AER releases investigation report into South Australia's 2016 state-wide blackout

Following an extensive investigation into the circumstances surrounding the 2016 state-wide blackout in South Australia, the Australian Energy Regulator (AER) is calling for greater communication, transparency and role clarity for the energy sector.

AER Chair Paula Conboy today released a report outlining the AER’s investigation findings and a number of recommendations to improve the regulatory framework.

“The 2016 blackout was a serious state-wide event, ultimately brought about by extreme weather, and in many cases unprecedented circumstances, impacting energy infrastructure in South Australia,” Ms Conboy said.

“The AER’s forensic investigation 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.” 

The investigation found non-compliance by AEMO in relation to five clauses of the National Electricity Rules (NER). Specifically, AEMO did not meet all of the process requirements for reclassification and notifications to participants, which stemmed from deficiencies in their procedures and guidelines.

Where appropriate, the AER has raised areas for improvement with AEMO throughout the investigation, and participated in public consultation processes following the state-wide blackout.  

“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,” Ms 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.”

Ms 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.

“Communication and transparency are particularly critical given the introduction of new types of energy generation and increasing numbers of market participants.

“Consideration was given to actions that have already been taken by AEMO in developing the recommendations.”

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

“We also found that AEMO and all South Australian market participants were committed to working together to restore power to customers and ensure the smooth operation of the market in the days after the event,” Ms Conboy said.

“The objectives of the National Electricity Law are to promote efficient investment in, and efficient operation and use of, energy services for the long term interests of consumers with respect to price, quality, safety, reliability and security of supply of energy.

“By recommending improvements to the regulatory and market framework we are aiming to enable better accommodation for the rapid changes in technology and energy generation.”

The AER’s recommendations will be key inputs into the Australian Energy Market Commission’s upcoming review of the regulatory framework.

The AER will continue to work with the industry to ensure the lessons learned from this event are effectively implemented in South Australia and more broadly, and will report on the implementation of our recommendations later in 2019.

This report relates to the circumstances prior to the blackout, system restoration, and the market suspension period. The AER’s review of the events immediately preceding the state-wide blackout is ongoing.

Issued date: 
14 December 2018
AER reference: 
NR 40/18
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