During the transmission of electricity, some energy is 'lost' from the transmission system, usually in the form of heat. This lost energy is known as transmission losses. Transmission network losses result from the transport of power between power producers and grid supply points through transmission infrastructure equipment, such as power transformers, overhead lines, cables, and switchgear. We have a duty, as part of our licence obligation, to report on transmission losses. We publish an annual transmission losses report along with a strategy that sets out how we intend to deal with losses.
As part of the Electricity Incentives consultation, Ofgem proposed replacing the old financial incentive on transmission losses with a reputational incentive. This reputational incentive acknowledges that National Grid only manages around three per cent of the total energy on the system through the balancing mechanism (BM), and therefore its limited control over the level of losses.
By removing the financial incentive, it removes the possibility of windfall gains and losses due to market developments beyond our control. These market developments could affect the level of transmission losses, which therefore affects our performance against the incentive scheme and BSUoS charges.
Under the new scheme, we are required to report on any actions taken in which we consider transmission losses and system transmission losses more generally. This information can be found in the Monthly Balancing Services Statement
We are also required to report on the level of transmission losses and expected impact of market developments. This information can be found in our Electricity Ten Year Statement (ETYS). The Transmission Losses Strategy and annual Transmission Losses Report are to be used in conjunction with the ETYS.