Regulator takes Tesla big battery to court for failing to properly back up broken coal plant

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The Australian Energy Regulator says it has instituted proceedings in the federal court against the Tesla big battery – officially known as the Hornsdale Power Reserve – over its alleged failure to deliver key grid services in 2019.

The AER is alleging breaches of the National Electricity Rules for its inability to deliver frequency control services and respond to instructions from the Australian Energy Market Operator over a four month period, and particularly one event when the country’s biggest single coal unit at Kogan Creek in Queensland tripped in October, 2019.

“Between July and November 2019, HPR made offers to (AEMO) and was paid to provide market ancillary services which allegedly it could not in fact provide, including when required to provide those services after a frequency disturbance,” the regulator said in a statement.

“The services are known as contingency frequency control ancillary services (FCAS) and they are required to keep the lights on following a power system disturbance.”

The only major event during this period was on October 9, when the Kogan Creek power station tripped unexpectedly. Hornsdale – located in South Australia – responded faster than others but not at the capacity expected by AEMO. The incident did not lead to any power outages.

Hornsdale owner Neoen Australia said in a brief statement that it was “disappointed” by the AER decision to take court action, and pointed to an independent report praising the battery’s overall performance.

Hornsdale was at the time the biggest lithium ion battery in the world with a capacity of 100MW/129MWh, and even though it has since been expanded to 150MW/194MWh, and has added additional services known as synthetic inertia along the way, it has lost the “biggest in the world” battery mantle.

However, its performance – and particularly its speed and flexibility – has been hailed by the market, regulatory authorities – including and particularly AEMO – and by policy makers, and market planners now see battery storage and inverter-based technologies as a key to a 100 per cent renewables future.

AEMO recently signed a 10 year contract with Neoen for a new form of grid service that underpinned the construction of the even bigger 300MW/450MWh Victoria Big Battery at Geelong, although that installation has been delayed by fires at two of its Tesla Megapacks battery units

Frequency control has been a major problem in the grid in recent years, one because it was a market that was regularly gamed by the incumbents, a cartel broken by Hornsdale, and also because coal generators often failed to deliver the FCAS services expected of them.

Earlier this year, the AER said Queensland state government owned CS Energy had paid $200,000 in penalties for allegedly failing to ensure it could FCAS services that it had offered to the market, and had repaid $1.3 million it received as payment to provide the services it failed to deliver.

Yet the AEMO report into that incident, sparked by the loss of the main links between NSW and Queensland  – while praising the response of the Hornsdale battery – was devastating in its criticism of coal generators. See: How the Tesla big battery kept the lights on in South Australia.

“Many (coal and gas) generators either no longer automatically adjust output in response to local changes in frequency or only respond when frequency is outside a wider band (dead-band) than has historically been set,” it noted.

““This lack of response resulted in significant technical challenges controlling power system frequency during this event, delaying the resynchronisation of QLD with NSW.” Yet the only action was taken against one generator in Queensland, and none in the other states where more than 1,100MW of load was lost.

Senior electrical engineers contacted by RenewEconomy said they were surprised by the regulator’s move against Hornsdale, particularly in light of the well known and repeated failures of coal plants in the FCAS market, some of which have since been addressed by a tightening of rules designed to stop the relaxation of “governor controls”.

“We seem to be in an environment where we blame renewables and inverter technologies for not being perfect, while at the same time turning a blind eye to the imperfections of legacy kit,” one engineer said, on condition of anonymity, adding that it seemed to be a “misrepresentation” and a “politicisation” of the issue.

The AER action against Hornsdale follows its court action against four owners of wind farms following the South Australia blackout of late 2016, the dramatic state-wide outage caused by storms that led to the construction of the Tesla big battery.

The regulator launched multiple actions against the owners of those wind farms over the settings of some software, before three decided to accept a fine without acknowledging the issues contributed to the blackout. One case, involving AGL, is still before the courts.

AER chair Clair Savage said the failure of the Hornsdale battery to provide the FCAS services in 2019 undermined AEMO’s ability to maintain frequency within the Frequency Operating Standard limits, creating a risk to power system security and stability.

“It is vital that generators do what they say they can do if we’re going to keep the lights on through the market’s transition to variable renewable generation,” Savage said in a statement.

