A comprehensive review of the marginal loss factors (MLFs) arrangements by the Australian Energy Market Commission (AEMC) is urgently required to avoid unpredictable hits to the financial sustainability of existing and future renewable energy projects, the Clean Energy Council said.

Clean Energy Council chief executive Kane Thornton said many wind and solar developers were coming to grips with reduced economic viability following the release of MLF figures by the Australian Energy Market Operator last week.

“The biggest challenge for the industry is that we have experienced significant and unexpected annual decreases in MLFs for the last few years,” Thornton said.

MLFs represent the loss of electricity as it travels from power generators along poles and wires to customers. A consequence of a fall in the ratio of energy used by customers versus energy generated is a reduction in the viability of wind, solar, hydro and bioenergy projects across the country, Thornton said.

“The MLF methodology was established over 20 years ago and is no longer fit for purpose. A comprehensive and holistic review of MLFs by the AEMC is imperative, along with considerations of how this volatility could be controlled in the short term. The industry is calling on the AEMC to complete this review as soon as possible.

“The issue also underlines the need for efficient investment in new poles and wires to relieve the strain on the existing network, which is rapidly becoming congested. This remains one of the highest priorities for our industry,” he said.

Thornton said the renewable energy industry attracted tens of billions of dollars in investment last year and had created thousands of jobs, and warned that a strong investment pipeline could be at risk if the issue was not addressed.

“Predicting MLFs into the future is something no-one has been able to do with any accuracy. Consequently the current process introduces risks that are virtually impossible to manage after investment decisions have already been made,” he said.

“This is a major issue for our industry, and we are interested in working with all stakeholders in good faith to address it as soon as possible.”