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Technical and Operations > Efficiency in Operation (EO) > Electricity Loss Reduction

Overview
Indicators
Self-assessment
Simulation
Best-practices
Case Studies

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Electricity Loss Reduction

This activity assesses the degree of productivity and efficiency of the transmission and distribution systems of the utility. It analyzes indicators and benchmarks and introduces best practices when designing a comprehensive plan to improve the technical and non-technical (commercial) electricity losses.

Electricity losses usually converge to the difference between the amount of electricity that enters the network and the amount that exits the network (final demand consumption and/or energy delivered to other networks). In the case of a utility that it is vertically integrated, the losses represent the difference between its generation injected into the grid and the amount consumed by the final demand. In a few cases, it may include the electricity billed to consumers but not collected after a reasonable amount of time (usually 180 days). Electricity losses can be divided in two parts:

* Technical losses: correspond to all the energy dissipated in the transport of electrical current in conductors, equipment, and connections due to resistance in the distribution network. Technical losses can be further divided into: (i) fixed technical losses (caused by physical inefficiencies such as hysteresis, Eddy Currents losses in the iron core of transformers, and the corona effect in transmission lines) and (ii) variable technical losses (which can happen when power current flows through the lines, cables, and transformers of the network. These are also called load losses, or series losses).

* Non-technical losses or commercial losses are those usually associated with the sale of energy supplied to the end user. There is a part of the energy that is produced, transported, and supplied; however, it is not invoiced. These losses can be caused by internal or administrative problems (such as errors in measurement, accounting or record keeping) but they are usually associated with the consumer's own illegal intervention, such as thefts, fraud, alteration of meters, or unmetered supply (when the consumer is responsible).

In this context, the reduction in electricity losses brings important financial benefit to the distribution utility but they cannot be an isolated activity. The reduction of losses is usually part of a strategic transformation of the utility with other performance improvement activities as it requires prioritization of investments and allocation of resources. These are described later in the best practice section.

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IDB strategy for energy

Latin America and the Caribbean are rich in energy resources including hydrocarbons, hydroelectricity and biofuels. But this wealth is unevenly distributed. Approximately 20 million people lack access to modern electricity services, and fuel imports consume a growing percentage of smaller countries’ budgets. The IDB helps member countries expand the coverage and quality of energy services such as electricity and natural gas. The IDB also finances programs to improve energy efficiency, foster cross-border energy integration, and diversify the energy matrix by sustainably exploiting renewable and non-renewable energy sources.

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Data and statistics from the energy sector, including indicators on electricity losses can be found at the IDB energy hub.
The energy hub is constantly updated with new information.

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Electricity Loss Reduction

Developing a comprehensive and sustainable electricity reduction program requires a "holistic view" integrating several activities. This section prompts the user to assess its degree of readiness on these activities that can be followed by the best practices in each activity.

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Public Actions and State Leadership

National and State political support

How much support the utility has from the national authorities to introduce a comprehensive loss reduction program? Is this program fully articulated with the authorities and does the utility has their commitment towards implementation?

Engagement with local authorities

How engaged is the utility with law enforcement authorities such as local police on matters of electricity theft? Is this collaboration clearly understood by everyone and described in a transparent manner?

Regulatory and normative aspects

Does the regulatory framework contemplate proper incentives to reduce electricity losses? How is the tariff calculation impacted by electricity losses?

Operations, Commercial and Financial

Baseline and master plan

Does the utility have a baseline study calculating the technical and non-technical electricity losses, and a roadmap establishing the priority activities to reduce losses in a comprehensive plan? How updated is this baseline plan?

Organization

Does the utility have a unit dedicated to reducing electricity losses? What is the government and authority level of this unit?

Investment technologies

Has the utility identified the proper technologies and business intelligent tools to efficiently reduce electricity losses? Have these technologies been included in the investment plan?

Commercial systems

Does the utility have a commercial system that is well managed with control mechanisms, and proper governance with clearly defined user access rules?

Infrastructure plan

Has the utility developed an infrastructure investment plan and identified financing options to implement the loss reduction program?

Social and Equity Considerations

Community Engagement and Social Considerations

Has the utility engaged the relevant communities identifying affordability considerations and facilitating access to credit and ability to pay?

Ecosystem of services and providers

Has the utility established a training program with contracted crews and partnerships with inspection companies with incentives to reduce electricity loss?

