KEY POINTS:
Consumers are paying more than $200 million a year for power "lost" on the distribution system.
A discussion paper from the Electricity Commission shows average losses of 10 per cent across the entire system and up to 19 per cent at peak times among distributors.
Losses occur when energy is dissipated from overhead lines, cables and transformers and due to metering problems.
New Zealand has one of the highest power loss rates in the developed world and the commission aims to develop a system which will ensure there are better incentives to reduce system losses.
The draft paper says that under the current regulatory and market structure generators, Transpower, lines companies and retailers have any responsibility to reduce losses on networks.
"Distribution networks impose potentially unnecessary costs on electricity consumers and the economy as a whole.
"Unnecessarily high losses are costly and at times cause an environmental impact due to marginal thermal generation."
Just on 70 per cent of New Zealand's power is generated from largely remote hydro dams meaning the distribution network is stretched. Transpower alone has nearly 12,000km of high voltage lines.
Transpower's general manager of grid investment, Tim George, said work was under way to cut back on its share of the losses - up to 4 per cent from its own system - but given the $3.5 billion upgrade across the entire grid, it was not a high priority.
"The harder we push out existing system it tends to drive our losses up," he said.
Capacitors in substations reduced losses but at $3 million to $4 million each were a significant investment.
Transpower was also trying to devise a system were they could be more efficiently activated. In Australia, the grid operator had spent months working on a software solution.
"This is not a trivial issue."
Another way to reduce losses was to install more lines to lower resistance, but this was prohibitively expensive.
Major Electricity Users Group executive director Ralph Matthes said big consumers kept an eye on lost power but for them it wasn't the issue it was for smaller consumers.
High voltage lines to major industries were more efficient than smaller single lines to homes.
"It's a difficult issue.
"There need to be the right pricing signals to get the right technology."
There's a fraction too much friction
Technical losses are those that are due to the physics of the power system, usually due to resistance (like friction).
These losses are mainly manifested as heat in cables or transformers. They are influenced by the diameter of the power line, the amount of energy being put down it and the length of the line.
New Zealand has a long, narrow system due to its geography and low population, where power has to travel relatively long distances either from a generator or a transformer. This means losses may be higher than for more densely populated areas. Non-technical losses include errors in metering and power theft.
