Losses

Losses - A Strategic Approach Craig Lucas

Tony Woods

Cliff Walton

[email protected]

[email protected]

[email protected]

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.

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

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.

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.

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

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.

looking at setting or revising system design standards.

Low 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.

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

High or Medium Voltage Systems

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 nontechnical 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 nonTechnical 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