Abstract Decentralization of energy generations in power distribution systems is recognized as an important development strategy to incorporate more small-scale renewable sources, reduce greenhouse gas emissions and increase energy efficiency. Beside integrating more decentralized generations into existing systems, an efficient system operation is equally important toward achieving a sustainable energy system. In order to keep track of upcoming changes regarding system efficiency, an accurate determination of energy losses in distribution system is the prominent step. Especially in the distribution systems with high penetration of the renewable energy resources, the installed distributed generations can significantly affect energy losses and influence grid efficiency in power distribution systems. To address this issue, this paper investigates the impact of distributed generations on the annual energy losses in low voltage distribution grids. Based on an analytical study on grid losses and the relevant features, which are used to describe the grid integration of distributed generators in diverse scenarios, an annual energy loss indicator is proposed in this work. This new indicator is capable to estimate the energy losses of low voltage grids for a wide range of scenarios concerning both the installation of distributed generators and grid structures. Also, the formulation of this new indicator is largely simplified in comparison to other state-of-the-art indicators presented by previous studies. The effectiveness and the performance of the proposed methodology is first demonstrated in two typical low voltage grids, in which high amount of photovoltaic units already exist today. Further, this indicator is applied on a set of grids in extended tests on readability and robustness. Comparison of the estimations using the proposed indicator against the exhaustive power flow calculations shows that the proposed indicator gives a reliable and sufficiently accurate estimation of grid energy losses under influences of distributed generations. Fast evaluations of the system losses, enabled by the proposed indicator, provide assessments on energy efficiency of distribution systems in future development stages of distributed generations. Accordingly, distribution system operators are able to select optimal locations for new generation units, adjust their grid reinforcement plans to improve the total energy efficiency on the whole system scales.