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Select Committee into the Resilience of Electricity Infrastructure in a Warming World
10/02/2017
Storage technologies and localised distributed generation in Australian electricity networks

ADAMO, Mr Joe, Acting Executive General Manager, Stakeholders and Information, Australian Energy Market Operator

O'TOOLE, Mr James, Assistant Secretary, Electricity Branch, Energy Division, Department of the Environment and Energy

RICHARDSON, Mr Stuart, Director, Technology and Demand Side Policy Section, Electricity Branch, Energy Division, Department of the Environment and Energy

SEWELL, Ms Margaret, First Assistant Secretary, Energy Security Office, Department of the Environment and Energy

SWIFT, Mr David, Executive General Manager, Corporate Development, Australian Energy Market Operator

WILKIE, Ms Joann, Acting First Assistant Secretary, Energy Division, Department of the Environment and Energy

[14:32]

CHAIR: I now welcome representatives of the Department of the Environment and Energy and the Australian Energy Market Operator to the table. Thank you all for coming along this afternoon. I remind the witnesses that the Senate has resolved that an officer of a department of the Commonwealth or of a state shall not be asked to give opinions on matters of policy and shall be given reasonable opportunity to refer questions asked of the officer to superior officers or to a minister. This resolution prohibits only questions asking for opinions on matters of policy and does not preclude questions asking for explanations of policies or factual questions about when and how the policies were adopted. Who would like to make a short opening statement?

Ms Sewell : Thank you for the invitation to appear before the committee today. I would like to present apologies from Deputy Secretary Rob Heferen, who was unable to attend.

The department, as we have just heard, has representatives here only from the Energy Division and the Energy Security Office, but in relation to the matters being considered by the inquiry, these two divisions support Minister Frydenberg's role as the chair of the Council of Australian Governments Energy Council, which, as I am sure you have heard quite a lot today, has a large body of work underway in relation to the security and reliability of the national electricity market and setting up the market frameworks that will help customers take advantage of new opportunities in distributed generation and storage. The divisions also support the work that Dr Alan Finkel is leading on for the Energy Council in reviewing the current state of security and reliability in the market, with advice to be provided to governments later this year, through the COAG Energy Council, on a coordinated national reform blueprint for the energy sector. The Energy Security Office is also responsible for Australian government interaction with the states and territories, industry and AEMO in the event of electricity system emergencies which trigger the National Electricity Market Emergency Management Forum, which is chaired by AEMO.

Mr Swift : The Australian Energy Market Operator in an independent and not-for-profit organisation that operates most of Australia's energy markets and systems and provides a range of planning services. In relation to electricity, AEMO operates the National Electricity Market in eastern and south-eastern Australia and manages the power system underpinning it. AEMO is also the market and power system operator in Western Australia. In gas, we operate a range of wholesale and retail gas markets and trading hubs around Australia, including the Wallumbilla Supply Hub in Queensland and the Moomba Supply Hub in South Australia. We also operate two gas bulletin boards. I should underline there, though, that while AEMO operates the systems and markets, it does not own any physical assets such as pipelines, transmission towers or wind farms.

In addition to our operational roles, AEMO has a range of planning roles across both electricity and gas markets that aim to inform market participants, regulators and policymakers. Information from that work is publicly available on our website, and we would be happy to assist the committee if it wished to extract information from that work. Of particular relevance to the committee terms of reference, we are responsible for the development of national forecasts of electricity and gas demand. Electricity demand is forecast annually, down to the transmission connection point. We plan the Victorian transmission system and publish material on that. We undertake national planning and produce an National Transmission Network Development Plan. We also provide occasional papers from time to time, looking at specific issues.

Forecasting in a national electricity market has become more complex. The traditional approaches to issues of demand, transmission and supply adequacy are being overturned as customer behaviour changes, new technologies emerge and government policies are implemented. For example, generation is becoming increasingly diverse and complex as traditional thermal generation retires and we continue to see the growth of rooftop photovoltaic solar and intermittent generation such as wind and large-scale solar.

In 2015, AEMO released its inaugural Emerging technologies information paperexploring the potential impacts of battery storage, electric vehicles and fuel switching from gas to electric appliances on the NEM over the next 20 years. The study is a starting point for AEMO to progress further work in the area and to explore how each NEM region might respond to these technology changes.

The terms of reference for this committee refer to the increasing severity and frequency of extreme weather events. We are not climate scientists and cannot confirm whether we are getting more severe events more frequently or not. We can agree, however, that customers in South Australia have faced a number of significant interruptions to their supply over the last six months. There were significant interruptions to supply caused by damage to the distribution system in July, November, December and January. There was the event on 28 September, initiated by tornadoes, which led to a system black. That was followed by days of outages for some regional customers caused by the severe transmission damage. On Wednesday this week, we had a very hot day and a shortfall of generation over the peak required some load shedding.

