The electricity grid has 3 main parts: Generation, Transmission, and Distribution. Grid operators must ensure that the amount of electricity put onto the grid ("supply") precisely equals the amount of electricity used by customers at the other end ("demand" or "load"), at every moment in time. However, both the grid and its operation are evolving into a more complex picture these days.

Generation is the production of electricity, which in the past has almost always occurred at large centralized power plants far from customers, using "traditional" energy sources (fossil fuels - coal and natural gas, nuclear, or large hydroelectric dams).

Transmission refers to the high-voltage power lines that conduct electricity from remote generators to population centers. High voltage and big wires are needed to keep energy loss over long distances to an acceptable level.

The Distribution system is where most of the customers are (cities, residences, businesses, and all but the largest factories). The voltage is lowered at "substations" so that smaller poles and wires can be used for shorter distances.

These days, new technologies and energy sources create a more complicated picture, but one with great opportunities for more efficient, cheaper, and cleaner electricity.

Generation can exist anywhere within the distribution system, such as from small, medium, or large-scale solar and other renewable energy sources. Power flows can be bi-directional rather than always one-directional from central generation to loads (imagine excess solar energy from your rooftop panels going back onto the wires that feed your neighbor's house).

Battery energy storage can serve any part of the grid in up to 13 ways, including: smoothing out variable renewable generation; absorbing cheap excess wind power at night and discharging it during the expensive late afternoon peak demand period (so batteries can act as both generation and load); and shifting excess solar generation at midday to serve the late-afternoon peak demand and displace expensive "gas peaker" plants.

There are now other ways to meet peak demand than dialing up the supply: demand can be decreased instead. Demand-Side Management (DSM) programs allow customers – either large customers or aggregated small customers – to allow utilities to occasionally, and often unnoticeably, to take temporary control of their loads (such as water heaters or air conditioners) in exchange for incentives, thereby reducing the cost of running the grid as a whole (a win-win-win situation).

Expensive new transmission can often be avoided by using these distribution-level methods to decrease the power that must flow from central generators. These are called "non-wires alternatives," and they are rarely considered by utilities because they're less profitable.  Innovative approaches are not rewarded in the cost-of-service utility business model, which is known as a perverse incentive.

[Figure from: DOE - Quadrennial Energy Review: First Installment (Fig. 3.1)]   [Semi-Technical Description of the Grid]