As electricity flows through the transmission and distribution networks, energy is lost due to electrical resistance and the heating of conductors. The losses are equivalent to approximately 10% of the total electricity transported between power stations and market customers.

Energy losses on the network must be factored in at all stages of electricity production and transport, to ensure the delivery of adequate supply to meet prevailing demand and maintain the power system in balance. In practical terms, this means more electricity must be generated than indicated in simple demand forecasts to allow for this loss during transportation.

The impact of network losses on spot prices is mathematically represented as transmission and distribution loss factors. Loss factors are calculated and fixed annually to facilitate efficient scheduling and settlement processes in the NEM.

Methodology

• Methodology for Calculating Forward-Looking Transmission Loss Factors

Guidelines

• Treatment of Loss Factors
• Proportioning of Inter-Regional Losses Within Regions

Transmission Loss Factors

AEMO publishes draft Marginal Loss Factors for 2019/20

AEMO has released the draft Marginal Loss Factors (MLFs) that will apply for electricity generation and loads connected to the National Electricity Market.  

MLFs represent the loss of electricity as it flows through the transmission network, due to resistive heating of transmission lines. MLFs are calculated and fixed annually to facilitate efficient market scheduling and settlement processes in the NEM.

The NEM is transforming, driven by new technology and a changing generation mix, newly formed supply hubs, leading to large year-on-year changes in MLFs. In many locations, MLFs have fallen by large margins, which in turn have material financial implications for existing and intending market participants. 

AEMO has been working with industry to explore opportunities to minimise impacts of current rules, will look at immediate interim changes that can be applied, whilst working with Australian Energy Market Commission (AEMC) on longer term solutions. 
 
AEMO continues to support the work program currently being progressed by the AEMC that will consider the current extent to which losses in the NEM are changing, and what measures may be introduced to make these changes more manageable for generators. This will include consideration of two rule change requests from Adani Renewables, dealing with issues related to the existing MLF framework in the NER and how this might be improved. 

In the longer term, the AEMC is progressing a work program to examine how generation and transmission investment may be more effectively coordinated, including how generators gain access to the transmission network. This longer-term work program will consider issues related to losses with a more holistic view.

The large year-on-year changes in MLFs demonstrate the ongoing need for comprehensive planning of both generation and transmission to minimise costs to consumers. All-of-system planning documents, such as the 2018 Integrated System Plan (ISP), are critical in the provision of information to participants regarding the needs and changes to the power system.

Updated draft Marginal Loss Factors for 2019/20

Since publishing the draft 2019-20 Marginal Loss Factors (MLFs) on 8 March 2019, AEMO has received substantial and credible information on the status of several committed projects which does not align with the information that AEMO had taken into account when determining the draft loss factors. This means the MLFs determined on the basis of that information may not be reflective of actual marginal losses in many parts of the network.

To best meet the principle in clause 3.6.2(e)(2) that these factors should describe the average marginal electricity losses between the regional reference node and each transmission connection point, as closely as reasonably practicable, AEMO will recalculate the MLFs using the updated information recently provided to it, as well as sourcing additional information relating to committed projects.

AEMO considers the benefit of improving the accuracy of the MLFs, in providing better signals on the value of investment in electricity supply, outweighs the inconvenience of delaying final publication. In order to minimise the disruption to participants, AEMO has now published updated draft MLFs to account for the impact of some of the recently received information.

New information and data that remains subject to further analysis and verification has not been accounted for in these updated factors. AEMO will finalise and publish the FY19/20 MLFs for the National Electricity Market by 10 May 2019.

Participants who wish to meet with AEMO to discuss their results should contact MLF 2019-20 Feedback.

• Regional Boundaries and Marginal Loss Factors for the 2015–16 Financial Year
• Regional Boundaries and Marginal Loss Factors for the 2014–15 Financial Year
• Regional Boundaries and Marginal Loss Factors for the 2013–14 Financial Year
• Regional Boundaries and Marginal Loss Factors for the 2012–13 Financial Year
• Regional Boundaries and Marginal Loss Factors for the 2011–12 Financial Year
• Regional Boundaries and Marginal Loss Factors for the 2010–11 Financial Year
• Regional Boundaries and Marginal Loss Factors for the 2009–10 Financial Year
• Regional Boundaries and Marginal Loss Factors for the 2008–09 Financial Year

Distribution Loss Factors

• Distribution Loss Factors for the 2019–20 Financial Year (692 KB, pdf)
• Distribution Loss Factors for the 2018–19 Financial Year (677 KB, pdf)
• Distribution Loss Factors for the 2017–18 Financial Year (673 KB, pdf)
• Distribution Loss Factors for the 2016–17 Financial Year (657 KB, pdf)
• Distribution Loss Factors for the 2015–16 Financial Year (253 KB, pdf)
• Distribution Loss Factors for the 2014–15 Financial Year
• Distribution Loss Factors for the 2013–14 Financial Year
• Distribution Loss Factors for the 2012–13 Financial Year
• Distribution Loss Factors for the 2011–12 Financial Year
• Distribution Loss Factors for the 2010–11 Financial Year
• Distribution Loss Factors for the 2009–10 Financial Year
• Distribution Loss Factors for the 2008–09 Financial Year

Archived loss factor documents may be obtained upon request from the AEMO Information & Support Hub.

Provision of indicative marginal loss factors

Interested parties may on occasion require marginal loss factors (MLFs) under conditions that differ from the Forward Looking Loss Factor (FLLF) methodology. Examples include:

• A proponent may wish to assess the potential impact on published MLFs if a generating unit is installed or upgraded at a particular connection point.
• A market customer may wish to assess the impact on the published MLF at a connection point without the contribution of a nearby generating unit.
• A market participant may wish to assess the MLF of an embedded generator for which AEMO does not normally calculate and publish an MLF.

To assist interested parties with such requests, AEMO currently provides a service to calculate indicative MLFs under non-standard assumptions for a nominal fee.The following document provides details of the indicative MLF calculation process, including fees and data requirements.

Indicative extrapolation input data for 2019-20 Marginal Loss Factors

AEMO conducted an indicative extrapolation study to assist generators in determining whether the historical generation data used by AEMO is reasonable for the 2019-20 MLFs calculation.

Indicative extrapolation input data for 2019-20 Marginal Loss Factors:

• Indicative extrapolation input data for 2019-20 loss factors (458 KB, docx)
• Indicative extrapolation results for 2019-20 loss factors (106 KB, xlsx)

Review of Marginal Loss Factor Calculation Processes

In August 2018 AEMO held several information sessions to seek feedback from participants and interested parties on the current MLF calculation process.

Specifically, AEMO asked:

• Whether the current MLF calculations are fit for purpose.
• Potential improvements to MLF calculations that AEMO can make through a market consultation to amend the Forward Looking Loss Factor Methodology.
• Potential improvements to MLF calculations that require changes to the National Electricity Rules.
• Ways AEMO can increase the transparency of the MLF calculation process and improve the ability of participants and intending participants to forecast MLFs.

The slide pack that was presented at the sessions is available here, and the high-level notes of the discussions available here.

AEMO will be continuing this review in 2018 and 2019.