I am not in a position today to answer all questions on these events, but I will be happy to address those I can and get further information on others for the committee if required. I would also note that all of these events are complex and investigations are not yet complete, so further information may come to light. Each of these different events had a different root cause and will potentially provide different learnings as to how we might be better managed in the future. However, I do note that we do not construct a network or manage the power system to a standard of no outages ever. That would be uneconomic, and I am sure no-one wants to unnecessarily increase prices to customers.

Addressing the resilience of the system is an issue for all of us. AEMO is particularly responsible for managing the overall power grid and its secure operation. AEMO sees the changing generation mix, with more asynchronous generation and intermittent generation as a challenge to the security of the system. Our ability to balance the security and reliability of energy supplied by these new technologies against the changing needs and preferences of the consumer is a primary focus for AEMO. The challenges arise in managing everyday 'credible contingencies', as we call them, as well as in extreme events. To help us deal with these issues, AEMO is conducting ongoing work in our Future Power System Security program, which aims to identify and quantify the challenges of main power system security in the NEM. We are also working in collaboration with the AEMC to change the market and regulatory frameworks to ensure these issues are managed into the future.

Many solutions to maintaining security are technically possible including network investment, constraining on conventional generators, installing synchronous condensers, batteries et cetera. We are particularly interested in obtaining frequency control ancillary services from utility scale wind and PV generators. Embedded and distributed generation provides potential benefits to the system and offers opportunity to optimise the use of infrastructure. Obtaining services in the future from small-scale batteries is also a potential contributor to an overall efficient solution. However, embedded generation, a more active demand side response and battery storage raise their own challenges. In particular, as the market operator, we need to predict our likely behaviour and ensure the overall system remains secure and reliable. Given the range of possible solutions, it is AEMO's view that a framework is required that allows the best combination of all solutions to arise over time.

CHAIR: Thank you, Mr Swift. I ask that you table that opening statement so that we can get it copied by the secretariat and circulated to the committee.

Mr Swift : Certainly.

CHAIR: Thank you. Obviously there is quite a bit of political discussion and debate today around the role of your organisation. It has been put that decisions made by AEMO in relation to shutting down power supply in South Australia was your decision, and your decision alone. For clarity here today I want an answer to that and also an answer to whether you think the criticism is fair that AEMO was asleep at the wheel on Wednesday.

Mr Swift : I guess we could start with that question first. We certainly were not asleep at the wheel. Grid operators around the world are tackling the problem of how you actually predict the behaviour of the changing power system. Our forecasts for the day turned out to be below what happened, but when you actually look at the extremity of the day our analysis now shows, when you look behind the meter at the actual customer load, that Wednesday was the highest demand ever in South Australia by quite a significant margin. There are a number of moving parts as you try to work out what the supply-demand balance is. We tried to predict the exact nature and shape of the demand, which was an enormous rise on the day before. The peak demand for the day before was only 1,800 megawatts. The peak demand from a scheduled point of view was over 3,000 megawatts on the Wednesday. That is an unprecedented rise. It is an unprecedented level of demand. During that day we lost about 75 megawatts of conventional generation—we had wind generation fall off dramatically during the afternoon and, of course, the blackouts occurred right at the end of the day as solar started to roll off. So there are a number of moving parts trying to predict all that.

CHAIR: How could you get it so wrong? Surely, that is your job—to be able to have those predictions predict what the demand is going to be. I accept that you have said you did not predict very well. South Australians and the rest of the country—people just want to know: how did you stuff it up so badly?

Mr Swift : As I tried to outline, there are many moving parts here. You are trying to predict the behaviour of the load, the solar, the other generators—some of which failed—and the wind. From some time ahead, we were issuing market notices seeking a market response to the fact that we saw shortages coming. There was no market response to that. When we got to six o'clock market time we did have to intervene, to shed load. If we had not, there would have been the possibility that the system would have collapsed or that plant would have been destroyed.

CHAIR: At what point did you realise that you had got it wrong?

Mr Swift : At market time five o'clock there was the first indication of, what we call, an LOR2. At that stage, we sought to intervene. That was too late to start the last generator and no-one had responded to the market signals. So we had to intervene at six o'clock market time. We intervened to reduce demand by 100 megawatts for 27 minutes.

Mr Adamo : We did face, as David alluded to, some unplanned and forced outages at that same time, and that exacerbated the need for the 100 megawatts to be load shed. If we had not made that call, we would have had a future risk to the entire system, which would have had a longer-lasting effect on the electricity assets, which would have taken a lot longer to be restored. We had to make that call in the time frame that we had.

CHAIR: Did you request that Pelican Point be turned on, at any stage, on Wednesday?

Mr Swift : No, we did not. We had the market signals out there, to request a market response from all participants. All participants, bar Pelican Point unit 2, did comply with that. We actually had all generators in South Australia that were available offered into the market, except for that one. That includes some plant that was running distillate and other expensive fuel.

