Regulator says AEMO made errors, but not to blame for South Australia blackout

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Regulator report critical of AEMO’s actions in the lead-up to South Australia’s System Black in 2016, but says it was not to blame for state-wide blackout.

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The Australia Energy Regulator has finally delivered its long-awaited report on the South Australia “system black” of more than two years ago – finding that the Australian Energy Market Operator had failed to comply with its obligations, but was not to blame for the state-wide blackout.

The AER report is the first official independent assessment of the blackout, which had previously only been studied in detail by AEMO itself, despite its profound impact on the politics of energy in the country, and particularly the decision by conservatives and the Coalition to blame the incident on “intermittent” renewables.

An AEMO investigation in 2017, blaming the event on unprecedented cyclonic winds, and not on the nature of wind technology, implemented more than 17 recommendations to update its data and procedures, and energy players note that it has taken a much more conservative approach since then.

AER chair Paula Conboy said the regulator had found that five breaches had been committed by AEMO.

But even though those those failures included a “failure to take all reasonable steps” to keep itself informed of the impending storm, and to advise market participants, the AER decided that “we consider these breaches did not contribute to the state going black and that all core obligations were met.”

The AER’s forgiving view of market participants extended to Origin Energy, which it said had “met its obligations,” even though its Quarantine power station failed to do what it was paid to do, provide a quick “black start” – a failure that dramatically extended the length of the blackout.

It also said ElectraNet, which changed the switching arrangements for Quarantine without telling anyone, and which caused the failure of the gas generation unit, was also “fully compliant.”

What did cause the blackout? Well, the AER hasn’t decided that. While this investigation looks at events in the lead-up, during and immediately after the system black, it does not look at the actual causes. That report will be released some time in 2019.

The five breaches identified by the AER were:

One: Failure (by AEMO) to take all reasonable steps to keep itself informed of abnormal conditions. While AEMO took several steps to keep itself promptly informed about the abnormal conditions on the day, we consider an additional reasonable step could have been taken.

Two: Failure to provide formal notification to market participants that the loss of multiple generating units or transmission elements, which would not be a credible risk in normal operating circumstances, was more likely to occur because of the abnormal weather conditions on the day.

The AER said that although the evidence indicates AEMO considered this and communicated with some market participants about it, it failed to provide the appropriate notification as required by the NER.

Three: Failure to conduct formal reviews of the reclassification criteria in the manner required by the rules in the three years prior to the Black System Event.

Four: Failure on several occasions to issue market notices when there were foreseeable circumstances that may have required AEMO to intervene in the market. There was also an occasion when AEMO did issue a market notice, but we assessed that it was not sufficiently immediate.

Five: Failure to adequately develop procedures for the issuance of directions in line with the legislated principles as required.

The conclusion from the AER will not be a surprise to many observers who questioned why the AEMO did not dial back the level of imports on the main Heywood inter-connector or summon more local generation as a back-up contingency. Similar criticisms were raised about AEMO’s preparation in the heatwave that led to the equally controversial blackouts in February, 2017.

Indeed, the AER noted that just before the blackout, actual measured 4-second and 5-minute interconnector flows exceeded the import limit by up to 183MW and 156MW, respectively.

“As stability limits cannot be determined in real time, we cannot conclusively state that the power system was known to be in a secure operating state during the pre-event period,” it said.

In a brief statement posted on its Energy Live website, AEMO CEO Audrey Zibelman noted that AEMO had completed its own review in March 2017, which determined there was nothing operationally AEMO could have implemented to prevent the event. Zibelman, who joined the organisation in March, 2017, said the AER’s report confirms this.

“In March 2017, AEMO identified 19 separate actions to further enhance power system security following the extreme event. All of these recommendations have been implemented,” she said. (This includes better weather forecasting and correction of software systems on wind farms that had set “ride-through” mechanisms at a low level, leading to the unexpected loss of 485MW of wind capacity.)

“The management of 24/7 real-time power system operations is extremely complex,” Zibelman said.

“It is critical our operators are enabled with the tools and decision-making flexibility to manage real-time events in ordinary and extreme circumstances. In this dynamic and changing industry, we are continuously looking for ways to evolve and improve our operations.”

Zibelman said AEMO would take note of AER’s recommended administrate improvements, and other suggestions for the rule maker, the AEMC, to adopt.

“Importantly, AEMO recognises the AER will release a further report in 2019 focused on analysing the cause of the Black System event, and we look forward to reviewing these critical findings in due course,” Zibelman said.

Conboy said the AER’s “forensic investigation” had assessed the actions of all parties, before and after the state went black, across 50 Rules.

“Overall, the investigation found a high level of compliance by the Australian Energy Market Operator (AEMO) and market participants with their obligations. In particular, we have found that AEMO has not breached any of its core obligations around operating the market or managing power system security.

“However there were instances in which AEMO did not comply with its obligations.

“It’s important to note that, following our investigation, we consider these breaches did not contribute to the state going black and that all core obligations were met,” Conboy said.

“Given the nature of the findings, the extreme circumstances under which the non-compliance occurred, and the actions that have been taken by AEMO and others since September 2016 to address some of the issues identified, we do not intend to take any further enforcement action in respect of these matters.”

Conboy said that as a result of this investigation, improvements, potential changes to the NER and framework, and further compliance activities to promote better future management of similar events, have been recommended.

“We have identified areas where changes should be considered to improve the overall effectiveness of the regulatory framework, predominantly to provide greater clarity and transparency about roles and responsibilities,” she said.

Recommendations proposed by the AER include:

  • Implementing more rigorous weather monitoring processes;
  • Standardising notifications for market participants during abnormal weather conditions;
  • Reviewing classification of weather events;
  • Improving AEMO operator training;
  • Clarifying roles and responsibilities of the market operator and network providers regarding system restoration.

(More to come).

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