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Utilities worldwide lose $96B each year from nontechnical losses, study says

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Essential Energy Insights - January 2021


Utilities worldwide lose $96B each year from nontechnical losses, study says

As demand for electricity increases in the developing world, utilities around the world are losing $96 billion each year to electricity theft, fraud and billing errors, according to a new study by Northeast Group LLC. The effects from what are called nontechnical losses can be "crippling," and lead to increased electricity prices for paying customers, financial instability for utilities and expensive government subsidies, the study from the energy and infrastructure consulting group said.

Nearly a quarter of nontechnical losses worldwide, $23.2 billion, occur in India, with 17 other countries experiencing losses of over $1 billion per year, the study said. The majority of those countries consume large amounts of electricity and experience moderate loss rates; the exception is Nigeria, which has lower electricity consumption and higher losses.

Large markets like the U.S., Brazil and Russia experience multibillion-dollar losses each year, according to the study.

"Labor-intensive premise inspections and account auditing often cost more than the actual value of the losses, enforcement is always challenging, and previously [advanced metering infrastructure] AMI metering was prohibitively expensive in many countries," the study said.

However, utilities across the globe are investing more in AMI and revenue protection measures because the cost of those measures have dropped, the study said, predicting that over the next decade, those investments would cumulatively reach $222 billion. "These solutions are spreading from developed countries where they are in many cases already well established to emerging market countries where the problem is significantly larger and critical to the fundamental health of many countries' utilities," the study said.

Analytics, which use data from AMI meters, help utilities identify losses and predict future losses, and lead to the highest non-technical loss reduction, the report said. The technology generally adds 50 cents to $4 to the price of electricity per customer per year after existing AMI costs, but costs can vary by country.

"Non-technical losses are often hidden costs and have received little public attention, but have enormous costs for utilities, customers and governments," Ben Gardner, president of Northeast Group, said in a statement. "This $96 billion problem not only results in higher prices for paying customers and costly government subsidies but also a public safety crisis in some countries with dangerous illegal power connections."