The Australian Energy Regulator (AER) is suing four of the wind farms involved in the 2016 South Australian blackout – run by AGL Energy, Neoen Australia, Pacific Hydro, and Tilt Renewables – alleging they breached generator performance standards and the national electricity rules.
These proceedings appear to contradict the conclusions of a 2018 report which said while the AER had found some “administrative non-compliance”, it did not intend to take formal action given the “unprecedented circumstances”.
However the AER has since said this report focused on the lead-up and aftermath of the blackout, not the event itself. The case hinges on whether the wind farms failed to provide crucial information during the blackout which hindered recovery.
In particular, the AER is arguing the software protecting the wind farms should have been able to cope with voltage disturbances and provide continuous energy supply. On the face of it, however, this will be extremely difficult to prove.
The 2016 South Australian blackout was triggered by a severe storm that hit the state on September 28. Tornadoes with wind speeds up to 260 km/h raced through SA, and a single-circuit 275-kilovolt transmission line was struck down.
After this, 170km away, a double-circuit 275kV transmission line was lost. This transmission damage caused the lines to trip and a series of subsequent faults resulted in six voltage dips on the South Australian grid at 4.16pm.
As the faults escalated, eight wind farms in SA had their protection settings activated. This allowed them to withstand the voltage dip by automatically reducing power. Over a period of 7 seconds, 456 megawatts of power was removed. This reduction caused an increase in power to flow through the Heywood interconnector. This in turn triggered a protection mechanism for the interconnecter that tripped it offline.
Once this happened, SA became separated from the rest of the National Energy Market (NEM), leaving far too little power to meet demand and blacking out 850,000 homes and businesses. A 2017 report found once SA was separated from the NEM, the blackout was “inevitable”.
The question then becomes, is there any action the wind farms could reasonably have taken to stay online, thus preventing the overloading of the Heywood interconnector?
The regulator is arguing the operators should have let the market operator know they could not handle the disruption caused by the storms, so the operator could make the best decisions to keep the grid functioning.
Wind farms, like all energy generators in Australia, have a legal requirement to meet specific performance standards. If they fall short in a way that can materially harm energy security, they have a further duty to inform the operator immediately, with a plan to remedy the problem.
To determine whether a generator has complied with these risk management standards, a range of factors are considered. These include:
The series of events leading up to the 2016 blackout was extremely difficult to anticipate. There were many factors, and arguably all participants were involved in different ways.
The Heywood interconnector was running at full capacity at the time, so any overload may have triggered its protective mechanism.
The transmission lines were damaged by an unprecedented 263 lightning strikes in five minutes.
The market operator itself did not adopt precautionary measures such as reducing the load on the interconnector, or providing a clearer warning to electricity generators.
Bearing this in mind, the federal court will be asked to determine whether the wind farms complied with their generator performance standards and if not, whether this breach had a “material adverse effect” on power security.
This will be difficult to prove, because even if the generator standards require the wind farms to evaluate the point at which their protective triggers activated, it is unlikely the number of faults, the severity of the voltage dip, and the impact of the increased power flow on the Heywood interconnector could have been anticipated.
The idea AEMO could have prevented the blackout if the wind farms had alerted it to the disruptive potential of their protective triggers is probably a little remote.
None of the participants could have foreseen the series of interconnected events leading to the blackout. Whilst lessons can be learned, laying blame is more complex. And while compliance with standards and rules is important, in this instance, it is unlikely that it would have changed the outcome.
The tragic recent events on the Darling River, and the political and policy furore around them, have again highlighted the severe financial and environmental consequences of mismanaging climate risks. The Murray-Darling Royal Commission demonstrates how closely boards of public sector corporate bodies can be scrutinised for their management of these risks.
Public authorities must follow private companies and factor climate risk into their board decision-making. Royal Commissioner Brett Walker has delivered a damning indictment of the Murray Darling Basin Authority’s management of climate-related risks. His report argues that the authority’s senior management and board were “negligent” and fell short of acting with “reasonable care, skill and diligence”. For its part, the authority “rejects the assertion” that it “acted improperly or unlawfully in any way”.
The Royal Commission has also drawn attention to the potentially significant legal and reputational consequences for directors and organisations whose climate risk management is deemed to have fallen short of a rising bar.
Until recently, scrutiny of how effectively large and influential organisations are responding to climate risks has focused mostly on the private sector.
In Australia it is widely acknowledged among legal experts that private company directors’ duty of “due care and diligence” requires them to consider foreseeable climate risks that intersect with the interests of the company. Indeed, Australia’s companies regulator, ASIC, has called for directors to take a “probative and proactive” approach to these risks.
The recent focus on management of the Murray-Darling Basin again highlights the crucial role public sector corporations (or “public authorities” as we call them) also play in our overall responses to climate change – and the consequences when things go wrong.
