Amount and cost of losses June 11 th 2014 - Florence School of Regulation Jose Luis Mata.

Amount and cost of losses

June 11th 2014 - Florence School of Regulation

Jose Luis Mata

June 11th/ Amount and cost of losses. Florence School of Regulation. 2 de 16

AN INTRODUCTION TO RED ELÉCTRICAFirst 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


ENERGY EFFICIENCY ROLE

Energy efficiency is a valuable tool to address these challenges

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


CURRENT SITUATION IN EUROPE

EU’s efforts should focus on this pending issue

Current estimates show EU is not on track to achieve its target of energy consumption reduction

Reduce greenhousegas levels by 20%

Increase share of renewables to 20%

Reduce energyconsumption by 20%

Current trend to 2020

20%

20%

Current trend to 2020

10%


ELECTRICITY NETWORKS AND EFFICIENCYElectricity network losses involve a significant component of electricity demand, and therefore represent an improvement area

Source: Euroelectric

EU network losses vs. total electricity demand

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


Losses= energy generated - energy delivered to customers

“NETWORK LOSSES” FOR POWER SYSTEMS

Energy generated

Energy delivered

Technical losses Non technical losses

power dissipation in electricity system components such as transmission and

distribution lines, transformers, and measurement systems

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

There is not a standard definition of network losses within the EU


There are no standard procedures neither for the allocation of network losses among market participants

Who should be responsible for losses costs?

LOSSES COSTS ALLOCATION


MAIN COMPONENTSTechnical losses are the main part of network losses which include both transmission and distribution losses

1-2%

2- 4%

1- 2%

4- 6%

Step-up transformer from generator to Transmission line

Transmission line

Step-down transformer from Transmission to Distribution network

Distribution network transformers and cables

Source: Schneider Electric


LOSSES TREATMENTIn many Member States, TSO’s are responsible for the procurement of energy losses in transmission through market mechanisms

“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.”

Average costs of losses are accepted by the regulator and used in the tariff calculation

Directive 2009/72 Art. 15-6

Energy generated

Energy delivered

TSO procurement

• Power exchanges

• Bilaterally

• By action/tenders


LOSSES TREATMENTHowever there are alternative models for losses management such as Spain, where consumers pay for all losses (transmission and distribution)

Regardless of the chosen scheme, incentives for network operators can be set into place for losses reduction

Energy generated

Energy delivered

100 GWh 90 GWh

Consumer billed for 100 GWh

• Consumers have to pay the 100%

of the cost.

• Losses are calculated through a

coefficient associated to their

tariff.

• Losses are priced at the same

market price than the energy

consumed


TSO’S ROLELosses 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?


TSO’S ROLETSO are responsible for several activities that play a significant role in the determination of losses

Network

design

Network operation

1 2

Network and equipment

maintenance

3

Nonetheless the room for improvement in these activities for losses reduction is quite limited


TSO’S ROLE

Geographical size of the market, number and dispersion of costumers and generation are important driving factors which can not be modified

There are a number of external factors beyond TSO’s responsibilities with a significant influence on the level of losses

Average demandAverage generation Generation-demand


INCENTIVESEffectiveness of incentives depend on the real capability of TSOs to control losses

Incentives for TSO must be tailored to the manageable part of technical losses

Incentive associated to losses purchase

Incentive= Losses procured – Losses accepted by regulator

• Volume of losses

• Unit cost of losses

Incentive associated to a reference value

Parameters

Incentive= +/- (Loss energy target - Real energy lost) * % Revenue

Do they consider external factors to fix a target?

• Volume of lossesParameters


CONCLUSIONS

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

Amount and cost of losses June 11 th 2014 - Florence School of Regulation Jose Luis Mata.

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