In any electric power distribution system there are inevitable losses associated with the transport and use of electricity. The peninsular system is not an exception and under the current framework such losses have a strong impact on the bill for final consumers. In this article we briefly analyze the losses of the Spanish system and we calculate through a practical example the real cost that the customer ends up paying, both for the losses themselves, as well as for the associated imbalances in which they are inexorably forced to incur.
No matter the level of development, the materials or the design of an electric power transport system, there will always be a fraction of generated energy that will never reach the final consumer. These losses can come from very diverse sources, being accepted in the sector two large groups: the technical losses and the non-technical losses. The first are inherent to the electrical transmission while the second group comprises those related to the use that the human being makes of the system.
Each consumer of electrical energy must bear the cost of the losses associated with their consumption. The calculation of the amount of energy that has been lost along the way from the generation unit to the end-point of consumption is established by law in RD 216/2014. In ANNEX III of this document, reference loss coefficients are set for each tariff and period and are subsequently adjusted through hourly adjustment coefficients that are periodically updated by Spanish TSO Red Eléctrica Española (REE). Through its successive settlements REE publishes estimated coefficients (Kest) that allow recalculating the reference coefficients published in the Royal Decree:
The final settlement (C5) is published just one year after the moment in which the energy consumption took place. It stablishes the KREAL coefficient, which allows knowing the coefficients for obtaining final and definitive losses associated with a tariff and period.
Electrical losses and collateral imbalances
As we commented a few weeks ago in our blog entry Transmission System imbalances: A general overview from the consumer a consumer must buy in advance the energy that will be needed in a fixed future time interval, including the losses associated with that consumption. Consumers needs to know in advance their consumption both downstream and upstream of the meter. That is, they need to know, before even the system itself does, the losses associated with their consumption, task that seems directly impossible and forces the consumer to incur in electric imbalances that will entail an additional cost to the one related to the energy consumed and its corresponding losses.
To better understand the consequences of the electrical losses costs being exclusively assumed by the consumer and that these cannot be known in advance, we analyze a practical case. We study the consumption, losses and the effect of its uncertainty for a consumer under tariff 6.1A during the year 2017, for which the definitive losses were known after the publication of the corresponding closing settlement in January 2019.
For this example, we will assume that the consumer is aware of the future exact downstream consumption for their purchasing programs and that applies the last updated loss coefficients by REE in their A1 settlements. In this case, the imbalance incurred by the consumer will be due solely to the upstream consumption, that is, due to the difference between the estimated losses and the final losses.
The following figure shows the first estimated loss coefficients published by REE in the settlements A1 and the definitive C5 (final settlement) for 2017 and tariff 6.1A. As mentioned above, the A1 coefficients are calculated prior to the purchase of energy and are the ones that most consumers apply to their energy programs to make their final consumption program raised to central busbars (BC).
Loss coefficients have a considerable hourly variability, oscillating throughout the year between 4-12% and being higher in the colder months of the year. This summer / winter variation is surprisingly enough, but that analysis is out of the scope of this article. Apart from the fact that users under this tariff must purchase an average of 7.3% more energy than actually needed, it must be highlighted the difference throughout each hour of the year between the first losses published by REE and the definitive. The following chart shows the difference between the initial and final coefficient for each hour:
The variation between the estimated loss and the final loss ranges between -4 and 4% with an average annual difference of 0.27%, being higher the initial losses (ideally this should be 0% so there is no bias). However, the costs for imbalance in the electricity sector are calculated with hourly granularity and, therefore, consumers are inevitably forced to incur in electric imbalances that can reach up to 6% of the energy consumed upstream of the meter.
In the case-study our customer is a direct buyer in the spot market that daily participates in the OMIE market. In 2017 the sum of its programs and hourly losses are shown in the following table:
Even if the consumer knew its exact downstream consumption to nominate in their programs, because of applying initial estimations and not definitive values for the hourly losses, there will always be imbalances that will bring additional expenses. In this case-study, the sum of the absolute imbalance has been 236 MWh, with a cost of 571 € for the client. For more information about the calculation of the imbalance costs the reader can consult our above-mentioned article on the topic.
The added cost of € 571 can be translated to a more common value in the sector: 2.4c€/MWh nominated. This value may seem small, but the importance relies on the fact that the consumer has no material way to escape from paying it. In addition, this value refers to a single consumer of a certain tariff, but when the problem extends to all the users of the network and all tariffs, the cost of these aggregated imbalances grows substantially.
Of the approximately 252 TWh of total energy demand in the Spanish Power System (considering losses) during 2017, 55.3 TWh were demanded through tariffs 6.1*. By grossly discounting the part corresponding to losses, about 51 TWh were consumed downstream of the meter in tariffs 6.1. Applying the 2.43c € / MWh rate, costs due to imbalances associated with the uncertainty about the value of the losses to use only in this tariff yields 1.1 M €.
With this practical example, we want to highlight on one hand the high costs of the electrical losses for the consumer and, on the other hand, the fact that consumers must face unfair imbalances related to the uncertainty of the losses of the system. We support the voices of the sector that in recent articles have already claimed the injustice of the current losses cost structure, its excessive impact on the final customer and the helplessness and impotence to which the consumer is subject.
The problem is not recent, and it does not seem that there have been many improvements in recent years. The evolution of losses in the Spanish electricity system (data from the World Bank) shows that in the last 30 years there have been no improvements and we are at loss values similar to those present in the 1980s. Technological improvements, both to optimize the electric transport and to detect the fraudulent use of the network, should be reflected in a reduction of the average coefficients of losses, but it is not doing so. The efforts should be materialized in reductions of the average coefficients of losses, approaching values from neighboring countries such as France (6.34%) or Italy (6.99%).
It is possible that in the upcoming years the coefficients will be reduced due to the development of self-consumption and distributed generation. These technologies will bring the source of energy closer to the point of consumption and will surely have a positive impact on the average loss coefficients. In parallel, other technologies related to artificial intelligence are supposed to help optimizing transport and increasing illegal connections to the network detection.
However, today the end consumer already carries on his back with excessive regulated costs and losses for which he is not responsible. While the technological improvements arrive, other more immediate options can be launched. One option, for example, is to share the costs of both the losses themselves and their collateral imbalances among all the agents, so that they do not fall, like everything else, on the consumer side.
*Data from medbcdem files from REE C5 settlement, published on their data website https://www.esios.ree.es/es