Marginal Gains

AEMO has released its final marginal loss factor (MLF) calculations for 2020/21. MLFs are the way the NEM accounts for the physical losses across the system. Generators with an MLF less than 1 receive a discount on their revenue, while those with an MLF greater than 1 get an uplift. Similar rules apply to large loads, which means that an MLF below one is good for them although it’s bad for generators. On average MLFs will be below 1 because electrical systems have losses so the amount consumed by customers must be less than the amount sent out by generators.

This highly technical element of the NEM surprisingly hit the headlines last year as the influx of new generation – almost all wind and solar and often built in the further corners of the grid – drove higher than usual volatility in MLFs. This caught out a number of generators, many of them the same new renewable plants that were driving the changes in electricity flows around the system. An attempt to get the rules changed to reduce this volatility and compress the range of MLFs recently failed.

There’s less excitement this year as there have been fewer big changes and many of the generators with the lowest MLFs have seen them improve. This itself is partly attributable to the slowdown in renewable investment which MLFs themselves have been blamed for. For some solar plants it’s not as good news as it seems – the improved MLF is a function of other constraints put on their output by AEMO to maintain system security. Notably a couple of batteries in the corners of the grid have been among the big winners, showing the value of location in battery siting.

The changing pattern of supply and demand across the NEM is changing the flows across the interconnectors that link the five different regions of the NEM. This means that changes in MLFs are mostly near the borders between the regions. Some notable changes are as follows:

NSW: most of the worst MLFs have improved (many of these are in the far west of the state and endure a revenue discount of 15-20% or more). Parkes solar farm is the only big loser, although the Uranquinty gas plant now has the 4th worst MLF in the region, further evidence that the MLF framework is not a great big anti-renewables conspiracy.

Victoria: Hydro plants are the biggest gainers here, with the solar plants in the northwest (an area called the “rhombus of regret” for the weakness of the grid seeing minor further declines. However, the battery in the area, Gannawarra BESS saw its import MLF drop by 4 per cent, i.e. it will be 4% cheaper for it to charge up.

South Australia: most of the worst MLFs improved and the Dalrymple battery was the standout winner, with both its import MLF falling and its export MLF rising. The nearby Wattle point wind farm also improved slightly, which may be a knock-on impact of the battery

Queensland: The worst MLFs here are the solar plants in the north of the state. These all improved, with the two worst seeing the largest improvement.