The Black System Event Compliance Report Investigation into the Pre-event, System Restoration, and Market Suspension aspects surrounding the 28 September 2016 event The Black System Event Compliance Report 1 © Commonwealth of Australia 2018 This work is copyright. In addition to any use permitted under the Copyright Act 1968, all material contained within this work is provided under a Creative Commons Attribution 3.0 Australia licence, with the exception of: • the Commonwealth Coat of Arms • the ACCC and AER logos • any illustration, diagram, photograph or graphic over which the Australian Competition and Consumer Commission does not hold copyright, but which may be part of or contained within this publication. The details of the relevant licence conditions are available on the Creative Commons website, as is the full legal code for the CC BY 3.0 AU licence. Requests and inquiries concerning reproduction and rights should be addressed to the Director, Director Content and Digital Services, ACCC, GPO Box 3131, Canberra ACT 2601. Inquiries about this document should be addressed to: Australian Energy Regulator GPO Box 520 Melbourne Vic 3001 Tel: (03) 9290 1444 Fax: (03) 9290 1457 Email: [email protected] ACCC_12/18_1463 The Black System Event Compliance Report 2 Contents Introduction 4 Executive summary 5 Shortened forms 7 Overview 9 1. Overview 10 2. Pre-event (AEMO) compliance 29 Appendix A—Legal framework 67 Appendix B—Summary of weather information available to AEMO 74 Appendix C—Wind farm output during the pre-event period 78 Appendix D—28 September 2016 Heywood Interconnector flows and limits 80 3. Pre-event (ElectraNet) compliance 85 4. System restoration compliance 102 Appendix A—Legal framework 155 5. Market suspension compliance 158 6. Implications for the regulatory framework 190 Glossary 195 The Black System Event Compliance Report 3 Introduction This is the AER’s final report into the Black System Event in South Australia (SA) on 28 September 2016. The AER’s report is a review of compliance by various National Electricity Market (NEM) participants against the applicable National Electricity Rules (the Rules) regarding the operation of the South Australia region of the NEM in the period surrounding the state-wide blackout that occurred on the afternoon of 28 September 2016. This report is divided into the following sections: • Chapter 1—Overview, which provides a high-level overview of the subsequent chapters, including the AER’s role and its investigation, key findings, recommendations and next steps. • Chapter 2—The Pre-event (AEMO), which focussed on AEMO’s actions in the lead up to the storm event, and how it managed power system security under the Rules. • Chapter 3—The Pre-event (ElectraNet), which focussed on ElectraNet’s actions in the lead up to the storm event, and how it met its obligations under the Rules in relation to power system security. • Chapter 4—System Restoration, in which we examined the actions of certain participants in relation to the provision and use of System Restart Ancillary Services to restore the network following the black system conditions of the 28 September 2016. • Chapter 5—Market Suspension, in which we assessed compliance with how participants operated during the 13 day period in which the spot market in South Australia was suspended, including how AEMO managed power system security. • Chapter 6—Implications for the Regulatory Framework, which identifies areas for potential change to improve the overall effectiveness of the regulatory framework. The AER’s work surrounding the actual Event is ongoing and is therefore not a focus of this report. References to times in this report are in “market time” (Australian Eastern Standard Time). The Black System Event Compliance Report 4 Executive summary This report is a review of compliance by various NEM relate to AEMO not meeting all of the process requirements participants against the applicable National Electricity Rules set out in the Rules for reclassification and notifications (the Rules) regarding the operation of the SA region of the to participants. These stem from deficiencies in AEMO NEM in the period surrounding the state-wide blackout that procedures and guidelines. occurred on the afternoon of 28 September 2016. In this Given the nature of the findings, the circumstances under report we deal with the Pre-event period, System Restoration which the non-compliances occurred, and the actions that and Market Suspension. Our work concerning the actual have been taken by AEMO and others since September Event is ongoing. 2016 to address some of the issues identified we do not The state-wide blackout on 28 September 2016 resulted intend to take formal enforcement action in respect of from unprecedented circumstances. It was triggered by these matters. severe weather that damaged transmission and distribution Rather, we consider that the National Electricity Objective assets, which was followed by reduced wind farm output (NEO)—to promote efficient investment in and efficient and a loss of synchronism that caused the loss of the operation and use of energy services for the long term Heywood Interconnector. The subsequent imbalance in interests of consumers with respect to price, quality, supply and demand resulted in the remaining electricity safety, reliability and security of supply of energy—is best generation in SA shutting down. Most supplies were restored served through: in 8 hours, however the wholesale market in SA was suspended for 13 days. • the implementation of recommendations for improved processes. This blackout, known as a ‘Black System Event’, affected • the AER submitting rule change proposals and conducting the entire state-wide network and is the most significant compliance reviews, and market event since the establishment of the NEM 20 years ago. Market suspension has only occurred once before, • reviewing the market framework to enable it to better in April 2001 for two hours; this time the market was accommodate the rapid changes in technologies suspended for 13 days. currently being experienced, and changing the Rules where required. As such, the scope of the AER’s investigation has also been unprecedented. The AER undertakes its compliance role not only for the NEO, but to ensure confidence in the market and that With the investigation not limited to particular parties participants have clarity about their roles and responsibilities. or regulatory obligations, we have assessed all relevant compliance obligations as they relate to market participants, Drawing from our findings, the importance of AEMO Network Service Providers and AEMO. complying with obligations around communication and transparency is growing given the introduction of new types We have found some areas where AEMO did not comply of participants and increasing numbers of participants. with administrative requirements during the pre-event period, but do not consider that these contributed to the sequence Actions proposed by the AER include: of events leading to the state going black. We also found • implementing more rigorous weather further non-compliance around administrative requirements monitoring processes during the market suspension period. Common elements • standardising notifications for market participants during of AEMO’s non-compliance in both of these periods abnormal weather conditions relate to inadequate communication and transparency • more broadly reviewing the criteria under which risks to with stakeholders. the power system are classified We have identified some similar issues with administrative • improving AEMO operator training, and processes in our consideration of the system restoration • clarifying roles and responsibilities of the market operator period. While we have not found any breaches of the Rules and network providers regarding system restoration. in relation to this period, we have made recommendations for future action, including in regard to strengthening joint communication protocols. We have not found that AEMO breached any of its core obligations around operating the market or managing power system security. Rather, the areas of compliance concern The Black System Event Compliance Report 5 Our goal in identifying future improvements is to ensure there is better management by all relevant parties including with regard to transparency and clear communications should similar circumstances arise again in the future. We recognise that some steps have already been taken, or are underway. The AER will be working closely with the AEMC, not only in regard to proposed rule changes, but also in relation to the broader framework issues that have arisen where it is clear that the AER and AEMO have very different interpretations of the Rules. The AER will also be undertaking follow-up monitoring and compliance reviews in relation to the key issues we found, particularly around communication and transparency, not only concerning AEMO’s conduct, but also that of all relevant Registered Participants. The Black System Event Compliance Report 6 Shortened forms Shortened form Extended form AEMC Australian Energy Market Commission AEMO Australian Energy Market Operator AEMO Final Report AEMO’s final report into the Black System Event in South Australia on 28 September 2016 published in March 2017 AER Australian Energy Regulator AEST Australian Eastern Standard Time AWEFS Australian Wind Energy Forecasting System BOM Bureau of Meteorology DI Dispatch Interval DNSP Distribution Network Service Provider DVAR Dynamic