Electric power transmission, the tools and means of moving electricity far from where it is generated, date back to the late 19th century. They include the movement of electricity in bulk (formally called "transmission") and the delivery of electricity to individual customers ("distribution"). In the beginning, the two terms were used interchangeably.

Early transmission

Prior to electricity, various systems had been used for transmission of power across large distances. Chief among them were telodynamic (cable in motion), pneumatic (pressurized air), and hydraulic (pressurized liquid) transmission. Cable cars were the most frequent example of telodynamic transmission, whose lines could extend for several miles for a single section. Pneumatic transmission was used for city power transmission systems in Paris, Birmingham, Rixdorf, Offenbach, Dresden and Buenos Aires at the beginning of the twentieth century. Cities in the 19th century also used hydraulic transmission using high pressure water mains to deliver power to factory motors. London's system delivered over a network of pipes carrying water at . These systems were replaced by cheaper and more versatile electrical systems, but by the end of the 19th century, city planners and financiers were well aware of the benefits, economics, and process of establishing power transmission systems.

In the early days of electric power usage, widespread transmission of electric power had two obstacles. First, devices requiring different voltages required specialized generators with their own separate lines. Street lights, electric motors in factories, power for streetcars and lights in homes are examples of the diversity of devices with voltages requiring separate systems. Secondly, generators had to be relatively near their loads (a mile or less for low voltage devices). It was known that longer distance transmission was possible the higher the voltage was raised, so both problems could be solved if transforming voltages from a single universal power line could be done efficiently.

Specialized systems Much of early electricity was direct current, which could not easily be increased or decreased in voltage either for long-distance transmission or for sharing a common line to be used with multiple types of electric devices. Companies simply ran different lines for the different classes of loads their inventions required. For example, Charles Brush's New York arc lamp systems required up to 10 kV for many lamps in a series circuit, Edison's incandescent lights used 110 V, streetcars built by Siemens or Sprague required large motors in the 500 volt range, whereas industrial motors in factories used still other voltages. Due to this specialization of lines, and because transmission was so inefficient, it seemed at the time that the industry would develop into what is now known as a distributed generation system with large numbers of small generators located near their loads.

Early high voltage exterior lighting High voltage was of interest to early researchers working on the problem of transmission over distance. They knew from elementary electricity principle that the same amount of power could be transferred on a cable by doubling the voltage and halving the current. Due to Joule's Law, they also knew that the power lost from heat in a wire is proportional to the square of the current traveling on it, regardless the voltage, and so by doubling the voltage, the same cable would be capable of transmitting the same amount of power four times the distance.

At the Paris Exposition of 1878, electric arc lighting had been installed along the Avenue de l'Opera and the Place de l'Opera, using electric Yablochkov arc lamps, powered by Zénobe Gramme alternating current dynamos. Yablochkov candles required high voltage, and it was not long before experimenters reported that the arc lamps could be powered on a circuit. Within a decade scores of cities would have lighting systems using a central power plant that provided electricity to multiple customers via electrical transmission lines. These systems were in direct competition with the dominant gaslight utilities of the period.

The idea of investing in a central plant and a network to deliver energy produced to customers who pay a recurring fee for service was familiar business model for investors: it was identical to the lucrative gaslight business, or the hydraulic and pneumatic power transmission systems. The only difference was the commodity being delivered was electricity, not gas, and the "pipes" used for delivering were more flexible.

The California Electric Company (now PG&E) in San Francisco in 1879 used two direct current generators from Charles Brush's company to supply multiple customers with power for their arc lamps. This San Francisco system was the first case of a utility selling electricity from a central plant to multiple customers via transmission lines. CEC soon opened a second plant with 4 additional generators. Service charges for light from sundown to midnight was $10 per lamp per week.

Grand Rapids Electric Light & Power Company, established in March 1880 by William T. Powers and others, began operation of the world's first commercial central station hydroelectric power plant, Saturday, July 24, 1880, getting power from Wolverine Chair and Furniture Company's water turbine. It operated a 16-light Brush electric dynamo lighting several storefronts in Grand Rapids, Michigan. It is the earliest predecessor of Consumers Energy of Jackson, Michigan.

In December 1880, Brush Electric Company set up a central station to supply a length of Broadway with arc lighting. By the end of 1881, New York, Boston, Philadelphia, Baltimore, Montreal, Buffalo, San Francisco, Cleveland and other cities had Brush arc lamp systems, producing public light well into the 20th century. By 1893 there were 1500 arc lamps illuminating New York streets.

