Tilt settles legal dispute over wind farm’s role in South Australian blackout

Tilt Renewables says it has reached a $1 million settlement with the Australian Energy Regulator in legal proceedings relating to the role of the Snowtown 2 wind farm in a South Australian system black event in 2016.

The AER commenced legal proceedings against four wind farm operators, including Tilt Renewables, Neoen, Pacific Hydro and AGL Energy, after wind turbines across seven wind farms unexpectedly shut down on 28 September 2016 following grid disturbances caused by a freak storm that damaged transmission lines and ultimately caused the entire state to be  plunged into a blackout.

The wind turbines ceased operating when in-built protection systems kicked in following voltage fluctuations across the South Australian grid caused by storm damage.

The AER alleged that these protection systems did not operate in a way that was consistent with the wind farm’s generator performance standards and that system operators had expected the wind farms to ‘ride through’ the voltage disturbances and continue operating.

An investigation undertaken by the AER into the causes of the South Australian blackout concluded that the primary cause was the impacts of a severe storm that impacted large parts of the state, described as a ‘once-in-50-year event‘.

However, the regulator also concluded that the unexpected behaviour of the wind farms had been a contributing factor, with around 450MW of wind power shut off due to the grid disturbances.

The AER had commenced legal proceedings against Tilt Renewables in August last year for alleged compliance failures at the Snowtown Stage 2 wind farm, which had unexpectedly reduced its output by 106MW.

Tilt and the AER settled the proceedings after each party agreed that there had been a contravention of the National Electricity Rules at the Snowtown 2 wind farm between 2013 and 2016.

In a settlement agreement endorsed by the Federal Court on Tuesday, Tilt Renewables has agreed to pay penalties to the federal government, as well as committing to engage a compliance expert to identify any gaps in the performance of the Snowtown Stage 2 wind farm, and within six months deliver a report on how any outstanding issues will be rectified.

In orders issued by Justice White of the Federal Court, the settlement between Tilt Renewables and the AER will see Tilt pay a pecuniary penalty of $1 million to the federal government, as well as paying an additional $100,000 towards the legal costs of the AER.

“The contravention in this case must be regarded as serious,” Justice White says in his judgement.

“AEMO’s ability to achieve security in the power system depends, amongst other things, on Generators such as [Snowtown Wind Farm 2] providing, both at the time of the connection and subsequently, accurate and complete information concerning their ability to operate in accordance with the agreed performance standards.”

“As the events of 28 September 2016 indicate, a compromise of the security of the power system can have extensive and serious consequences.”

In a statement to the ASX, Tilt Renewables said that the penalties would not have a material impact on the company’s earnings, as a contingency for the anticipated penalty had already been included in a calculation of proceeds from the sale of Snowtown Stage 2 wind farm.

“[Tilt] has engaged with the AER in an endeavour to resolve this matter and is pleased to announce that a settlement of the proceedings has today been endorsed by the court,” Tilt told the ASX.

“The terms of this settlement include the entry of orders providing for payment of a penalty of $1M, completion of a compliance program review and an enforceable undertaking to implement minor updates to the generator performance standards for the Snowtown 2 Wind Farm.”

Tilt sold Snowtown Stage 2 wind farm to Palisade Investment Partners Limited and First State Super in December last year in a deal worth more than $1 billion.

It appears proceedings brought against Neoen, Pacific Hydro and AGL Energy are continuing, and are scheduled to appear before the court in late March next year.

Chair of the Australian Energy Regulator, Clare Savage, said that the enforcement action had been necessary to ensure compliance with the electricity rules, while noting that Tilt had been cooperative with the AER throughout the process.

“As wind farms make up an increasing proportion of our generation mix, it is more important than ever that they comply with the National Electricity Rules,” Savage said.

“This penalty outcome sends a strong message to all generators that the AER will take court action when necessary to enforce the National Electricity Rules.”