“AEMO relies on accurate information and compliance with offers and dispatch instructions to ensure it can effectively stabilise frequency deviations.

“Contingency FCAS providers receive payment from AEMO to be on standby to provide the services they offer. We expect providers to be in a position, and remain in a position, to respond when called upon by AEMO.”

Savage said that the AER is seeking pecuniary penalties, declarations and costs.

The court documents allege that Hornsdale failed to comply with 185,738 dispatch instructions given by AEMO from July 23 to November 14, 2019, and in more than 32,000 trading intervals.

It alleges that during this time, the “droop” setting for the Hornsdale battery had been adjusted by a “firmware” update from 1.7 per cent – the minimum allowable droop setting for any battery providing contingency FCAS – to 3.7%.

Contingency FCAS is a service designed to respond to major disruptions and maintain grid frequency within certain bands. It is mostly triggered by major outages, such as a loss of a transmission line or a big coal generator. The AER itself acknowledges 1,000 days of baseload outages in the second quarter of this year alone.

“For the whole of the relevant period, the respondent’s capacity to provide contingency FCAS was only 46% of the capacity that it offered to AEMO and which had been enabled by it,” the documents allege.

It cited an event on October 9, 2019, when the Kogan Creek power station – at 750MW the biggest and most modern single unit in the main grid – tripped unexpectedly (one of 17 unplanned trips at Kogan Creek over 2018 and 2019, according to analysts), pushing frequency down to 49.6Hz.

Hornsdale was “required to provide (through HPRG1) the fast raise service in accordance with an offer that it had made and which had been enabled through dispatch instructions from AEMO,” the court documents say.

“However, because of the update referred to (above), the output provided by the HPRG1 was less than the accepted offer.”

The court documents allege that Hornsdale was paid $6.43 million for contingency FCAS during the period the droop settings had been changed, nearly all of it from the Kogan Creek event.

AEMO had recovered 52% of this amount, which reflected the shortfall between what had been enabled and what was in fact available, but the regulator is now seeking civil penalties and costs.

RenewEconomy understands that Hornsdale responded to the Kogan outage within 100 milliseconds, faster than all other generators, but did not deliver the megawatts expected by AEMO – although it often did provide contingency FCAS for “free”, delivering capacity that was not contracted to AEMO.

Curiously, the October 9 incident is not mentioned at all in the AER’s regular weekly reports into the electricity and FCAS markets. The report for the week covering October 9, 2019, was not actually filed for more than a year afterwards, in November, 2020. They are usually filed within weeks.

In its media response, Neoen pointed to the track record of Hornsdale over its near four years of operation, including a report by Aurecon from February, 2020, which noted it had captured 15 per cent of the contingency FCAS market in the NEM in 2019, leading to cost reductions of $80 million.

That Aurecon report also cited three “separation events” when South Australia found itself cut off from the remainder of the grid – on August 25, 2018 (the incident when CS Energy was fined), November 16, 2019 (two days after its droop settings were restored) , and January 31, 2020.

“On each occasion, HPR responded by closely tracking the changing frequency and accurately changing its power dispatch as required.” And it noted, as AEMO had, it prevented the lights from going out.

RenewEconomy asked AEMO if it supported the AER action: sought further information from Neoen, and from AEMO this morning.

“The AER determines which matters it investigates, and makes its own compliance and enforcement decisions,” said. “As the AER has commenced court proceedings in relation to Hornsdale Power Reserve, it is not appropriate for AEMO to comment on this matter.”

Neoen’s de Sambucy said in a later comment: Since Hornsdale Power Reserve began operations in 2017 it has repeatedly delivered on the high expectations of its performance and market impact, proving itself to be a critical positive contributor to maintaining the reliability and stability of the South Australian electricity network.

“Independent Reports found that in its first two years of operation the big battery reduced the cost of Frequency Control Ancillary Services (FCAS) in South Australia by over $150m, delivering significant savings for energy consumers.

“Hornsdale Power Reserve has also played a key role in supporting system security a number of times, including the SA/VIC separation event of 31 January-17 February 2020 and the recent Callide incident on 25 May 2021.

“On each occasion it has responded with its Fast Frequency Response capability to reduce the severity of the disturbance and support a return to normal frequency conditions.”

See also our analysis: AER sues Hornsdale battery: Fair cop or regulatory over-reach?


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