Our leaky electricity networks

Power losses on the UK’s electricity networks results in higher bills and needless emissions. It’s time the sector took power leakage seriously.

Extreme weather and rising consumer costs throughout 2019 have seen utilities pushed firmly into the limelight. While this creates a fertile environment for change, we need to see a focus on a problem nobody is talking about – energy losses.

In comparison, the water industry has faced heavy criticism from Ofwat about leakage, while Labour is calling for the whole sector to be renationalised. Consumers and policymakers have grasped how serious water leakages are because it’s easy to imagine water gushing away and see money washing down the drain. The solution is also clear – fix the pipes.

Why, then, is nobody talking about energy losses and our outdated network of energy cables? Energy networks face the same problems as the water industry and are, quite simply, getting away with it. The consequence? Higher bills for consumers and unnecessary carbon emissions.

To make matters worse, the Department for Business, Energy and Industrial Strategy (BEIS) last week released its annual Digest of UK Energy Statistics, which confirmed a worrying trend – losses are not going away.

Last year, losses in the UK totalled 26,663GWh – or 7.6 per cent of total demand. These losses cost the country £1.45 billion, according to Ofgem’s “societal cost of losses” (adjusted for 2018 prices). They also total around 1.5 per cent of the UK’s carbon emissions, and if this power reached its destination, it would be enough to power almost seven million homes

At a time of rising energy costs, consumers are left to foot the bill for energy that never reaches their home. Instead of solely focusing on market remedies and improving consumers’ energy efficiency to bring down bills, government and Ofgem should focus on a quick win to reduce consumer bills – efficiency in the transmission and distribution of energy.

Not only do losses have a financial cost, they also have an environmental impact. Losing energy means more energy must be generated to meet demand. In turn, carbon emissions are unnecessarily high, and renewables undermined. Bringing down the total generation needed to service demand would allow renewables to make up a bigger share of the UK’s energy mix and slash carbon emissions.

Tackling losses head-on would not only result in a victory for consumers but would also be a win for both government and Ofgem’s work in supporting the transition to net zero.

At Enertechnos we welcome the 2050 net zero target, and the ambitious policies to get us there, but tackling losses must be a part of this road map. At present, losses are threatening to undermine government policies – particularly in terms of electrification of sectors such as heat and transport. These policies are a key pillar of the transition to net zero but will inevitably put extra pressure on the grid, risking brownouts and blackouts.

As demand increases, losses will increase, compounding the financial and environmental impacts. By reducing losses, much of the extra demand needed can be met without the need for extra generation – helping to facilitate the shift to net zero.

Just as with the water industry and leakages, it is time for action on energy losses. But what should this look like?

First, to support net zero ambitions, government and the regulator must put losses at the heart of their thinking across the energy market – including the retail market and consumer protection, the shift to low carbon generation, and improving efficiency. Doing so will support government’s goal of a future-proof energy market with the interests of consumers at its heart.

Second, we must recognise that there is no time to lose. Cable infrastructure has a long lifespan, so the infrastructure we install today must be fit for the demands of tomorrow. As programmes of replacement are conducted and new infrastructure is built – from connecting renewables to rolling out EV charge points – loss reduction must be a priority.

Third, policies of distribution network operators (DNOs) are key – 71 per cent of losses occur in the distribution system. It is right that we are beginning to see some DNOs take the lead on this issue, but across the sector this activity must be unlocked and accelerated.

To do so, government and regulator must ensure the right regulatory framework to encourage and incentivise loss reduction innovation from the DNOs.

As part of our work, we at Enertechnos are partnering with a leading DNO to undertake a real-world trial of innovative cabling that can play a role in reducing losses in the grid.

Just because we cannot see energy losses – as with burst pipes and leaks in the water industry – this does not mean their impact isn’t as severe. Losses should not be accepted as the norm. It is essential that across government, regulator and industry, action is taken now to ensure the problem of losses does not stretch on and on, as it has historically, with an increasingly negative impact.