Australia’s economy, once dominated by publicly owned enterprises, was reshaped by waves of privatisations in the late 20th century. However, hundreds of public authorities continue to play an important role in our economy. They build and maintain infrastructure, generate energy, oversee superannuation portfolios, provide insurance and manage water resources, among many other activities.
This means that, like their counterparts in the private sector, many face risks associated with climate change. Take Melbourne Water, for instance, a statutory water corporation established to manage the city’s water supply. It will have to contend with increasingly hot summers and reduced rainfall (a physical risk), and also with the risk that government policy in the future might impose stricter conditions on how water is used (a transition risk).
Our new research from the Centre for Policy Development, shows that, at the Commonwealth and Victorian level (and likely in other Australian jurisdictions), the main laws governing officials in public authorities are likely to create similar obligations to those imposed on private company directors.
For instance, a 2013 federal act requires public authority board members to carry out their duties with the degree of “due care and diligence” that a reasonable person would exercise if they were a Commonwealth official in that board position.
The concept of a “reasonable person” is crucial. There is ever-increasing certainty about the human contribution to climate change. New tools and models have been created to measure the impact of climate change on the economy. Climate risks are therefore reasonably foreseeable if you are acting carefully and diligently, and thus public authority directors should consider these risks.
The obligations of public authority directors may, in some cases, go beyond what is required of private company directors. The same act mentioned above requires Commonwealth officials to promote best practice in the way they carry out their duties. While there is still wide divergence in how private companies manage climate change, best practice in leading corporations is moving towards more systematic analysis and disclosure of these risks. Accordingly, a “best practice” obligation places an even higher onus on public sector directors to manage climate risk.
The specific legislation that governs certain public authorities may introduce different and more onerous requirements. For instance, the Murray-Darling Basin Authority’s governing legislation, the Water Act 2007, imposes a number of additional conditions on the authority. This includes the extent to which the minister can influence board decision-making.
Nonetheless, our laws set out a widely applicable standard for public authority directors.
While some public authorities are already carefully considering how physical and transition climate risks affect their work, our research suggests that standards vary widely.
As with the private sector, a combination of clear expectations for better climate risk management, greater scrutiny and more investment in climate-related capabilities and risk-management frameworks can all play a role in raising the bar. Our research highlights four steps that governments should consider:
creating a whole-of-government toolkit and implementation strategy for training and supporting directors to account for climate-risk in decision-making
using existing public authority accountability mechanisms – such as the public sector commissioner or auditor general’s office – to more closely scrutinise the management of climate-related financial risks
issuing formal ministerial statements of expectations to clarify how public authorities and their directors should manage climate-related risks and policy priorities
making legislative or regulatory changes to ensure consistent consideration, management and disclosure of climate risk by public sector decision-makers.
Measures such as these would set clear expectations for more consistent, sophisticated responses to climate risks by public authorities. However, even without any changes, it should be clear that public authority directors have legal duties to consider climate risks – and that these duties must be taken seriously even when doing so is complicated, controversial or politically sensitive.
The Murray-Darling crisis has led to drinking water shortages, drying rivers, and fish kills in the Darling, Macintyre and Murrumbidgee Rivers. This has been the catalyst for recommendations for a Royal Commission and creation of two independent scientific expert panels.
The federal Labor party has sought advice from an independent panel through the Australian Academy of Science, while the Coalition government has asked former Bureau of Meteorology chief Rob Vertessy to convene a second panel. Crucially, the first panel contains no Indigenous representatives, and there is little indication that the second panel will either.
Water for Aboriginal people is an important part of survival in the driest inhabited landscape on Earth. Protecting water is both a cultural obligation and a necessary practice in the sustainability of everyday life.
The Aboriginal peoples’ worldview sees water as inseparably connected to the land and sky, bound by traditional lore and customs in a system of sustainable management that ensures healthy water for future generations.
Without ongoing connection between these aspects, there is no culture or survival. For a people in a dry landscape, traditional knowledge of finding, re-finding and protecting water sites was integral to survival. Today this knowledge may well serve a broader vision of sustainability for all Australia.
While different Aboriginal Nations describe this in local ways and language, the underlying message is fundamentally the same: look after the water and the water will look after you.
In the current crisis in the Darling River and Menindee Lakes, the focus should be on the Barkandji people of western New South Wales. In 2015, the native title rights for 128,000 square kilometres of Barkandji land were recognised after an 18-year legal case. This legal recognition represented a significant outcome for the Barkandji People because water – and specifically the Darling River or Barka – is central to their existence.
Under the NSW Water Management Act, Native Title rights are defined as Basic Landholder Rights. However, the Barwon-Darling Water Sharing Plan provides a zero allocation for Native Title. The Barkandji confront ongoing struggles to have their common law rights recognised and accommodated by Australian water governance regimes.
The failure to involve them directly in talks convened by the Murray Darling Basin Authority and Basin States, and their exclusion from the independent panels, are further examples of these struggles.
