In any isolated power system, the amount of generated power must be equal to the consumed power including losses.
For an electric system consisting of an electric power generation plant, a distribution system, including distribution transformers and a variable speed drive, the power flow can be is:
The prime movers, e.g. diesel engines or gas turbines, supply a power to the electric generator shaft. The electric motor, which could be the propulsion motor, is loaded by a power from its connected load.
The power lost in the components between the shaft of the diesel engine and the shaft of the electric motor is mechanical and electrical losses which gives heat and temperature increase in equipment and ambient.
Hence, the efficiency of a diesel electric system, from diesel engine shaft, to electric propulsion motor shaft, is normally between 0.88 and 0.92 at full load. The efficiency depends on the loading of the system.
Since the additional components between the prime mover and the propeller shaft in a diesel electric propulsion system contributes to a total of approximately 10% losses, the fuel savings potential is not due to the electrical component.
One must regard the hydrodynamic efficiency of a speed controlled propeller compared to a fixed speed controllable pitch propeller (CPP), and the fuel efficiency of the prime mover when installed in a diesel electric system with constant speed and high loading, compared to in a mechanical propulsion system with strongly varying load. The differences may be significant, especially on low thrust operations as DP and maneuvering.