The first alternating current power grid system was installed in 1886.[5] At that time, the grid was a centralized unidirectional system of electric power transmission, electricity distribution, and demand-driven control.

In the 20th century local grids grew over time, and were eventually interconnected for economic and reliability reasons. By the 1960s, the electric grids of developed countries had become very large, mature and highly interconnected, with thousands of 'central' generation power stations delivering power to major load centres via high capacity power lines which were then branched and divided to provide power to smaller industrial and domestic users over the entire supply area. The topology of the 1960s grid was a result of the strong economies of scale: large coal-, gas- and oil-fired power stations in the 1 GW (1000 MW) to 3 GW scale are still found to be cost-effective, due to efficiency-boosting features that can be cost effectively added only when the stations become very large.

Power stations were located strategically to be close to fossil fuel reserves (either the mines or wells themselves, or else close to rail, road or port supply lines). Siting of hydro-electric dams in mountain areas also strongly influenced the structure of the emerging grid. Nuclear power plants were sited for availability of cooling water. Finally, fossil fuel-fired power stations were initially very polluting and were sited as far as economically possible from population centres once electricity distribution networks permitted it. By the late 1960s, the electricity grid reached the overwhelming majority of the population of developed countries, with only outlying regional areas remaining 'off-grid'.

Metering of electricity consumption was necessary on a per-user basis in order to allow appropriate billing according to the (highly variable) level of consumption