In the early days of commercial electric power, transmission of electric power at the same voltage as used by lighting and mechanical loads restricted the distance between generating plant and consumers. In 1882, generation was with direct current (DC), which could not easily be increased in voltage for long-distance transmission. Different classes of loads (for example, lighting, fixed motors, and traction/railway systems) required different voltages, and so used different generators and circuits.[page needed]
Due to this specialization of lines and because transmission was inefficient for low-voltage high-current circuits, generators needed to be near their loads. 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.
In 1886, in Great Barrington, Massachusetts, a 1 kV alternating current (AC) distribution system was installed. That same year, AC power at 2 kV, transmitted 30 km, was installed at Cerchi, Italy. At an AIEE meeting on May 16, 1888, Nikola Tesla delivered a lecture entitled A New System of Alternating Current Motors and Transformers, describing the equipment which allowed efficient generation and use of polyphase alternating currents. The transformer, and Tesla's polyphase and single-phase induction motors, were essential for a combined AC distribution system for both lighting and machinery. Ownership of the rights to the Tesla patents was a key advantage to the Westinghouse Company in offering a complete alternating current power system for both lighting and power.
Regarded as one of the most influential electrical innovations, the universal system used transformers to step-up voltage from generators to high-voltage transmission lines, and then to step-down voltage to local distribution circuits or industrial customers. By a suitable choice of utility frequency, both lighting and motor loads could be served. Rotary converters and later mercury-arc valves and other rectifier equipment allowed DC to be provided where needed. Generating stations and loads using different frequencies could be interconnected using rotary converters. By using common generating plants for every type of load, important economies of scale were achieved, lower overall capital investment was required, load factor on each plant was increased allowing for higher efficiency, a lower cost for the consumer and increased overall use of electric power.
By allowing multiple generating plants to be interconnected over a wide area, electricity production cost was reduced. The most efficient available plants could be used to supply the varying loads during the day. Reliability was improved and capital investment cost was reduced, since stand-by generating capacity could be shared over many more customers and a wider geographic area. Remote and low-cost sources of energy, such as hydroelectric power or mine-mouth coal, could be exploited to lower energy production cost.
The first transmission of three-phase alternating current using high voltage took place in 1891 during the international electricity exhibition in Frankfurt. A 25 kV transmission line, approximately 175 km long, connected Lauffen on the Neckar and Frankfurt.
Voltages used for electric power transmission increased throughout the 20th century. By 1914, fifty-five transmission systems each operating at more than 70 kV were in service. The highest voltage then used was 150 kV.
The rapid industrialization in the 20th century made electrical transmission lines and grids a critical infrastructure item in most industrialized nations. Interconnection of local generation plants and small distribution networks was greatly spurred by the requirements of World War I, with large electrical generating plants built by governments to provide power to munitions factories. Later these generating plants were connected to supply civil loads through long-distance transmission.