Australian Chart of the week | Two roller coaster rides for the price of one? Preliminary vs final MLFs

In recent years, movements in marginal loss factors (MLFs) have received significant attention in the National Electricity Market (NEM). Many renewable projects in remote areas have experienced material MLF reductions as more supply connects nearby. For example, the MLF for Broken Hill Solar Farm saw a whopping 50 ppt drop in two years (from 1.2456 in 17/18 to 0.7566 in 19/20). Revenue swings of this magnitude could turn a profitable project into a loss.

Many participants were also concerned that the year-on-year movements in MLFs are unpredictable and called for more regular updates by the system operator. In response, AEMO recently started publishing indicative MLFs for the coming financial year through the Preliminary MLF Report in December. This is intended to provide more transparency (or forewarnings) regarding potential major changes in the Final MLF Report in April.

This ‘Chart of the week’ compares the Final 21/22 MLF (y-axis) changes with that indicated in the Preliminary version (x-axis). The dots to the left of the 45-degree line are projects whose final MLFs are higher (those to the right are lower) than predicted in the Preliminary Report.

Dr Franklin Liu

Dr Franklin Liu

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