Projects face suppressed revenues in Australia

Wind projects in Australia are facing a reduction in project revenues following a change in the Marginal Loss Factors (MLF) for 2019-20 for the country's generators.

Wind projects in Australia face a reduction in revenue due to falling MLFs (pic: AGL)
Wind projects in Australia face a reduction in revenue due to falling MLFs (pic: AGL)

The Australian Energy Market Commission (AEMC) has released its draft MLF for 2019-20.

MLFs represent the loss of electricity along transmission cables and power lines as a result of "resistive heating", the Australian Energy Market Operator (AEMO) said.

The factor is a percentage of the generation from a plant that reaches an end user. Generators are paid for the amount of electricity delivered, rather than produced.

A reduced MLF — or more losses incurred on the grid — means less revenue. MLFs are set annually by AEMO and AEMC. AEMO said the figures were predictions and still subject to change.

All generators are affected, but it is believed wind and solar sources are more adversely affected due to not being located at load centres, meaning more transmission distance, equaling greater loss.

Some projects, such as AGL’s Silverton Wind Farm could see its MLF fall from 1.0062 to 0.799, resulting in a 20% fall in power being delivered to end users, causing lower project revenues.

Most wind and solar projects are projected to see a 5% fall in MLF, while few could increase.

The Clean Energy Council (CEC) called for a review of the MLF system, which it claimed was outdated and could put future investment at risk, if project revenues prediction was uncertain.

"The biggest challenge for the industry is that we have experienced significant and unexpected annual decreases in MLFs for the last few years," said Kane Thornton, chief executive at CEC.

"MLFs represent the loss of electricity as it travels from power generators along poles and wires to customers.

"While this is a complex issue, the consequences are simple — an unexpected and unpredictable reduction in the viability of wind, solar, hydro and bioenergy projects across the country.

"The MLF methodology was established over 20 years ago and is no longer fit for purpose. A comprehensive and holistic review of MLFs by the AEMC is imperative, along with considerations of how this volatility could be controlled in the short term.

"The industry is calling on the AEMC to complete this review as soon as possible.

"The issue also underlines the need for efficient investment in new poles and wires to relieve the strain on the existing network, which is rapidly becoming congested. This remains one of the highest priorities for our industry," Thornton added.

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