Electricity grids, with both direct and alternating current, are subject to losses. This means that part of the energy injected in one side of the line is lost, so the energy received at the receiving side of the cable is less than the energy initially sent.
Factors such as temperature and how far power is transported contribute to loss of electricity in transmission.
Loss functionality is currently implemented on the Baltic cable between Sweden and Germany (SE4 and DE), the NorNed cable between the Netherlands and Norway and the NordLink cable between Germany and Norway. Loss factor on the Baltic Cable is set to 2.4%, on the NorNed cable 3.2% while the loss factor on the NordLink cable is set to 3.1%.
Example: A sell position of 100 MW at power exchange A will lead to buy position of 97.6 MW at power exchange B (assuming a loss factor of 2.4%).
Hence, the volume physically exported from one sending bidding area will not be the same as the one imported by the receiving bidding area. The capacity limits allocated to each line apply to flows before losses.
Losses impact on volume and on prices
When no congestion (no congestion rent):
When line A>B is congested:
In an ATC network model without losses:
In an ATC network model with losses:
In other words, the energy being imported equals the amount of energy being exported minus the amount of energy that is lost.
As it is preferable not to waste energy, losses will thus be minimised. If multiple paths exist between sending and receiving areas, lines with the smallest losses will be used first, as this will allow more quantity to be exchanged.
In the example below, there are two paths from area A to area B: A->B and A ->C ->B with different losses. In this case energy will be sent from A to B using the line with smallest losses via the direct route from A to B. The route from A to B going through C will only come into play when the direct route from A to B is fully used.