Energy Commodities: Electricity Consumption and Supply Chain - dummies

Energy Commodities: Electricity Consumption and Supply Chain

By Amine Bouchentouf

Electricity is now a tradable commodity, but Benjamin Frankly couldn’t have imagined that his kite experiment would come to that. His experimentation paved the way for developments in electricity, which is now a necessity of modern life.

Have you ever wondered where the electricity that allows you to watch TV, use your air conditioner, or power your computer comes from? Getting electricity to residential, commercial, and industrial consumers is a lengthy process.

The electricity is first created in a generator at a power plant and is then sent through transmission lines at very high voltages to a substation near consumers. The substation is equipped with a generator that transforms the high-voltage electricity into a low-voltage form, which is then sent to consumers via distribution lines. So how can you profit from it? It’s quite simple.

Most of the electricity in the United States is generated through steam turbines. The water used to generate steam is heated to very high temperatures using traditional energy sources such as coal, natural gas, and nuclear power, as well as other renewable sources (such as wind and solar).


Electricity is measured in watts, with 1 kilowatt equal to 1,000 watts and a megawatt equal to 1 million watts. In the power industry, watts are expressed in terms of hours of operation, where 1 kilowatt-hour (1 kWh) is 1,000 watts working for a period of 1 hour. Your electricity bill is measured in kilowatt-hours, and 1 kWh is the equivalent of 3,412 Btu.

To put it in perspective, the United States consumed a grand total of 3,669 billion kWh of electricity in 2003.