Many people often ask me what a load factor is as its one of the terms often used by people within the energy industry without much by way of explanation.
As you know electricity is consumed as it is generated in a modern power system. While research and development into battery storage continues, there is little deployed electricity storage in Australia's electricity system. As such, supply has to ramp up and down as demand does. This makes our industry very different from others because there is no inventory management (i.e. building up stocks of a product to supply customers at times of peak demand such as Christmas).
A load factor measures the ratio of energy consumption at times of peak demand compared to average consumption. A declining load factor means that peak demand is growing more quickly than average consumption. A declining load factor presents issues such as: increased spending on network infrastructure used for small periods of the year; increased requirements for peaking power stations that can be switched on and off quickly; and greater variation (or volatility) in demand.
Tomorrow we will provide some quantitative information on load factors within the NEM.