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Inaction on marginal loss factors equals less clean energy and higher power prices

Today’s media reports that the Australian Energy Market Commission (AEMC) has decided to maintain the out-dated framework for marginal loss factors (MLFs) will put new investment in energy generation at risk, to the detriment of Australian consumers.

Clean Energy Council Chief Executive Kane Thornton said the industry was already struggling with the impact of unexpected and unmanageable changes in MLFs over recent years, and that the decision to retain the status quo would undoubtedly put future investment at risk, resulting in higher power prices for consumers.

“Under the current regime, MLFs represent a major challenge for investors in energy generation projects in Australia. It is very disappointing that the AEMC has not listened to the serious concerns of investors and taken for granted their appetite to continue to invest in Australia.”

“We are already seeing a slow-down in investment in new energy generation. Without changes to the way transmission losses are calculated, we expect this downturn will continue to worsen. This will not only be devastating for the clean energy industry, but also places Australia’s future energy reliability at risk as new investment in wind and solar is needed to replace our ageing coal generators.”

MLFs play a critical role in project economics as they determine how much of the electricity output will be credited for payment, and therefore have a significant impact on revenue.

Mr Thornton said the view that the current methodology for calculating transmission losses was no longer fit for purpose was widespread across the industry, with many pointing to an ‘average loss factor’ calculation as a potential measure to reduce the level of risk facing investors.

“The AEMC believes its coordination of a new generation and transmission (COGATI) process will provide the reform needed to address investment concerns. However, the COGATI access model is hugely unpopular with key industry stakeholders, including the Australian Energy Market Operator. The AEMC needs to start listening to industry’s concerns.”

“Disappointingly, the clean energy industry is losing confidence in the Australian market. There is a real risk that the AEMC’s decisions on MLFs and COGATI will see renewable energy investors move their money overseas, at a time when investment in new generation is critical to ensure Australia’s future energy supply is secure and put downward pressure on power prices.”

Please contact Claire Holster on 0451 221 283 for more information or to arrange an interview.