Losses - A Strategic Approach
Craig Lucas Tony Woods
Craig.lucas@powerplanning.com tony@cre8is.co.uk
System Losses - Why do they matter
Electricity system losses affect the operation of
every network operator and supply business,
and in extreme cases can threaten the very
financial sustainability of companies. When a
power company generates a unit of energy, not
all of this will arrive at the consumer's
premises. This is because power networks
inherently consume and lose a proportion of the
energy transported. In industry terminology we
call these `Technical Losses.'
In addition, no power utility in the world has
perfect commercial processes, so billing 100%
of the electricity that has been used by
customers just does not happen. We call these
losses `non-technical' or `commercial' losses.
Losses occur at all levels, from generation,
through transmission and distribution, to the
consumer and the meter. It is normally at the
distribution level where the majority of
avoidable losses occur. The variation in the
level of System Losses experienced by different
utility companies, as measured by the
difference between generation input and energy
sales, is immense. In Western Europe System
Losses account for 6-10% of energy supplied.
In other markets this figure can be 40% or even
higher.
In theory, a utility with high losses may be able
to cover them by raising tariffs but this is often
commercially, socially or politically impossible.
This also matters because often utilities with the
highest losses are also often in markets where
the customer has the least ability to pay. Even in
mature markets, regulators set targets and
incentives for the
Cliff Walton
cliff@cre8is.co.uk
reduction of losses, and there are growing
incentives on companies to show they are
actively managing their carbon footprint. In
talking to senior distribution business managers
from around the world, we find that losses are
increasingly their number one topic of future
concern. This is not just because losses directly
affect the bottom line, and the level of capital
investment requirements, but in some cases
threaten the very viability and financial
sustainability of the company itself.
Losses also impact stakeholder perception, and
in consequence the ability of the company to
invest and grow to meet the needs of its
customers.
Technical Distribution (or System)
Losses
For the distribution system operator Technical
Losses will always arise as the physics of
electricity transport means that no power system
can be perfect in its delivery of energy to the end
customer. There is no absolute optimum level of
Technical Losses as this is essentially a trade off
between the costs of the energy and generating
capacity required to supply the losses incurred,
versus the capital costs of the network
infrastructure to reduce them.
The level of losses incurred depends on some
fundamental characteristics of the system, such
as whether the network is urban or rural, what
plant and equipment has been procured and
installed in the past, the voltage levels
employed, the system utilisation and load factor,
and not least the way the system is managed.
However, in our experience there
are a number of common factors that point to
higher than average losses and which a
successful loss reduction strategy will address
through proven processes and techniques.
Low Voltage Systems
The majority of avoidable losses generally
occur at the lowest level of the network closest
to the consumer. This is because the low
voltage system is often the most extensive part
of the system, and, conversely, often the least
well-documented and managed. There are a
wide variety of causes of such losses many of
which are rooted in design and operational
practices. Understanding and ranking the
importance of these issues is a key step in cost
effective loss reduction.
Our methodology works on the basis of an
initial high level assessment of the
appropriateness of system design and the
maturity of the loss management systems in use
within the company. Having identified potential
key opportunities we work on the basis of
measuring and studying a sample of the system
in quite a high level of detail. The sections
chosen should be as `typical' as possible for the
system as a whole.
A strategy for optimising these sample areas of
network can then be scaled up with predictable
levels of accuracy. The issues and solutions
vary from company to company, but include
using these localised studies to draw up a
management plan addressing design,
construction, and operation of the network.
Proven strategies can then be applied
consistently over a wide area to achieve large
scale sustainable and quantifiable success.
Whilst the individual techniques are
conceptually simple, designing an overall
strategy which provides the best cost-benefit
requires consistent reliable data, deep
experience and consideration of whole-life
costs. Losses also need to be carefully
considered in the context of other measures of
performance and costs and particular when
looking at setting or revising system design
standards.
High or Medium Voltage Systems
Work at these levels follows a similar
methodology involving an initial overall
assessment of the appropriateness of system
design and the maturity of the loss
management systems in use within the
company. Measures here tend to involve
looking at the design of the network, the
location and size of substations, and
specification of network components. As few
customers are connected at this level, the
chance to make `quick wins' can be more
limited. For this reason it makes sense to start
from the lowest level of the network and work
upwards as this generally gives the fastest
payback. Nevertheless, there are real benefits
to be had at higher voltage levels although they
tend to be longer-term in nature and incur high
capital costs.
Non-Technical Distribution Losses
Non-technical distribution losses - sometimes
called commercial losses - is a coverall term
for all losses that occur in electricity systems
other than those that happen as a result of
thermal, electrical insulation and magnetic
effects in the plant, cables and lines that make
up the system.
By their nature non-technical losses can only
be estimated by subtracting Technical Losses
from overall total System Losses. As overall
total System Losses and Technical Losses are
themselves estimates, inevitably there must be a
degree of uncertainly about the accuracy of the
resulting estimate of non-technical losses. A
sound methodology is essential to ensure
appropriate estimation accuracies are achieved
to avoid misleading results and inappropriate
targets being set.
In even the most well managed utility there is
likely to be a significant element of non-
technical loss and constant vigilance is
required to ensure that such losses remain
small and tightly controlled. In some cases the
level of such losses may become quite large -
perhaps more than 20% of the electricity
entering the system - and may exceed the level
of Technical Losses.
There are a large range of sources of non-
Technical Losses which generally can be
grouped under the following
headings:- § theft and fraud
technical problems with metering
problems with billing systems
problems related to human processes
such as meter reading, creation and
closure of customer accounts, etc.
inaccurate or missing inventories of data
on customers
With a large range of potential sources of these
losses and considerable data complexity,
reducing non-Technical Losses requires a range
of initiatives to ensure sustained progress.
Our Approach
We offer a strategic approach to this problem.
We start with a review which
undertakes an initial high level
assessment of the appropriateness of
system design, business processes and
an assessment of maturity of the loss
management systems in use within the
company.
identifies the overall level of system
losses (validating the business
procedures by which this is calculated)
carries out a assessment to gauge the
level of Technical Losses
estimates the scale of non-Technical
Losses and - by examining the utility
experiences and business processes - the
likely sources of such losses
We then propose a programme of proven
solutions and activity to reduce both Technical
and Non-Technical Losses, together with a
monitoring regime designed to oversee the
implementation of the programme, providing
the utility with evidence of progress and the
ability to make changes as the programme is
executed.
Increasingly, new technologies are becoming
available to address these issues. Products such
as pre-payment meters, AMR and smart
metering all have potential to drive significant
improvements. However, as with all new
technology, improvements need to be viewed
`holistically' - i.e. the technology will only
have maximum effect if all the organisational,
behavioural, data management and commercial
factors are also addressed. We are involved in
leading research activities and programmes in
this area, and will provide more details and
case studies as they progress.
For further details about this or any related
topics see:
www.powerplanning.com www.cre8is.co.uk
Power Planning Associates: +44 1483 544944
Cre8 Innovation Solutions: +44 20 8325 6560