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EDITOR IN CHIEF- ABDULLAH BIN SALIM AL SHUEILI

Reductions in system losses yield RO 822m in savings for power sector

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MUSCAT, JULY 24 - A comprehensive effort led by the Authority for Electricity Regulation Oman (AER) to achieve consistent reductions in losses incurred in the transmission, distribution and supply of electricity to consumers around the country continues to deliver solid gains. In value terms, when assessed against a peak loss of 24.6 per cent registered in 2004 around the time of the landmark restructuring and liberalisation of power sector in Oman, the cumulative savings amount to a staggering RO 822 million, according to the regulator.


In any electrical network anywhere in the world, a certain amount of energy is lost due to technical and non-technical factors. Also described as system losses or Transmission & Distribution (T&D) losses, they refer to the difference between the amount of energy delivered to the distribution system and the amount of energy billed to customers. The difference can be as high as 15 per cent even in advanced countries, according to experts. System losses are typically of two kinds: technical and non-technical. Technical losses occur naturally as a result of energy dissipating in transmission lines and transformers due to internal electrical resistance. Non-technical losses, on the other hand, are attributable to factors unrelated to the power system. They are the result, for example, of billing inaccuracies, power theft, faulty or tampered meters, accounting errors and so on.


In the Sultanate, system losses that at prevailed at a peak of around 25 per cent of total supply in 2004 have since plummeted to 8.8 per cent in the North Oman grid — also known as the Main Interconnected System (MIS) — in 2017. This compares with a figure of 9.2 per cent in 2016. The MIS accounts for 90 per cent of the total share of power supply in the Sultanate, the regulator noted in its 2017 Annual Report published here this week.


In the Dhofar Power System (DPS) — a much smaller grid covering mainly Dhofar Governorate — system losses dipped slightly to 11.5 per cent in 2017, down from 12.7 per cent a year earlier. However, in the regions covered by the Rural Areas Electricity Company (RAECO) — encompassing all of the areas that do not fall under the MIS and DPS grids — system systems spiked to 16.3 per cent in 2017, up from 14.7 per cent in 2016, the Authority stated.


Commenting on the trend, the regulator said: “The Authority is pleased to note that the outturn MIS losses in 2017 (of 8.8 per cent) are lower than the target level of losses set for the year in 2014 when the distribution losses target were set. The significant losses reductions achieved since the sector restructuring in 2005 reflects the application of a clear incentive based price control mechanism and the constructive responses of licensees.”


Losses reductions, the Authority explained, are of “considerable economic value” in terms of achieved and future cost savings. “If the cost saving of a 1 MWh reduction in losses is RO 10, the reduction in MIS losses from 9.2 per cent in 2016 to 8.8 per cent in 2017 returned benefits of around RO 1.1 million (the benefit is RO 49.3 million if assessed against 2004 losses of 24.6 per cent). The cumulative value of MIS losses reductions since 2004 is RO 29.3 million, and in present value terms the benefit of MIS losses reductions in 2017 is around RO 18 million, using a discount rate of 6 per cent (RO 822 million if assessed against 2004 losses of 24.6 per cent). These figures take no account of investment savings in generation and network infrastructure, which would significantly increase the value of losses reduction benefits,” the regulator added.


Conrad Prabhu


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