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Environmental concerns remain a driving force for European energy policy, as exemplified by last years’ directive on energy efficiency. The directive sets the legislative framework to achieve energy efficiency targets. Since electricity network losses comprise a significant component of electricity demand, regulatory incentives to facilitate loss reduction in electricity networks should be in place. This paper evaluates the incentives for investments in low-loss equipment in differing regulatory settings and outlines pathways to assure the proper embedding of these incentives.

A widespread use of high efficiency transformers could save the world 100 TWh/year. Under normal conditions, purchasing high efficiency transformers is both economically and environmentally sound. In the liberalized European energy market however, the regulatory and financial framework obstructs utility companies from making long term investments like purchasing high efficient transformers. National regulators put pressure on utility companies to do cost cutting and do not compensate with sufficient incentives for energy efficiency. According to this paper, there is a heterogeneous treatment between generation on renewable energy and transformer efficiency. Yet the greenest kWh is still the one that is saved, even when it is compared to a kWh derived from a renewable source.