However, it is undesirable for this type of voltage to be used to connect to commercial buildings, factories and residential neighborhoods from a safety point of view, and therefore the distribution network operates at lower voltage levels, typically well less than 1kV for residential customers. Distribution sub-stations exist to, among other things, "step-down" the high voltage levels to medium/low voltage levels.

While often ignored within the context of a smart grid, the transmission and distribution (T&D) network plays a key role and represents an area of substantial long-term opportunity for grid investment. More mature economies with aging electrical infrastructure have outdated T&D equipment that can contribute to unnecessary power outages and long periods of downtime. More modern T&D equipment add considerable levels of distributed intelligence and control to a T&D network, and help alleviate these problems greatly. IMS Research is increasingly covering this segment to highlight the associated smart grid investment opportunity.