Calculating the efficiency of electricity and natural gas networks in regulated energy markets

Abstract

Due to the liberalization of European electricity and natural gas markets and the implementation of regulatory authorities, evaluating the efficiency of electrical and natural gas networks has gained in importance over the last years. Besides econometric methods, algorithms originally developed for network planning may be used for calculating optimal cost-efficient networks as a benchmark for existing networks. In this contribution, alternative approaches for calculating efficiency values are discussed and applied to two near to practice 110 kV networks. As a reference, the potential for reducing network costs over several decades is evaluated for both networks by means of a newly developed network optimization method as well. Based on these results, the loss of accuracy resulting from the exclusive use of econometric methods and highly aggregated data for benchmarking of network system operators is discussed.