A DC circuit has two wires through which the current in the circuit flows from a source of electricity through a load and back to the source. A single-phase AC circuit also has two wires connected to the source of electricity. However, unlike the DC circuit in which the direction of the electric current does not change, the direction of the current changes many times per second in the AC circuit. The 120 volt electricity supplied to our homes is single phase AC electricity and has two wires - an "active" and a "neutral".
The distribution line supplying your home may be single phase and have only two wires strung between the poles (we will use the overhead power lines as examples because they can be easily seen). However, the distribution line may be made up of 4 lines. What are the others? The other lines carry the currents from two other electrical circuits, making a total of three circuits or phases. The reason why there are only 4 lines is because the 3 phases have a common neutral line (i.e. 3 active lines and 1 common neutral line).
But why 3 phases? Why not 2 or 4? Because the magnitude and direction of the electricity flowing in each of the phases is slightly displaced in time from the electricity flowing in the other phases, the current flowing in the common neutral will be the sum of the neutral currents from the 3 phases. The resultant current in the common neutral is smaller in a 3 phase system than in systems with other numbers of phases. This ability to use a common neutral of relatively small capacity has large economic advantages and is the main reason why 3 phases are used.
3 phase electricity has another advantage. We mentioned above that, in Canada, the voltage between the active and neutral in the single phase, low voltage supply to our homes is 120 volts and that this phase is only one of the phases in the 3 phase system. The voltage between the phases of a 120/208V 3 phase system is 208 volts (in Canada). A 208 volt, 3 phase supply is able to deliver more energy than a 120 volt, single phase supply. 3 phase supplies are normally restricted to large electrical loads, such as large electric motors. Commercial buildings are often wired for three phase power. Air conditioners for instance are run on the three phase power while single phase power is typically used for most electrical, electronic and lighting equipment.
As we travel back up the electrical network, the voltage increases and the neutral disappears! Why? The answer can be found in the consideration of why a neutral is used. A single phase supply must have a neutral, whereas a 3 phase supply does not require a neutral. More complicated reasons deal with fixing the voltage of the single phase supply relative to the ground (because domestic appliances have their metal enclosures connected to ground) and for fault protection purposes. 3 phase, medium voltage, distribution systems and high voltage transmission systems therefore use one wire for each phase and no neutral.
The above discussions focused on active and neutral conductors (wires) as being the means to convey the electricity. One type of system uses the ground as the return path, with only the active being conveyed by a wire conductor. This type of single-phase supply system is called the Single Wire Ground Return system and is use to supply small loads which are located far from the main distribution networks.
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