The electricity market in England and Wales is stratified into four distinct licensed functions: generation, transmission, distribution and supply as described below.
i) Generation comprises physical production of electricity at power stations by nuclear fission or by combustion of fossil fuels or biomass to raise steam for steam turbines, or by using the power of water or wind to spin direct turbines. More recently this includes generation from solar photovoltaic (PV) cells. Sites are operated by a mixture of organisations from large, vertically integrated energy companies or specialist portfolio generators to smaller independent operators.
ii) Transmission is the means of transporting bulk electricity away from major power stations or national interconnectors towards the main areas of electricity demand via grid supply points. Electricity is transmitted at very high voltage (400kV or 250kV) to minimise transmission losses. The transmission network in England and Wales is in single occupation.
iii) Distribution comprises the physical act of transporting electricity from the grid supply points to consumers. This is achieved using a regional distribution network operating at 132kV and progressively transforming power down to 33kV and 11kV at a series of substations until it is finally delivered to customers at 415V or 240V via a service cable and meter. The distribution networks are owned and operated by twelve distribution network operators (DNOs).
iv) Supply comprises the purchase of electricity (from a generator or elsewhere) and sale to the ultimate consumer. The supplier incurs use of system charges in respect of both the national grid transmission system and the regional distribution system. These charges are passed on to the consumer and ultimately form part of the retail price of electricity.
