Energy theft has a long and dishonourable history. As far back as the late 19th century, pioneering utility the Edison Illuminating Company was complaining about attempts to tamper with electricity meters. In 1886, Edison’s company identified numerous illegal connections stealing electricity. It responded by sending a surge down electricity lines to burn out illicitly attached machinery.
Market intelligence has estimated that energy theft, also referred to as non-technical losses, costs utilities up to US$96billion annually – equivalent to four times the annual GDP of Cambodia.
In its Emerging Markets Smart Grid: Outlook 2017 report, Northern Group LLC indicated a staggering US$64.7 billion could be lost each year to these thefts in developing economies.
The Energy Loss Landscape
The particulars of energy theft can vary widely. Meter tampering, interfering with devices designed to measure fair energy use, is a key line of attack. Direct tampering, on the other hand, involves illegal hook ups from transmission networks to individual homes or businesses, completely bypassing the electricity meter. In some cases, this theft takes place on an industrial scale. In a recent case in Malaysia, police raided two illegal cryptocurrency operations which had stolen an estimated RM2.5 million worth of electricity to generate valuable bitcoin.
operational costs are factored in when regulators set upcoming electricity tariffs
These thefts put pressure on the system, driving up operational costs for utilities. This means more resources are needed to maintain and repair energy transmission systems, as well as investigate unusual consumption patterns. These operational costs are factored in when regulators such as Malaysia’s Energy Commission assess the energy market and set upcoming electricity tariffs. For Malaysia, those costs can ultimately be passed on through mechanisms such as imbalanced cost pass-through, unfairly impacting overall electricity prices.
In extreme circumstances, energy theft can even threaten the underlying stability of energy utilities, and necessitate costly interventions by government, such as with the raided cryptocurrency operation.
Tackling Energy Theft
Electricity theft is a problem which often lacks public recognition. In some jurisdictions it’s even seen as a commonplace approach to gain free access to power, or to pay a lower price for the power that is consumed. The reality is that for every individual or business happy to steal electricity, the ripple effect causes increased costs for maintenance and transmission of electricity.
It’s not just the financial implications of energy theft that we should be aware of. There are significant safety implications for tapping into electricity transmission networks without the right equipment or training. Analysis from the US indicates about 40% of serious electrical injuries caused by acts such as energy theft are fatal.
The safety of direct transmission lines and the stability of an area’s overall supply are also compromised if energy theft runs rampant. Since industry regulators and utilities rely on registered household accounts to forecast the nation’s electricity demand, stolen and undocumented usage from the grid can severely impact the stability of electricity supply. In these cases, energy theft can even threaten the reliability of supply to honest customers in the nearby area.
Analysis indicates about 40% of serious electrical injuries caused by acts such as energy theft are fatal
The battle to prevent energy theft has been a persistent challenge for utilities. Mechanical solutions have been introduced to create increasingly sophisticated anti-tamper mechanisms on electricity meters. These go some way to solving the problem, but does nothing to tackle those bad actors stealing directly from transmission networks.
A ‘bodies on the ground’ approach has long been utilised within the industry. This process uses expert investigators and analysts to physically investigate potential areas of theft. While this has been a valuable solution for industry over the decades, it requires substantial resourcing, and is limited by physical access to these areas. With policing transmission grids and eliminating energy theft cases falling under the purview of law enforcement, there is only so much utilities can do to help manage operating costs.
In recent years, more sophisticated digital tools have become available. Smart meters form an important part of the anti-energy theft mechanism. These connected meters not only provide valuable data insight on individual consumption within a home, but can be aggregated across a network to create a more strategic map of what regular consumption should look like.
Data and analytics can provide predictive modelling that quickly identifies anomalous energy consumption across an electricity grid. This can help inform physical interventions, as with the case with the Malaysian bitcoin mining operation.
Machine learning and artificial intelligence solutions provided even greater depth to these anti-theft solutions. These digital platforms can use sophisticated algorithms to analyse insight not only from demand-side consumption, but across the whole energy network.
Data from transmission grids, substations, and smart meters provide a detailed overview of the energy ecosystem. This massive volume of data can be analysed in real-time, highlighting and flagging vulnerabilities or fluctuations that indicate theft or technical issues. The smarter a connected grid is, the more data it collects, and the more accurate such reporting can be.
No Small Price to Pay
Digital tools offer a powerful solution to mitigate the impact of energy theft
Ultimately, regulation plays a huge part in framing this landscape too. In Vietnam, energy theft is subject to administrative fines, from VND2mil for the smallest thefts, up to VND50mil for larger thefts. The most significant energy thefts can be transferred for criminal prosecution. In Singapore, energy theft is covered under the Public Utilities Act, Electricity Act, Gas Act, with punishment up to SGD50,000, plus three-times the total of electricity stolen, and imprisonment of up to three years.
In Malaysia, the Electricity Supply Act 1990 governs electricity consumption. Section 37 of the act sets out punishments for anyone who dishonestly abstracts electricity, consumes electricity, uses electricity, or prevents any meter from recording the output of consumption.
While legislative action can serve as a powerful deterrent, technical capabilities must be backed by the levers to penalise those whose thefts drive up energy costs for others. Digital tools offer an increasingly powerful solution to mitigate the impact of energy theft.
Yet fraudsters and bad actors continue to develop new ways to defraud utilities and steal electricity supplies. The most effective way to tackle this challenge is by utilities and ecosystem providers working together with customers to ensure fair, honest, transparent policies for all. At the end of the day, large fines and harsh punishments are consequences of energy theft; no matter how big or small the transgression, it compromises the energy supply of a nation – the cost of one person’s action impacts the entire group of people connected to that grid.