Over the past two decades, Aboriginal people have been lobbying for an environmental, social, economic and cultural share in the water market, but with little success.
The modern history of Aboriginal peoples’ water is a litany of “unfinished business”, in the words of a 2017 Productivity Commission report.
In 2010 the First Peoples Water Engagement Council was established to advise the National Water Commission, but was abolished prior to the National Water Commission’s legislative sunset in 2014.
The NSW Aboriginal Water Initiative, tasked with re-engaging NSW Aboriginal people in water management and planning, ran from 2012 until the Department of Industry water disbanded the unit in early 2017. In a 2018 progress report the Murray-Darling Basin Authority described NSW as “well behind” on water sharing plans.
Even after a damning ABC 4Corners report shed light on alleged water theft and mismanagement, the voices of the Aboriginal people of the Murray-Darling Basin were absent.
In May 2018 the federal Labor party agreed to a federal government policy package of amendments to the Basin Plan, including a cut of 70 billion litres to the water recovery target in the northern basin, and further bipartisan agreement for better water outcomes for Indigenous people of the basin.
While the measures also included A$40 million for Aboriginal communities to invest in water entitlements, a A$20 million economic development fund to benefit Aboriginal groups most affected by the basin plan, and A$1.5 million to support Aboriginal waterway assessments, how worthwhile are they in a river with no water?
The recent crisis emphasises the perpetual sidelining of Aboriginal voices in water management in NSW and beyond. Indigenous voices need to be heard at all levels, with mechanisms that empower that involvement. Indigenous communities continue to fight for rights to water and for the protection of its spirit.
In the wake of revelations of water theft, fish kills, and towns running out of water, the South Australian Royal Commission into the Murray-Darling Basin has reported that the Basin Plan must be strengthened if there is to be any hope of saving the river system, and the communities along it, from a bleak future.
Evidence uncovered by the Royal Commission showed systemic failures in the implementation of the Murray-Darling Basin Plan. The damning report must trigger action by all governments and bodies involved in managing the basin.
The Basin Plan was adopted in 2012 to address overallocation of water to irrigated farming at the expense of the environment, river towns, Traditional Owners, and the pastoral and tourism industries.
The Commission has made 111 findings and 44 recommendations that accuse federal agencies of maladministration, and challenge key policies that were pursued in implementing the plan.
The commission found that the Basin Plan breached federal water laws by applying a “triple bottom line” trade-off of environmental and socioeconomic values, rather than prioritising environmental sustainability and then optimising socio-economic outcomes.
I and my colleagues in the Wentworth Group of Concerned Scientists provided evidence to the commission from our independent assessment of the Basin Plan in 2017, which the commission’s findings reflect.
Contrary to current government practices, the Commission recommendations include:
The Murray-Darling Basin is not just a food bowl. It is a living ecosystem that depends on interconnected natural resources. It also underpins the livelihoods of 2.6 million people and agricultural production worth more than A$24 billion.
The continued health of the basin and its economy depends on a healthy river – which in turns means healthy water flows. Like much of Australia, the Murray-Darling Basin is subject to periods of “droughts and flooding rains”. But over the past century the extraction of water, especially for irrigation, has reduced river flows to a point at which the natural system can no longer recover from these extremes.
That lack of resilience is evidenced by the current Darling River fish kills. More broadly, overextraction risks the health of the entire basin, and its capacity to sustain productive regional economies for future generations.
From the perspective of the Wentworth Group, we support the commission’s main recommendations, including increasing pressure on recalcitrant state governments to responsibly deliver their elements of the plan, and to refocus on the health of the river.
We particularly support recommendations related to the use of the best available science in decision-making, including for managing declining water availability under a changing climate.
We welcome the recommendation to reassess the sustainable levels of water extraction so as to comply with the Commonwealth Water Act. These must be constructed with a primary focus on the environment.
In line with this, the 70 billion litre reduction in environmental water from the northern basin adopted by parliament in 2018 should be immediately repealed. So should the ban on direct buyback of water from farmers for the environment.
We also recognise that the Basin Plan’s water recovery target is insufficient to restore health to the environment and prevent further damage, and would welcome an increase in the target above 3,200 billion litres.
South Australian Premier Steven Marshall has taken a welcome first step in calling for a Council of Australian Governments meeting to discuss the commission’s findings. Our governments need to avoid the temptation to legislate away the politically inconvenient failings exposed by the commission, and instead act constructively and implement its recommendations.
This is not only a challenge for the current conservative federal government. The Labor side of politics needs to address its legacy in establishing the Murray-Darling Basin Authority and the Basin Plan, as well as the Victorian government’s role in frustrating the plan’s implementation by failing to remove constraints to environmental water flows.
Now, more than ever, we need strong leadership. If the Murray-Darling Basin Plan fails, we all lose.