Marginal Loss Factors (MLFs) are AEMO's annual calculation of generation-weighted electrical losses on a plant's marginal unit of generation as it travels towards the regional reference node (RRN). An MLF of 0.95 means a generator receives only 95 cents per dollar of the regional spot price. This is a permanent haircut that compounds over the life of a project. MLFs also affect an asset's competitiveness in the bid stack.

This report analyses AEMO’s draft 2026-27 Marginal Loss Factors, reviewing them against the previous four years with a focus on solar and BESS. Final figures set to be published on 1st April.

The geographic pattern in the latest draft MLFs is stark. South-West New South Wales has the lowest MLFs in the NEM. Northern Victoria and Central Queensland are also well below 1. Meanwhile, assets near Sydney, Melbourne and Brisbane largely sit at or above 1.0. Importantly, a low MLF is not always due to distance from the RRN; instead, the worst-affected areas are caused by a high level of generation exporting to the grid simultaneously.

Why Marginal Loss Factors matter: a two-pronged effect

A low MLF penalises generators in two compounding ways:

1. Direct revenue reduction. Settlement prices are multiplied by the MLF at the connection point. An asset with an MLF of 0.90 receives $0.90 for every $1.00 earned at the regional reference node.
2. Competitive dispatch disadvantage. AEMO dispatches against MLF-adjusted bid prices. Therefore, a generator with a lower MLF must bid proportionally lower just to achieve the same dispatch priority.

Solar hit hardest in draft 26/27 Marginal Loss Factors

Solar carries the lowest median MLF across all technologies and is the only sector whose median has deteriorated materially year-on-year. Wind and hydro sit below 1.0 but higher than solar, while gas and batteries, typically sited closer to load, have a median MLF much closer to 1.