Australia’s Guarantee of Origin Scheme: consultation papers

8 February 2023

Hon. Chris Bowen MP

Federal Minister for Climate Change and Energy

Commonwealth Government

Lodged online at: DCCEEW Consultation hub

Dear Minister,

Response to Australia’s Guarantee of Origin Scheme - Consultation Papers

Windlab welcomes the opportunity to provide feedback on the Commonwealth
Government Department of Climate Change, Energy, the Environment and Water’s
Consultation Papers published in December 2022 on Australia’s Guarantee of Origin – policy paper (the GO paper) and Renewable Electricity Certification - policy paper (the
REGO paper).

Windlab is a member of the Clean Energy Investor Group (CEIG) and fully supports the
CEIG’s submission.

In addition to what is contained in the CEIG submission, Windlab would like to emphasise the following point:

The formula for the creation of REGO certificates should differ from the current Large-
scale generation certificate (LGC) general formula in that it should use actual (average)
loss factors (ALF) instead of marginal loss factors (MLF).

The loss factor term in the LGC formula is there to allow for electricity losses in the
transmission network. It is appropriate to have a loss factor term, however this term
should reflect actual network losses. The Average Loss Factor (ALF) provides a much
better guide of actual network losses than the MLF. The MLF reflects the loss of the final
MW delivered from a particular connection point, which is approximately twice the
average loss of generation from that same connection point.

1
Background
Regulation 14 of the Renewable Energy (Electricity) Regulations 2001 contains the general formula for the number of large-scale renewable certificates (LGCs) that can be created by an accredited power station. The formula is copied in the figure below. The MLF term appears in this formula, and is described as “… the marginal loss factor, to allow for the amount of electricity losses in transmission networks…”. However, the marginal loss factor is not a good representation of electricity losses in transmission networks, as is demonstrated in AEMO’s document “Treatment of Loss Factors in the
National Electricity Market” 1, described in more detail here.

1
https://www.aemo.com.au/-
/media/Files/Electricity/NEM/Security_and_Reliability/Loss_Factors_and_Regional_Boundaries/2016/Treatme nt_of_Loss_Factors_in_the_NEM.pdf

2
In section 5.3 of this document, there is an example calculation of a generator supplying a load of 97
MW at the regional reference node (RRN) as indicated in the figure above. The generator must supply
100 MW to satisfy the load due to transmission losses of 3 MW. Three percent of generation is lost in transmission, resulting in an average loss factor (ALF) of 0.97. The calculation shows that the marginal loss factor (MLF) is 0.94. This is because the loss applicable to the very last MW of generation is 6%, or twice the average loss.
The above example should demonstrate that using MLF to estimate transmission losses when calculating REGO or LGC entitlement is not appropriate. The ALF value of 0.97 better reflects actual losses in transmission (3%), and is therefore the more appropriate term to use.
MLFs have been used in the national electricity market due to the NEM’s fundamental assumption of pricing at the margin. No such assumption is required or necessary for renewable certificate entitlement.

Windlab thanks the department for the opportunity to provide feedback on the Guarantee of Origin design paper, and looks forward to continued engagement on these issues. For any further information about Windlab’s submission, please contact David Osmond via the email david.osmond@windlab.com

Yours sincerely

John Martin
Chief Executive Officer
Windlab

3