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 distance in grid contribute to loss of electricity in the transmission.
Loss functionality is currently implemented on the Baltic cable between Sweden and Germany (SE4 and DE) and NordNed cable between Netherlands and Norway. The loss factor on NordNed cable is set to 3.2% while the loss factor on Baltic Cable is set to 2.4%.
Example: A sell position of 100 MW at PX A will lead to buy position of 97,6 MW at PX 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 that is being imported, equals the amount of energy being exported minus the amount of energy that is lost.
As it is preferable to not waste energy, losses will thus be minimized. If multiple paths exist between sending and receiving areas, the lines with the smallest losses will be used first, as this will allow more quantity to be exchanged which promotes social welfare.
In this example, 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 using the direct route from A to B. The route from A to B going though C will only be used when the direct route from A to B is fully used.