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“Market Bloodbath”: Too many new remote renewables projects means high losses

Posted By Jo Nova On March 18, 2019 @ 8:08 pm In Cost,Grids,Renewable,Solar Power | Comments Disabled

As Australia push-pumps “renewables” into remote locations some of their incomes are suddenly being cut because the losses (as they transmit across long lines) are higher than they expected. On March 8th the AEMO rerated many generators and this year it’s being called a bloodbath for wind and solar. Some of them,  like AGL’s Silverton wind farm face losses of 20%.

It all revolves around something called Marginal Loss Factors, a value that is set by the AEMO each year for each generator. The rating is reduced by transmission losses over distance and also by “congestion” from other renewables which are popping up in the same remote locations far from the cities and industries that need the electricity they make. This sudden loss of expected income threatens new wind and solar projects (as it should — hello market signal!) Sometimes the loss factors are hard to predict years in advance which makes it difficult to also predict whether a project will return a profit (even despite the guaranteed subsidies).

Another renewable inefficiency strikes — “marginal loss factors”

Generators are paid according to the electricity that arrives rather than what they produce at the plant. (Seems fair). This is called the Marginal Loss Factor (MLF). Ideally they’d get paid for an MLF of 1.0 or higher (which means paid for every MWh or potentially even more if they are based in an area where there is a lot of demand and not many generators). Loss factors range from 0.8 up to 1.2, though most of them are close to 1.000.  But this year there are losses across the board and only a few gains.  An MLF below 1.0 is bad news for generators. In the extreme case of Silverton, the marginal loss factor fell from 1.0 to 0.79 which means they only get paid for 79% of what they produce. One fifth of the energy generated is not getting to where it is needed and won’t get paid for. Karadoc Solar Farm dropped from 0.94 to 0.78. These are some of the biggest falls.

It’s affected base load providers too, to a lesser extent. Snowy Hydro, and some gas plants are down about 5%. If dumping too much capacity on the grid causes the MLF’s to sink, surely that is another “renewable cost”? Add it their bills…

The big inescapable  problem for unreliable generators is that they need acres of land which makes it expensive to build them near the demand.

There were some big falls last year (as in North Queensland for 2018 which was particularly bad). This gives us some idea of how the trend is “breaking new ground”. Alas I don’t think there are graphs for the 2019 projections yet.

Marginal losses, North Queensland, AEMO 2018

1996 – 2018: Last year the falls in marginal loss factors showed up in some places like here in Far North Queensland. In 1997 – 2006 before the growth of renewables, most projects in North Queensland had MLFs over 1.0.  (2018 Presentation AEMO)

Hard to believe but as our grid capacity grows and load stays largely the same, the marginal loss factors are increasing. Really.

These losses were not expected

According to Paul McArdle of WattClarity,  MLF’s have been in this wide range for 20 years, but these current announcements have still surprised people. It might have a lot to do with the huge 50% increase in renewable generation in the last 12 months. Who would have thought? Their models failed. As McArdle says: “In his “Lessons from the trenches” article from September 2018, Jonathon Dyson notes (about MLFs) that:

“physics of the power system beats financial models every day of the week”

Dyson has this spectacular quote showing how confused the developers are:

A recent conversation around MLF’s, where a developer told me ‘… the degradation in MLF was not in our business-model; who do we need to talk to get the MLF changed by AEMO?…

The draft Marginal Loss Factors report was released on March 8. The final one comes out on April 1. The AEMO says that the year-on-year changes to the MLF are high and they are considering proposals to change the way they are calculated, and other ways to make the system “more manageable” for generators. But these rules have been rules for years — smart planners should have allowed for the possibility that rampant subsidies and religious fervour would mean too many new renewables in the one spot, and when the wind stops on one, it stops on the neighbours too.

Wind and Solar plants get massive de-rating in congested grid

 Giles Parkinson, March 8th, Reneweconomy

The MLFs are having a greater impact on wind and solar farms because many are being built away from load centres, and the “open access” regime means the local grid struggles to transport the new capacity and some project developers might not know – at the time of construction – what else might be built nearby.

“As more generation is connected to electrically weak areas of the network that are remote from the regional reference node, then the MLFs in these areas will continue to decline,” AEMO says in its MLF draft documentation.

