Amount and cost of losses
Jose Luis Mata
June 11th 2014 - Florence School of Regulation
AN
INTRODUCTION TO
RED ELÉCTRICA
First transmission and system operator company in the world
Operates the Spanish power
system and guarantees
continuity of supply
Designs, builds, owns and
maintains the Spanish
transmission network
Independence from market players
and transparency as system operator
Commitment with society and
environment and excellence in
managment
Red Eléctrica guarantees the appropriate operation of the Spanish power system:
Efficient management at the service of the society
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ENERGY
EFFICIENCY ROLE
EU facing big challenges due to increased dependence, scarce energy
resources, the need to limit climate change and to overcome economic
crisis
Sustainability
Competitiveness
Security of supply
Energy efficiency is a valuable tool to address these challenges
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CURRENT
SITUATION IN
EUROPE
Current estimates show EU is not on track to achieve its target of
energy consumption reduction
Reduce greenhouse
gas levels by 20%
Current trend
to 2020
Increase share of
renewables to 20%
Reduce energy
consumption by 20%
Current trend
to 2020
20%
10%
20%
EU’s efforts should focus on this pending issue
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ELECTRICITY
NETWORKS AND EFFICIENCY
Electricity network losses involve a significant component of electricity
demand, and therefore represent an improvement area
EU network losses vs. total electricity demand
Source: Euroelectric
The treatment of losses is a key topic to be addressed:
• in order to achieve energy efficiency improvements
•requires a proper economic and regulatory approach
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“NETWORK
LOSSES” FOR
POWER
SYSTEMS
There is not a standard definition of network losses within the EU
Losses= energy generated - energy delivered to customers
Energy
generated
Energy
delivered
Technical losses
power dissipation in electricity system
components such as transmission and
distribution lines, transformers, and
measurement systems
Non technical
losses
Caused by actions external to
the power system and consist primarily
of electricity theft, non-payment by
customers, and errors in accounting and
record-keeping
Power losses in transmission and distribution networks may account for
up to 8-15% of the total amount of electricity produced1
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LOSSES
COSTS ALLOCATION
There are no standard procedures neither for the allocation of network
losses among market participants
Who should be responsible for losses costs?
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MAIN
COMPONENTS
Technical losses are the main part of network losses which include
both transmission and distribution losses
Step-up transformer from
1-2% generator to Transmission line
2- 4% Transmission line
Step-down transformer from
1- 2% Transmission to Distribution network
Distribution network transformers
4- 6% and cables
Source: Schneider Electric
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LOSSES
TREATMENT
In many Member States, TSO’s are responsible for the procurement of
energy losses in transmission through market mechanisms
Energy
generated
Energy
delivered
“Transmission system operators shall
procure the energy they use to cover
energy losses and reserve capacity in
their systems according to transparent,
non discriminatory and market based
procedures, whenever they have such
a function.”
• Power exchanges
TSO
procurement
• Bilaterally
• By action/tenders
Directive 2009/72 Art. 15-6
Average costs of losses are accepted by the regulator and
used in the tariff calculation
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LOSSES
TREATMENT
However there are alternative models for losses management such as
Spain, where consumers pay for all losses (transmission and distribution)
Energy
generated
Energy
delivered
• Consumers have to pay the 100%
of the cost.
• Losses are calculated through a
100 GWh
90 GWh
coefficient associated to their
tariff.
Consumer billed
for 100 GWh
• Losses are priced at the same
market price than the energy
consumed
Regardless of the chosen scheme, incentives for network operators can be
set into place for losses reduction
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TSO’S
ROLE
Losses in the T&D system depends greatly on the physical
characteristics of the system
Joule effect:
P=I2R
R=ρL/S
Losses increase with
distance, network load
and decrease with
voltage
How can TSO’s improve network losses?
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TSO’S
ROLE
TSO are responsible for several activities that play a significant role in
the determination of losses
1
2
Network
design
3
Network
operation
Network and
equipment
maintenance
Nonetheless the room for improvement in these activities
for losses reduction is quite limited
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TSO’S
ROLE
There are a number of external factors beyond TSO’s responsibilities
with a significant influence on the level of losses
Average generation
Average demand
Generation-demand
Geographical size of the market, number and dispersion of costumers
and generation are important driving factors which can not be modified
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INCENTIVES
Effectiveness of incentives depend on the real capability of TSOs to
control losses
Incentive associated to
losses purchase
Incentive associated to a
reference value
Incentive= Losses procured – Losses accepted
by regulator
Incentive= +/- (Loss energy target - Real energy
lost) * % Revenue
Parameters
• Volume of losses
Parameters
• Volume of losses
• Unit cost of losses
Do they consider external factors to fix a target?
Incentives for TSO must be tailored to the manageable part of
technical losses
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CONCLUSIONS
1
2
3
4
No standard definition for energy losses
As part of electricity demand, network losses represent an efficiency
improvement area
Main losses drivers are not manageable by TSO’s
The design of incentives is thus best left to subsidiarity
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Thanks for your attention
jlmata@ree.es