Share This Article
Grid 101: How the American Energy Grid Works
From the national grid to energy-producing regions — why using power closer to where it’s made matters.
When we flip a switch and a light turns on, we typically don’t think about the electric grid. But behind that everyday moment is a huge system that has to stay balanced every second of every day.
Understanding that balance helps explain the magic behind routine aspects of modern life — and explains why the geographic distance between where energy is produced and where that energy is used is quite important.
This blog series will cover three key aspects:
- Part 1: The American energy grid, explained
- Part 2: How MISO powers the Heartland
- Part 3: Our region’s role in our energy grid
Part 2: How MISO Powers the Heartland
Part 1 covered the national picture of how electricity is generated and used. Now let’s zoom in.
Minnesota sits within one of North America’s three main interconnections, and the Regional Transmission Organization (RTO) that manages the Midwest region is MISO: the Midcontinent Independent System Operator. MISO stretches from Manitoba, Canada, down to the Gulf Coast, balancing tens of thousands of “nodes” of power generation.
This part of the country is also an excellent location for wind and solar electricity generation. The wind and sun across the Heartland represent a robust, reliable, and entirely renewable resource that can be harvested, much in the same way the rich soil of the Heartland has been used to grow and harvest agricultural crops for more than 200 years.
Map of MISO pricing nodes and generation sources across the Midwest.
Wind generation is heavily concentrated along the western portion of the MISO region.
Similar to crops, harvesting wind and solar energy brings a cascade of benefits that spread from local to national level:
- Landowners gain a predictable, reliable income stream that can help even out the ups and downs of growing seasons and ag markets.
- Local municipalities and counties receive tax revenue directly from energy generation in their community.
- Community members see public-spending benefits from a healthier tax base in the form of better-funded schools, roads, and public services.
- The American energy grid grows stronger and more resilient through diversification.
Power Supply and Demand Aren’t Always in the Same Place (and Why That Matters)
Some parts of MISO generate a lot of electricity. Other parts use a lot of electricity. Those two are not always located near each other. That’s why we have robust transmission infrastructure to move energy supply to meet demand.
Even though electricity moves at the speed of light, transmission lines can only carry so much at once. So, when multiple generators try to move power along the same paths at the same time, the system gets crowded. The industry term for this is congestion — the same way roads get congested at rush hour.
When transmission lines hit max capacity without fully meeting energy demand, MISO needs to pull supply through transmission lines with available capacity (and, thus, from different power generation nodes).
Map of the MISO transmission network showing generation sources and congestion points across the region. Congestion often occurs when electricity generated in the western portion of the grid must move long distances to reach demand centers farther east.
Electricity moving through a shorter transmission line will arrive at its destination sooner than electricity that has to move further. So, in times of high energy demand, MISO tends to favor generation nodes located closest to where energy is used, because a shorter path means less congestion and more efficient, expedient delivery.
How RTOs Use Price-Setting to Balance the Energy Grid
MISO looks at electricity use across its whole region and signals generators when more power is needed. That “signal” comes in the form of the price it offers to generators.
MISO’s first priority is reliability (ensuring the light always comes on when you flip the switch). But in some cases, if MISO sees that supply is running far ahead of demand, it will begin lowering prices.
Energy prices can even go negative (meaning the power generator is paying MISO to take their power, rather than MISO paying for the power).
How Do Power Generation Nodes Decide When to Shut Off Production?
No matter the fuel source, every power generator has some overhead cost of operation — so the price they sell that energy for needs to be above the operational cost, or it doesn’t make sense to run.
For wind energy, that cost to operate is near zero, which generally allows wind energy projects to generate profit even when energy prices are low.
Why would a power generator ever pay MISO to take their power? There are some edge cases that get highly technical. But the short answer is that they won’t. This makes negative pricing the figurative “off switch” that MISO can use when they don’t need a generation node to send any more power.
Read Part 3: What This Means for Energy-Producing Regions
If you’re not familiar with the energy grid, it’s often surprising to learn that power generation isn’t just about making sure enough energy is generated — it’s also about ensuring that energy can reach the demand in time. That’s where the relative location of energy supply and demand become important, and concepts like congestion and price-setting come into play.
In Part 3, we’ll bring this down to the regional level and look at what this means for energy-producing communities — and how adding energy demand closer to where energy is produced can help unlock more value for those regions.