Public Actions and State Leadership

National and State political support

Engagement with local authorities

How engaged is the utility with law enforcement authorities such as local police on matters of electricity theft? Is this collaboration clearly understood by everyone, publicly available, and described in a transparent manner?

Regulatory and normative aspects

Does the regulatory framework contemplate proper incentives to reduce electricity losses? Are these incentives designed as rewards or penalties? How is the tariff calculation impacted by electricity losses? 

Operations, Commercial and Financial

Baseline and master plan

Organization

Does the utility have a unit dedicated to reducing electricity losses? What is the governance and authority level of this unit?

Investment technologies

Has the utility identified the proper technologies and business intelligent tools to efficiently reduce electricity losses? Have these technologies been included in the investment plan?

Commercial systems

Does the utility have a commercial system that is well managed with control mechanisms, and proper governance with clearly defined user access rules? How is this access reviewed over time?

Infrastructure plan

Has the utility developed an infrastructure investment plan and identified financing options to implement the loss reduction program? How is this investment plan in losses aligned with other investments and expansions in transmission and distribution networks?

Social and Equity Considerations

Community Engagement and Social Considerations

Has the utility engaged the communities identifying affordability considerations and facilitating access to credit and ability to pay? How often doe the utility meet with representants of the community?

Ecosystem of services and providers

Has the utility established a training program with contracted crews and partnerships with inspection companies with incentives to reduce electricity loss?

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Electricity Loss Reduction

This tool facilitates comparing the performance of an individual utility with the database of utilities in the Latin America and Caribbean region. The users can enter their individual performance on the indicator and the chart will display its performance against the database.

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Electricity Loss Reduction

International experience in the management and reduction of electricity losses indicates that a company must have a “holistic view” of this activity since it integrates several units, and the results have a large impact on its financial and operational results. The LAC region has implemented successful electricity loss programs, and these are illustrated in the next section of references. Considering the indicators calculated for this company compared to external references, and the good practices described below, it is possible to establish an action plan with the activities to reduce electricity losses.

For each practice, the main “insights” found in companies that have been successful in this field are listed. These insights are not authoritative, since each company must adapt the practices to its reality, however they serve as general guidelines to assist the company to advance its respective good practice.

The practices of electricity losses are organized in 10 items across three main groups which are presented next: (i) public actions and State leadership; (ii) operations, commercial, and financial practices part of a distributing company (core part of the activities of a distribution utility), and (iii) social and equity considerations.

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Practice groups

Public Actions and State Leadership

Operations, Commercial and Financial

Social and Equity Considerations

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Best practices

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Electricity Loss Reduction

For more information regarding the financial management and sustainability, please consult the Case Studies:

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Power Lost: Sizing Electricity Losses in Transmission and Distribution Systems in Latin America and the Caribbean

Electricity loss is a key component in measuring the efficiency and financial sustainability of the power sector. It represents the difference between the amount of electricity that enters the network and the amount that is delivered to end-users, reflecting the degree of productivity of transmission and distribution systems. The objective of this Brief on electricity losses in transmission and distribution systems is to map the severity of the problem across LAC countries.

Best practices in the electric power distribution sector in Brazil promoted by ABRADEE

Brazilian Electricity Distribution Association through its biannual seminar SENDI - Seminário Nacional de Distribuição de Energia Elétrica (Years 2010, 2012, 2014, 2016 and 2018).

Increasing the efficiency of the Electricity Sector

In a vertically integrated public electricity sector, as is the case in Ecuador, the control of electricity losses in the National Distribution System has been one of the central issues of the last decade. Through training, targeted investments, continuous monitoring, and the involvement of the country's authorities at all levels, actions were implemented that made it possible to reduce electricity losses by 10 percentage points in seven years.

This technical note describes the main initiatives of the CEEE Group Recovery Program, the initial results achieved so far, and the lessons learned. These initiatives are focused on the following areas: (i) reduction of loss levels in the electric power d

This technical note describes the main initiatives of the CEEE Group Recovery Program, the initial results achieved so far, and lessons learned. These initiatives focus on the following areas: (i) reduction of loss levels in the electricity distribution system; (ii) improvement of quality and operations indicators; and (iii) introduction of social inclusion and citizenship programs in highly complex areas.

