Utilities sector can recuperate millions by reducing grid losses

15 December 2016 Consultancy.uk 7 min. read
More news on

Grid losses comprise a substantial cost factor for grid companies, according to an analysis by the IDBC, an international expert community for the power & utilities sector. Conversely, organisations that succeed in adopting best practices to reduce grid losses could recuperate millions of euro’s worth of energy. For example: a distribution company with 5% of grid losses could, with a one percent slash in grid losses, save €12 million per year, as well as 210 kilotons in its CO2 footprint. 

Founded in 2008 by four utility organisations, IDBC is an international learning platform that helps electricity and/or gas distribution companies benchmark performance and share best practices in areas such as strategy, operations, reliability, safety, and energy transition. Today, the platform, which is supported by consultants from UMS Group, works with utility organisations across Europe and North America. 

One of IDBC’s initiatives, the IDBC program, analyses the causes of network losses and compares industry practices between peers. The program’s latest research finds that, although technical grid losses are unavoidable, the percentage of grid losses can be optimised by having an optimal grid design and/or mode of operation. The research also finds that utility companies would benefit from being able to distinguish between technical and non-technical grid losses. The latter, non-technical grid losses are mainly mitigated by collaboration in the value chain and effective administrative procedures.

Ed de Vroedt and Peter Hoving, Director and Senior Consultant at UMS Group respectively, provide a synapse of the research’s key results.

Grid losses comprise a substantial cost factor for grid companies

Defining grid loss

Grid losses for a distribution grid operator are defined as the difference between what is inserted in the grid and what is consumed from the grid. International data show that grid losses vary quite a lot across the globe (from 0% in Singapore to 87% in Togo). From a global perspective, the IDBC participants belong to the best practice companies with grid losses between 5.4% and 2.8% and average grid losses of 540 GWh per year. These grid losses are a significant cost factor to utilities: over €20 million per year. Additionally, network capacity has to be build and maintained to cover the grid losses. Even more impressive is the associated reduction in CO2 emissions due to the decrease of energy generated to feed the system. 

Best practices regarding Grid Losses

Due to physics laws (I2R), technical grid losses are unavoidable. However, the percentage of grid losses can be managed by having an optimal grid design and / or operational measures. The type of conductors, the current flow, and the length of a distribution line impact the percentage of grid losses.

Best practices include:

  • Lifetime costs of grid losses are included in the total evaluation price in tenders;
  • Closing MV-loops for optimising grid-losses;
  • Installing MV and LV cables that are usually not in near maximum current;
  • From a load factor of about 70%, it is profitable to put spare transformers into service;
  • New MV/LV-transformers have substantially lower losses due to new production techniques of transformer core; and
  • Optimising location of splitting point in MV distribution ring.

Most companies also identify administrative grid losses which are defined as “fraud, contractual differences e.g. due to vacancy and / or measurement corrections”. Administrative grid losses can account up to 25% of the total grid losses, worth millions of euro’s. Especially areas which face illegal cannabis cultivation, record a lot of fraud. Reducing these types of grid losses will not only bring financial benefit, but also safety benefits as fraudulent installations generally disregard safety requirements. Methods to reduce administrative grid losses are intensified cooperation with police, training field personnel (as well as contractors) in noticing illegal installations and / or performing random inspections. Additionally, providing public information could help in getting more warnings about unsafe situations.

But most effect can be expected from the installation of smart meters. For example, automatically switching off connections when a contract ends will reduce vacancy losses. Another advantage of having smart meters is the option of fraud detection, if legally allowed.

The installation of smart meters can improve the reduction of administrative grid losses

Besides the financial business case and safety benefits, a reduction of grid losses is also attractive from an environmental point of view. The ecological footprint of a DSO decreases when the grid losses are reduced. The average 540 GWh of grid losses per year for the average IDBC company corresponds to circa 380 kilotons of CO2 emissions per year. One easy and practical take-away from the IDBC conference was the result of two DSO’s which decided to lower the temperature in substations.

Greening of grid losses

Another option to reduce the ecological footprint is by “greening” grid losses. Some of the European IDBC companies already buy Guarantees of Origin to proof that their grid losses and own electricity consumption are produced from renewable sources. Other companies are a bit behind with no apparent environmental focus at the moment. When defining a strategy on “greening” grid losses, several levels of greening can be identified:

Purchasing the cheapest available Guarantees of Origin (European market)

  • Generally Norwegian or Icelandic hydropower
  • Costs a few €ct/MWh

Purchasing Guarantees of Origin from a specific source (i.e. wind / solar) and / or location

  • (i.e. from region DSO / from country or neighboring countries)
  • The more specific, the higher the costs (several €’s/MWh)

Participating in additional capacity, for example solar panels on office buildings

  • DSO’s are in a regulated business in which electricity generation is often a prohibited activity
  • Costs will be tens of €’s/MWh 

Greening of grid losses

Gas Grid Losses

The topic of grid losses in gas grids is mainly associated with gas leakages. Gas leakages are primarily considered a safety issue because of the risk of explosions or poisoning. But, as methane is a strong greenhouse gas (25 times as strong as CO2), a reduction of gas leakages certainly contributes to financial and environmental objectives as well.

Practices reducing gas grid losses include replacement programs for materials with the highest gas leakages per kilometer (grey cast iron and asbestos cement) and improving search and repair methods of gas leakages. A case study presented during the IDBC conference showed that the additional costs associated with 20% more leakage search, is less than the profit for reduced methane emissions. More experimental methods to prevent gas leakages are monitoring ground movement and landslides and methods to optimise the pressure in the low pressure network.