After much speculation, the Australian Energy Regulator (AER) has commenced court action against a number of registered participants who operate wind farms (including AGL Energy, Pacific Hydro, Neoen Australia and Tilt Renewables) in relation to the 28 September 2016 blackout in South Australia. The blackout resulted in 850,000 consumers in South Australia being temporarily without power while the State suffered a ‘system black’ event due to a series of unforeseen, ‘1 in 50’ cyclonic winds which damaged HV transmission line infrastructure.

The claims

Registered participants are required to ensure that, in connecting their generation equipment to the national grid, they comply with the National Electricity Rules (NER) and the generator performance standards (GPS). Various safeguards exist in this process, including the Reliability Panel, a panel established by the Australian Energy Market Operator, to operate its generator compliance program.

The AER’s claims focus on the failure of the above registered participants to ensure that their generation equipment had sufficient ‘ride-through’ capabilities as required by the NER and GPS. The ability of the Hallet, Hornsdale 1, Snowtown 2 and Clements Gap wind farms to withstand ‘unusual power system events’ has been called into question, and in particular their shutdown and consequential overloading and ‘trip’ of the Heywood VIC-SA interconnector.

It is expected that the AER’s claims will be vigorously defended, with the outcome of the case likely to affect the future operation of wind farms Australia-wide.

The case is likely to be an expert’s banquet given the known complexity of the:

  • NER and GPS applicable at the time
  • interface between each generator’s internal system protection settings and the language of the NER concerning generator responses to grid events
  • subjective nature of many of the GPS which governs how generating equipment is required to respond in relation to significant adverse effects.

What is at stake

The AER has so far claimed unspecified ‘declarations, penalties, compliance program orders and costs’. The maximum penalty under the NER against participants is $100,000, or $10,000 per day that a breach continues.

Whether the AER will pursue damages in full remains to be seen. According to AER Chair, Paula Conboy “the AER has brought these proceedings to send a strong signal to all energy businesses about the importance of compliance with performance standards to promote system security and reliability”.

Further to any claims by the AER, it is possible that any findings could form the basis of class actions by consumers affected by the blackouts.

Who to sue

The current defendant’s to the AER’s case are registered participants who operate wind farms. While proceedings are currently on foot only against registered participants themselves, wind turbine manufacturers and advisors may be the subject of formal or informal proceedings due to their role in designing systems to comply with the NER and GPS.

The case has been long feared, with Neoen provisioning for the risk of litigation arising from the blackout as far back as September 2018 in its IPO disclosure statement.

The AER in a recent report formed the view that the Australian Electricity Market Operator (AEMO) failed to ‘take all reasonable steps’ in light of the impending storm conditions which preceded the blackout. However, the AER has also commented that it did not consider that such breaches contributed to the blackout and at this stage AEMO is not the subject of proceedings.

Why this matters

The case is likely to be technical as much as it is political. Since 2016 various political and industry groups have sought to lay blame for the blackout on a range of factors, including:

  • freak weather events which caused HV transmission towers to bend ‘in half like paperclips’
  • State and Federal energy policy which has driven the level of renewable energy produced in South Australia to allegedly unsustainable levels
  • ageing fossil-fuelled generators which do not have the systems required to respond adequately to grid instability.

The case will provide further insight into the right of a registered participant to not generate (for safety, financial or other reasons) versus the State’s insistence on ‘reliable’, forecasted generation, even in the extreme.

While the case is expected to focus on complex technical issues, some are expecting (hoping?) that the case will act as a ‘referendum’ on renewable energy, particularly given the recent outcome of the Federal election.