Loss Modeling in T&D Systems: Is $25 Billion Worth Losing?

Deck: 
Energy players can lose a lot more than their shirt if they fail to model transmission losses properly.
Fortnightly Magazine - August 2002
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Energy players can lose a lot more than their shirt if they fail to model transmission losses properly.

It's no secret that the delivery of electricity from the generator plant to the end user causes energy losses in the power system. Since 1960, losses typically have ranged from 8.5 percent to 10.5 percent of total generation annually. If the national average retail price for electricity is used, these losses have a value of $25 billion-a staggering sum that evaporates into thin air if not properly modeled, tracked, and accounted for. However, a close look at the information technology (IT) platforms of power marketers, off-the-shelf transaction management systems, and IT systems used by energy service providers shows that loss modeling in many of these product suites is very rudimentary, if not non-existent.

Each market has its own methodology for calculating losses. Market participants doing business in a given market must therefore have an intimate understanding of how different markets model losses, and in turn have an IT system capable of accounting for losses using the given market's methodology.

Most market participant IT systems reflect a rather casual regard for the importance of losses in the energy trading business. The financial implications of not properly accounting for losses can be significant.

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