Last year, falls in marginal loss factors of 20 per cent or more were imposed on some projects as a result of grid congestion, or changes to load. That has the potential to dramatically alter the economics of a project, affecting equity owners and lenders alike.

The worst-affected regions this year and last year are north Queensland, south-western and western NSW and north-west Victoria, known now as the “rhombus of regret” – so named because of the shape of the grid and because of the sheer number of projects built and proposed for the area, and the grid limitations.

In NSW, these include three projects owned by Neoen – the new 150MW Colleambally solar farm (down from 1.01 to 0.88), the Griffith solar farm (1.06 to 0.92), and the Parkes solar farm (1.06 to 0.92) – and AGL’s Silverton wind farm (1.0 to 0.79) and Broken Hill solar farm (0.97 to 0.72).

Not good news for renewables investors

But remember this is another inefficiency hitting non-renewables to some extent too. No joy for anyone with a stupid system and a broken market.

New solar, wind projects may stall in face of network “bloodbath”

Giles Parkinson, March 12, Reneweconomy

 The MLF is a key calculation because it can make or break a power project. It reflects how much of a power plant’s output at source arrives at destination (load) and is credited for payment.

Many solar and wind farm operators contacted by RenewEconomy say the latest downgrades – of up to 20 per cent in some instances, and more than 5 per cent in many cases – will have a major impact on the industry.

Developers say that some existing projects may face equity calls or refinancing demands from lenders because of the anticipated fall in revenue. Other projects that are not yet developed, or yet to get finance, may find themselves stalled at the gate.

“Some projects won’t go ahead,” said the head of one international developer.

Some [developers] have been completely blindsided, in certain instances by poor modelling done internally or by consultants, and in other cases because they were simply unaware of the scale of impact, or the number of other projects competing for space in the same part of the grid.

The data is all in the AEMO latest draft. If anyone feels like graphing the fall in the MLF per state or region it might be interesting. However the latest report only has last years data and the projections. Other years are at the AEMO link. It would be quite a bit of work.

The AEMO explains why there are losses this year and explains that it could get worse

Changes between the 2018-19 MLFs and the 2019-20 MLFs are mainly due to changes in projected power flow over the transmission network. The key driver for these changes is a large increase in generation connections to the NEM, particularly in Victoria, New South Wales and Queensland. The modelling for the 2019-20 MLFs includes 47 new connections providing approx. 5,600 MW of new capacity. As more generation is connected to electrically weak areas of the network that are remote from the regional reference node, then the MLFs in these areas will continue to decline.

When will politicians stop the subsidies? The growth is becoming carnivorous.


Mosomoso #2:

What do they do? They mainstream a bunch of antique technologies guaranteed to be high cost, high impact, resource-greedy, import-dependent, unreliable, diffuse, intermittent and feeble. To improve the image they call these relics “renewables” and group them with an old technology, hydro, that has some mainstream use. For laughs, they incinerate anything that grows, is discarded or is exuded by a ferment and call all that “renewable” too.

Then they express surprise when distances prove a problem on a continent about which “The Tyranny of Distance” was written.

I say they knew it was all a turkey from the get-go. Renewables were too-failed-to-fail from their very inception. It was like clobbering the Titanic with an iceberg before it was launched.

Jo replies: But you are too kind. Most of the renewables-fans can’t add it all up and still don’t see what’s coming. Free is *!Free!* and dollars are only numbers!

REFERENCES (from Paul McArdle, WattClarity)

 Ben Skinner at the Australian Energy Council has provided this article explaining some of the underlying logic for how MLFs are calculated and why they are used.

“Treatment of Loss Factors in the National Electricity Market”
 from 1st July 2012
 … paying particular attention to sections 4 and 5.

“Forward-Looking Transmission Loss Factors” from 8th February 2017 … see section 5.

It’s also worth noting that the AEMO clearly cautions on page 27 of the document “Draft Marginal Loss Factors: FY 2019-20” from March 2019 that:

“As more generation is connected to electrically weak areas of the network that are remote from the regional reference node, then the MLFs in these areas will continue to decline.”

(emphasis added by McArdle)

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