TECHNICAL NOTE ADVANCING POWER SECTORS’ SELF-RELIANCE THROUGH ELECTRICITY SYSTEM LOSS REDUCTION

Total transmission and distribution losses (T&D losses) are the canaries in the coal mines – they are the primary indicator by which you can quickly judge the financial and operational health of an electricity utility. In brief, T&D losses represent the amount of electricity produced and injected into the grid but not paid for by users due to technical inefficiencies and to theft, meter tampering, and billing and accounting errors. (See Box 1 for detailed definition).

In the Dark How Much Do Power Sector Distortions Cost South Asia?

This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not ecessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work.

Improving Power Distribution Company Operations to Accelerate Power Sector Reform

Many emerging market distribution utilities are in a state of chronic disrepair, both technically and fiscally. After an initial surge of interest in the 1990’s, there has been a near complete disappearance of private investors

Best practices and strategies for distribution loss reduction

The implementation of power sector reforms has embarked India on the journey of achieving a national turnaround.

UNITED STATES DEPARTMENT OF AGRICULTURE

Losses and purchase price should be considered when deciding which transformer to purchase. The purpose of this bulletin is to present a uniform approach that can be used to determine the dollar value of these losses over the life of the transformer.

Reducing Technical and Non‐Technical Losses in the Power Sector

In electricity supply to final consumers, losses refer to the amounts of electricity injected into the transmission and distribution grids that are not paid for by users. 1 total losses have two components: technical and non-technical.

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Area

Subarea

Activity

Number of activities:

Activities

Electricity Loss Reduction

Assesses the degree of productivity and efficiency of the transmission and distribution systems and it is analyzed to design a plan to improve the technical and non-technical (commercial) losses.

Quality of the technical service

Measures the reliability, continuity of supply, and the voltage quality of the electric system using a set of standard metrics. Overall, it relates to the ability of the electric system to perform its functions.

Management of O&M cost

This activity considers how the utility manage its Operation and Maintenance (O&M) activities and includes best practices. It also includes the main accounting and financial practices that improves the efficiency and transparency of the utility on its financial management activities.

Attention to the client

Assesses the interaction between the service provider (distribution company) and the user on services such as responsiveness to customers, billing information, and handling complains. Main objective is to provide best service to the customers.

Access to service

Describes how the utility is supporting national electricity plans to achieve universal electricity coverage. It also includes affordability of the electricity service to less vulnerable parts of society.

Efficiency and execution of the investment plan and asset management

Reviews the utility’s methodology and process of its investment plans and the prioritization and flexibility to deal with unforeseen events. Also includes the activities of maintenance of existing assets.

Modernization and vision of the future

Reviews how the utilities are modernizing their activities and considering new business models focused on services to meet future needs of customers and technology disruptions. Also includes the activities of electromobility.

Technology, digitalization, and cybersecurity

Reviews the initiatives utilities are undertaking to introduce new technologies and increase digitalization of its network and infrastructure. Also includes cybersecurity activities and controls to mitigate its exposure to risks.

Innovation initiatives

Considers the level of readiness of innovation culture in the utility, including a review of the internal processes, behavior, and resources dedicated to innovation. Also includes the partnerships (and the results) the utility has established with leading organizations to foster innovation.

Financial management and sustainability

Analyzes the financial health and sustainability of the utility and to what extend its revenues cover the costs. Also includes assessment of the balance sheet and remuneration to the capital.

Commercial management

Assesses the commercial management practices and processes of an electricity utility in activities such as billing, collection, and debt management. Also includes management of customer registers and databases.

Autonomy, decision making, controls, and transparency

Reviews the main activities of corporate governance of a utility in activities such as accountability, autonomy and transparency and control. Reviews the roles and responsibilities among the Board of Directors, Management, and the other stakeholders.

Strategic planning, organizational structure and Human Resources

Assesses that a performance management is in place to monitor the utility’s performance and the aspects of people management. Also reviews the topics related to gender equality, diversity, and inclusion.

Climate change mitigation

Reviews activities distribution companies have introduced to mitigate climate change with a focus on energy efficiency measures. Also reviews their commitments and activities towards distributed generation with renewable energy and electromobility.

Environmental and social aspects

Reviews the environmental and social standards practices of the utility, and their adherence to local legislation and international best practices. Reviews also utility’s contribution to the Sustainable Development goals.

Resilience and emergency planning

Assesses the preparedness of the utility infrastructure against natural disasters and its contingency plans. Refers to the capacity of the energy systems to cope with the hazardous and maintain its essential function.