argues that “affordable energy allows the economy to become more efficient, lowers the cost of goods, and saves us money.” The authors point out that easy access to energy improves our productivity and affords us additional free time that we otherwise would not have. This free time can then be used to further increase our productivity or be used for relaxing and spending time with friends and family, or for hobbies or other activities that generally make our lives more enjoyable.
This idea is key to understanding the value of easily accessible energy to our lives. Access to on-demand energy enables us to automate tasks that previously required significant manual effort, such as keeping warm, growing and harvesting food and traveling and transporting goods, among other things. With this perspective in mind, it’s clear that, overall, access to energy improves human well-being and enhances our quality of life.
But public policy that guides the production, distribution and use of energy is a complex and complicated matter. The goal of this primer is to make it clear how we obtain the energy that powers our lives in Michigan. This report will cover how electricity gets generated, distributed, delivered to millions of homes and businesses, and, of course, paid for by taxpayers and consumers.
Reliable and affordable electricity powers, directly or indirectly, almost everything we do on a daily basis. In fact, it is difficult to overstate just how important it is to our modern lifestyles. Access to on-demand, reliable electricity has become such an integral part of our lives that we rarely give it much thought — much like the automatic systems that keep our lungs filled with air or the blood coursing through our veins.
Understanding how the essential energy we use to power our lives is created and transported requires some basic knowledge about how Michigan’s electricity system works. Key parts of this system include the regulatory frameworks, electricity generation, the infrastructure used to distribute electricity to our homes and businesses, as well as the mix of public and private organizations that carry out these ends.
Large and dynamic, Michigan’s electricity system is in an almost constant state of change and evolution. Old power plants are taken offline and new ones are built. New generation from natural gas plants and renewable energy installations are regularly coming online. Consumers are also constantly changing their consumption patterns — for their own personal reasons, as a result of changing prices, or because of a government mandate or law. We swap outdated appliances and machines for newer, more energy efficient ones. More efficient generation and appliances often lead to lower prices, which can lead to increased overall demand. And we are using more and more electricity to charge hybrid and electric cars, and to power the many connected devices, computers, flat screen TVs, and mobile technologies we have in and around our homes and businesses.
Michigan’s electricity system has been organized into three distinct phases, largely as a result of various federal and state laws. This report will address each phase in turn. They are:
- Generation: This is how electricity is created and primarily involves combusting coal or natural gas or splitting uranium atoms to make heat and steam that drives large turbines and generators. Electricity is also generated by capturing geothermal energy and energy from the sun, wind or stored water.
- Transmission: This is how electricity is transferred from where it is produced to where it can be made ready for distribution to “end users,” namely homes and businesses.
- Distribution: This is the process of transporting electricity directly to residential or commercial customers for their individual use.
A clear description of how these phases work will help educate Michigan residents about the state’s electricity system and hopefully make them better consumers and more informed voters. Reliable and affordable electricity is easy to take for granted, but its impact on our quality of life is immense. Knowing how the system operates is the first step toward fully appreciating the benefits we derive from it and the first step we take to help make it even better.
Figure 1. Electricity Transmission System
Electricity flows from power stations to homes and businesses through a network of substations and transmission lines.
- Electricity is directed from the power plant to a substation en route to its destination.
- The electricity is directed from the substation to the transmission network, which consists of heavy cables strung along towers.
- The electricity is directed from the substation to a distribution line, which delivers the power to home or business.