Direct current lighting Early arc lights were extremely bright and the high voltages presented a sparking/fire hazard, making them too dangerous to use indoors.The First Form of Electric Light History of the Carbon Arc Lamp (1800–1980s) In 1878 inventor Thomas Edison saw a market for a system that could bring electric lighting directly into a customer's business or home, a niche not served by arc lighting systems.Howard B. Rockman, Intellectual Property Law for Engineers and Scientists, John Wiley – 2004, p. 131 After devising a commercially viable incandescent light bulb in 1879, Edison went on to develop the first large scale investor-owned electric illumination "utility" in lower Manhattan, eventually serving one square mile with 6 "jumbo dynamos" housed at Pearl Street Station.Ahmad Faruqui, Kelly Eakin, Pricing in Competitive Electricity Markets, Springer Science & Business Media – 2000, p. 67 When service began in September 1882, there were 85 customers with 400 light bulbs. Each dynamo produced 100 kWenough for 1200 incandescent lights, and transmission was at 110 V via underground conduits. The system cost $300,000 to build with installation of the of underground conduits one of the most expensive parts of the project. Operating expenses exceeded income in the first two years and fire destroyed the plant in 1890. Further, Edison had a three wire system so that either 110 V or 220 V could be supplied to power some motors.

Transformers and alternating current

In 1876, Pavel Yablochkov patented his mechanism of using induction coils to serve as a step up transformer prior to the Paris Exposition demonstrating his arc lamps. In 1881, Lucien Gaulard and John Dixon Gibbs developed a more efficient device which they dubbed the secondary generator, namely an early step-down transformer whose ratio could be adjusted by configuring the connections between a series of wired bobbins around a spindle, from which an iron core could be added or removed as necessary to vary the power output. The device was subject to various criticisms and was occasionally misunderstood as only providing a 1:1 turn ratio.Thomas Parke Hughes, Networks of Power: Electrification in Western Society, 1880–1930, p. 89, (1993)

The first demonstrative long-distance (34 km, 21 mi) AC line was built for the 1884 International Exhibition of Turin, Italy. It was powered by a 2-kV, 130-Hz Siemens & Halske alternator and featured several Gaulard secondary generators with their primary windings connected in series, which fed incandescent lamps. The system proved the feasibility of AC electric power transmission over long distances. Between 1884 and 1885, Hungarian engineers Zipernowsky, Bláthy, and Déri from the Ganz company in Budapest created the efficient "Z.B.D." closed-core coils, as well as the modern electric distribution system. The three had discovered that all former coreless or open-core devices were incapable of regulating voltage and were therefore impractical. Their joint patent described two versions of a design with no poles: the "closed-core transformer" and the "shell-core transformer".Patent No. US352105, U.S. Patent Office, 1886-11-02, retrieved 2009-07-08 Ottó Bláthy suggested the use of closed-cores, Károly Zipernowsky the use of shunt connections, and Miksa Déri performed the experiments. Smil, Vaclav, Creating the Twentieth Century: Technical Innovations of 1867–1914 and Their Lasting Impact, Oxford University Press, 2005, p. 71. The new ZBD transformers were 3.4 times more efficient than the open-core bipolar devices of Gaulard and Gibbs.

In the closed-core transformer, the iron core is a closed ring around which the two coils are wound. In the shell-type transformer, the windings are passed through the core. In both designs, the magnetic flux linking the primary and secondary windings travels almost entirely within the iron core, with no intentional path through air. The core consists of iron strands or sheets.

The ZBD patents included two other major interrelated innovations: one concerning the use of parallel connected, instead of series connected, utilization loads, the other concerning the ability to have high turns ratio transformers such that the supply network voltage could be much higher (initially 1,400 to 2,000 V) than the voltage of utilization loads (100 V initially preferred). These revolutionary design elements would finally make it technically and economically feasible to provide electric power for lighting in homes, businesses and public spaces.Bláthy, Ottó Titusz, Hungarian Patent Office. Ottó Bláthy also discovered the transformer formula, Vs/Vp = Ns/Np. Electrical and electronic systems the world over rely on the principles of the original Ganz transformers. The inventors are also credited with the first use of the word "transformer" to describe a device for altering the EMF of an electric current.

In May 1885, at the Hungarian National Exhibition in Budapest, Deri, Blathy, and Zipernowski held a large-scale demonstration of what is widely regarded as the prototype of modern AC lighting systems. Their system used 75 transformers in parallel connection, supplying 1,067 incandescent Edison lamps from an AC generator that provided 1,350 V.

When George Westinghouse became interested in electricity, he quickly and correctly concluded that Edison's low voltages were too inefficient to be scaled up for transmission needed for large systems. He further understood that long-distance transmission needed high voltage and that inexpensive conversion technology only existed for alternating current. Transformers would play the decisive role in the victory of alternating current over direct current for transmission and distribution systems.