Losses in the energy system last year had a “societal cost” of £1.5 billion, with the amount of billable energy failing to reach its intended destination calculated at more than double that.
This is the conclusion of a new report by clean-tech firm, Enertechnos, which has called on Ofgem to explicitly address the issue in the RIIO2 price control for distribution networks.
The company pointed out that electricity losses of 26,412 GWh in 2019, as recorded in government figures, represents the amount that would be needed to power seven million homes for a year or charge 6.8 million electric vehicles.
In identifying the cost of losses to consumers, Enertechnos updated Ofgem’s figure for the “societal cost” of losses, which stood at £48.42 per MWh in 2012/13 prices. Accounting for inflation, the company puts the current figure at £56.51/MWh, giving a total of £1.493 billion.
Enertechnos stressed that a more accurate reflection would be the current retail cost of energy, at around £125 per MWh. On this ratio it puts the amount of billable energy lost every year at over £3.3 billion.
The paper – The road to 2050: Is our energy infrastructure ready to deliver net zero emissions?- called on Ofgem and the government to ensure losses are a focus of ongoing regulation. Specifically, it urged Ofgem to introduce an obligation for Distribution Network Operators (DNOs) to provide two models of cost benefit analysis – one focussed on business-as-usual technology and another on using “innovative equipment”. It said this would allow DNOs to highlight the carbon costs of each approach.
It also asked the regulator to include loss reduction in the criteria for Consumer Value Proposition rewards. Similarly, it suggested insufficient action on losses should incur a penalty through the Business Plan Incentive.
Enertechnos chief executive Dominic Quennell said: “The UK has a chronic problem with energy losses – with one of the highest levels in Europe and losses totalling a shocking 27TWh every year. Left unchecked, this will only undermine our efforts to decarbonise. As more is demanded from the network, we need to ensure that the UK’s cable infrastructure is fit for the 21st century to deliver the resilient and environmentally sustainable system that we all want.”