A Tale of Two Grids

Originally published on Feb 2, 2023

The power grid is the largest, most complex, and most important machine ever constructed. It is the network that enables everything we have in modern society, and yet we are scarcely aware of it until it stops working. It is quite literally the platform that our lives are built on. The United States power grid alone is of a scale that is hard to fathom (year-end 2025):

With its millions of interconnected parts, the power grid is mind-bogglingly complex, and yet in the United States we’ve managed to turn it into a mostly reliable system with a few notable exceptions. But that reliability didn’t come about by accident. It came from many many decades of intense engineering, hard learned lessons, and like it or not, government regulation.

Early Days

In the early days of electric power production, the equipment that needed electricity had to be at most a few thousand feet from the generator producing it. But it was clear from even the earliest days when the first power plant in the U.S. was built, the Pearl Street Station in New York City, that centralized production of electricity would be the real future of the electricity industry.

But as electric production ramped up, more and more independent power companies arrived on the scene. Virtually all of these early electric companies were vertically integrated, building all of the infrastructure needed to get power from their plant to their customers. These companies usually had a single plant, and served power to a few hundred or few thousand customers in a very small area.

Massive Consolidation

As more and more of these companies appeared, it quickly became apparent that there were economies of scale to be achieved. Building and maintaining electrical infrastructure is expensive, and so as with any industry faced with high capital outlays, consolidation began.

Within the power industry though, the benefits of consolidation weren’t just financial. In addition to allowing them to save money due to reduced infrastructure costs, power companies quickly realized that they could more efficiently use their power plants by networking them together.

For example, if one power company had a hydroelectric power plant, and another had a coal power plant, the coal power plant could provide supplemental power when the river that fed the hydroelectric power plant was low. And the hydroelectric plant could provide cheaper power when the river was high. Or if one power plant had to be taken offline for maintenance, power from other plants could pick up the slack. This enabled a level of reliability that hadn’t previously been achievable.

The benefits of cost savings and reliability led to larger power companies buying up smaller power companies and in some cases even forming agreements with competing power companies to provide supplemental power or power in emergency situations.

Transition to Utility Power

At this time, most industrial electric customers were still producing their own electricity, and felt that “rented power”, as it was called at the time, was too unreliable. But as the demand for electricity within the industrial sector grew, so did the size and reliability of grids, which began to produce electricity at a cost that the manufacturers couldn’t match. The “utility scale” power plants were much more efficient, and were located at sources of power like coal mines or rivers.

The shift towards “rented power” was so quick, and demand grew so fast, that the fledgling power industry couldn’t keep up. Utility electric production increased over 70x between 1902 and 1942, but still wasn’t enough to meet demand. Leading into World War I power shortages were becoming more common and were affecting wartime production. The federal government began to push for power companies to interconnect in order to better utilize existing power plants.

Power plants that weren’t connected tended to run at much lower utilization rates, as they could only sell as much power as they could get customers in their immediate area. Coming out of World War I larger and larger grids started forming, with organizations like the Interconnected Systems Group being formed by multiple power companies spanning multiple states. The Interconnected Systems Group eventually went on to form the largest synchronized grid in the world at the time.

The Feds Get In the Game

On the eve of World War II the federal government started mandating interconnections between utilities in order to avoid power supply issues if wartime manufacturing should increase. This process continued after World War II, leading up to the mid-1960’s where most of the continental United States was covered by two major grids. In the late 60’s, there was a brief eight year period where the eastern and western grids were actually connected, but this was eventually abandoned due to technical challenges.

These two grids, or “interconnections” as we call them, are actually independent synchronous electrical grids that are internally connected and synchronized, but have only limited connections between them (these connections are high voltage DC connections, which allows the grids to function separately so they don’t have to be synchronized). This allows for power to flow relatively freely, for example, within an interconnection, but not between two different interconnections.

And Then There Were Two

Today, we call those two primary grids within the United States the Eastern Interconnection and the Western Interconnection. These interconnections now span most of Canada and parts of Mexico. There are also three smaller interconnections within the US and Canada: the Texas Interconnection, the Quebec interconnection, and the Alaska interconnection. While they aren’t generally considered part of the North American grid, there are also the Sistema Interconectado Nacional (SIN) of Mexico and the Central American Electrical Interconnection System (SIEPAC).

The Texas interconnection exists for primarily political reasons, as it grew largely separate from the Eastern and Western interconnections and was never absorbed into either out of a desire for Texas to keep its own grid out of the purview of the federal government. Because the ERCOT transmission grid operates wholly within Texas, most transmission of electricity within ERCOT falls outside FERC’s jurisdiction under key sections of the Federal Power Act. That does not make the region exempt from federal oversight: ERCOT market participants remain subject to applicable federal reliability requirements as well as regulation by the Public Utility Commission of Texas.

The Grid Enters a New Growth Era

For much of the early 2000s, U.S. electricity demand grew slowly. That era appears to be ending.

U.S. net electricity generation reached a record 4,430 terawatt-hours in 2025, up 2.8% from 2024, which had also set a record. Recent growth has come from higher electricity use across the residential, commercial, and industrial sectors, with data centers and manufacturing among the important drivers.

The scale of expected growth is substantial. NERC now forecasts aggregated North American summer peak demand to rise by more than 224 GW over the next decade, 69% more growth than it projected just one year earlier. Data centers account for most of the projected increase in North American electricity demand, alongside other large commercial and industrial loads. [4]

This growth is arriving while the resources supplying the grid are changing quickly. Developers plan to add a record 86 GW of utility-scale capacity in the United States in 2026. Solar, battery storage, and wind represent 93% of those planned additions.

Yet proposing generation is not the same as connecting it. At the end of 2025, more than 2,060 GW of generation and storage was actively seeking interconnection to the U.S. grid. Most projects that enter these queues are ultimately withdrawn, and projects that are built are taking longer to complete studies and reach commercial operation.

The challenge is no longer simply producing enough electricity. The grid must connect new generation, serve enormous new loads, move power across longer distances, and remain reliable as both supply and demand become more dynamic.

That requires more than new power plants. It requires transmission, substations, interregional connections, faster interconnection studies, better system models, and planning processes capable of evaluating a future that looks very different from the past.

Planning and regulation are beginning to respond. FERC Order No. 1920 requires transmission providers to develop long-term regional plans looking at least 20 years ahead and to update them at least every five years using multiple scenarios. In June 2026, FERC also directed the six regional grid operators under its jurisdiction to justify or reform the rules governing how data centers, manufacturing facilities, and other large energy users connect to the grid.

The North American grid grew into the world’s largest machine because utilities learned to connect previously isolated systems. Its next chapter may depend on whether we can extend that same logic across regions, technologies, and planning organizations.

Summary

Understanding the grid’s history helps explain why changing it is so difficult. Today’s system is the product of more than a century of engineering decisions, business arrangements, regulation, and lessons learned through failure.

But that history also shows that the grid has never been static. It expanded when industrial demand grew, interconnected when reliability required it, and adapted when new technologies changed how electricity was produced.

Now it must adapt again. The central question is not whether electricity demand will change, but whether the infrastructure and processes behind the grid can change quickly enough to meet it.