Generators and alternators are the primary methods of creating power. Generators create DC power and alternators create AC. In the early days of automobiles, generators were used; these have been completely replaced by alternators in modern vehicles. Likewise, in the early days of commercial power generation, there was a battle between DC and AC for dominance--a battle that AC won. But while alternators have been the big winners, generators still have their uses.
In terms of design, a DC generator is the simpler of the two. In fact, a DC generator can be used as a DC motor by applying power to the shaft, while the opposite is also true--turn the shaft of a DC motor, and it will act as a generator. This is one of the greatest benefits of a generator: It will generate power purely from mechanical motion. As long as you turn the shaft, the generator will produce electricity.
AC alternators are more complex, because the AC must be converted to DC and this takes extra circuitry. Theoretically, an alternator can act as an AC motor, but it will not be a very good motor. Also, unlike the generator, the alternator requires some power to generate electricity. However, an alternator produces a large amount of electricity and may provide enough electricity to power all the devices on a car without taxing the battery at all.
The generator is the exact opposite of the alternator. In the generator, a winding of wires is spun inside a magnetic field to create a current. In an alternator, a magnetic field is spun inside a winding of wires. Efficiency is on the alternator's side, as the wire winding is the biggest and heaviest part of both devices, so the alternator is spinning the lightest part. This means the alternator can work at a higher speed, creating more power at lower speeds.
Alternators tend to be more reliable than generators, largely because of the difference in how they each use rings and brushes. Generators use split brushes, which wear more quickly, as the brushes rub against them; the brushes wear out also. An alternator uses solid rings, which cause less wear and reduce problems caused by the constant making and breaking of the circuit, because the brushes "jump" the gaps in the split rings.
Once we move beyond cars to commercial power generation, AC becomes the big winner between the two. Transformers only work with AC. Because of this, the output from an alternator can be easily stepped up or stepped down using a transformer. When the voltage is stepped up, it is much easier to send it long distances over power lines with very little loss, then step it down again for use in your home.
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