Australia’s biggest coal generator fined for failing to deliver promised grid services

Australia’s biggest coal generator, AGL, has been hit with massive fines for failing to deliver essential grid services from its generators as promised.

The fines – from failures across the AGL coal portfolio between September 2018 and August 2020 – total $6 million, and are part of a crackdown by the Australian Energy Regulator to ensure that generators on the grid do what they say they are going to do, or say that they have done.

The AER Federal Court has ordered that AGL Energy Ltd subsidiaries, AGL Macquarie Pty Ltd (AGLM) and AGL Loy Yang Marketing Pty Ltd (AGLL), operators of AGL’s Bayswater and Loy Yang power stations, pay penalties totalling $6 million for breaches of the National Electricity Rules.

In proceedings brought by the AER, the Federal Court found that the AGL subsidiaries did not comply with dispatch instructions given to them by the Australian Energy Market Operator (AEMO) in relation to frequency control ancillary services (FCAS) they had offered, and were paid, to provide.

The court found that “the contraventions arose from a combination of insufficient processes and practices and inadvertence, which resulted in contraventions over periods of almost two years (in respect of AGLM) and four or five months (in respect of AGLL)”.

Justice Button ordered that AGL pay $3.2 million for the failures at Macquarie Generation, which includes the Bayswater and now closed Liddell generators in NSW, and a further $2.8 million for the breaches at Loy Yang A in Victoria.

The issue around frequency control and ancillary services (FCAS) is a hot one. Critics of wind and solar lament that FCAS costs have risen with the growth of wind and solar and battery storage, and the creation of new markets designed to attract new providers of the service.

The critics say that these services used to be provided “for free” by coal and gas generators. But the reality was that many of these coal and gas generators were not providing the service that they had promised and were being paid for.

The AER instituted its crackdown after the “system black” in South Australia, and subsequent blackouts and grid events, which found that the settings on many generators were different to what AEMO had understood. Fines have been issued to a number of wind and battery projects, as well as other thermal generators, in recent years.

The AER said it is important that power generators can supply contingency FCAS (in serious events when there are bigger disturbances) in accordance with their offers.

“It is of vital importance to the maintenance of a secure and stable power network,” it said.

“The contraventions did result in there being less contingency FCAS available to respond to any significant frequency deviations and so raised the risk that power system security would be compromised in the event of a frequency disturbance.

“This factor heightens the need for deterrence in respect of the respondents’ conduct. It is, of course, vitally important that power generators in fact be able to provide the contingency to which they commit.”

AER chair Clare Savage said the ruling sends a message to all generators of the importance of providing accurate and timely information about their capability and availability to AEMO.

“FCAS services are essential to keep the lights on following a power disturbance in the grid and these services are critical during the rapid transition to renewable energy generation,” she said in a statement.

“AEMO relies on compliance with dispatch instructions and offers to keep the energy market stable. Generators must be prepared to provide the back-up services they have committed to so AEMO can keep the National Electricity Market stable and secure.”