CHAIR: Did that not give you some kind of red flag to say, 'Maybe someone should pick up the phone and ask them'?

Mr Adamo : Market signals are to instigate a response from the generators.

CHAIR: So you put the market before the consumer, before the people.

Mr Adamo : No.

Mr Swift : No, that is not true. We would intervene when we saw the reserves we were forecasting fall below a particular level. That has to happen in sufficient time for them to start. A generator cannot start instantly. It takes a number of hours to start. So by the time the gap in reserves was clear, it was too late to direct them.

CHAIR: You do have the power to direct them though, don't you?

Mr Swift : We certainly do.

CHAIR: You did not foresee that you would need to direct them, or you decided that directing them was not needed because you could just load shed instead.

Mr Swift : We certainly do not take load shedding lightly. No grid operator wants to shed load. We understand the pain that that causes to all customers. But we did not foresee the need for that plant early enough to give it an instruction, in time, to be able to start.

CHAIR: It is your job to ensure that there is electricity supply?

Mr Swift : We can only work with the plant that is in the market, obviously, where it is not our job to build generators. The market participates—

CHAIR: No, I am not suggesting that you are a generator, but it is your job to make sure that the power that is being generated gets to the people who need to turn the light on.

Mr Swift : Yes.

CHAIR: And that did not happen.

Mr Swift : On Wednesday, there was a requirement for some load shedding for that period of time. That is correct.

CHAIR: Why do you see load shedding as a preferred option to getting more power online?

Mr Swift : We certainly do not see load shedding as preferential to anything.

CHAIR: Would you say it is the last resort?

Mr Swift : Absolutely the last resort. That is a very good way to put it.

CHAIR: When you realised that there was a shortage of power in the system, did you think about asking for Pelican Point to come on, seeing as you had already missed the opportunity to foreshadow that demand was going to be higher than what was there already? Did you think at some point: 'We'd better get it turned on as quickly as possible,' regardless of your decision to load shed? You turned it on yesterday, right?

Mr Swift : We turned it on yesterday. Yesterday the forecasting was better. It was the second day of high temperature and a forecast proved to be more useful.

CHAIR: My 10-year-old daughter knew all week it was going to be stinking hot in Adelaide. All the kids at school were talking about how it was going to be stinking hot and they would go swimming after school. I cannot see how the energy operator did not foresee that demand would be high.

Mr Swift : We certainly did foresee that demand would be high. If you look at the error: 100 megawatts in over 3,000 megawatts is a fairly small shortfall, so we actually did see that the demand was high. We just did not get it exactly right. I might also point out that the forecast only 24 hours ahead was 4.7 degrees centigrade below what actually occurred. At the 40 degree mark we expect over 100 megawatts per degree centigrade in terms of the demand. Demand is very sensitive to the exact degrees that we actually get on the day.

CHAIR: I know there are going to be other senators who want to ask questions, so I will try and get through a couple of these other issues. It has been put to us over the course of the day and through submissions that it is in the interest of big energy generators and energy network providers not to allow the distribution and the disruption of solar battery storage to take hold, because it is going to impact on their profits. It feels as though your decision to load shed rather than request and demand that Pelican Point be turned on, for example, was more about protecting the profits of energy generators than anything else.

Mr Swift : No. That certainly is not the case. The behaviour of the generator in question is for them to answer. We do not understand why they did not particularly come on, and the prices were very high.

CHAIR: Have you asked them why they did not?

Mr Swift : I do not believe we have.

Mr Adamo : I do not believe we have.

CHAIR: Do you know whether the minister has asked them why they did not? Maybe the department of the environment could answer that question.

Senator BACK: Do you mean the state minister?

CHAIR: No. The federal minister.

Senator BACK: I would ring the state minister about it.

Unidentified speaker: They do not run it.

CHAIR: They do not run the power station.

Mr O'Toole : Not that I am aware of.

CHAIR: At what point did you, as the market operator, have any communication with the federal minister over this matter on Wednesday?

Mr Adamo : With respect, Senator, that is a pretty general question. What part of the organisation are you referring to?

CHAIR: Did the federal minister for energy at any stage on Wednesday reach out and say: 'What's going on here? Why are we losing power in South Australia?'

Mr Swift : I think we have highlighted how this happened very late in the day and with very little notice so most of the questioning actually came after the event had occurred. I might point out again that the event lasted for only 27 minutes, so it actually arose quickly and finished quickly. So it is more in the wash up of the event that we have been speaking to ministers and the other institutions around Australia.

CHAIR: When you ordered Pelican Point to be turned on yesterday was that at the request of the federal minister?

Mr Swift : No, it was not.

CHAIR: Was it at the request of the South Australian government?

Mr Swift : No, it was not. That was our decision.

CHAIR: It was your decision and you requested and ordered them to turn the plant on yesterday?

Mr Swift : That is correct.

CHAIR: Were they reluctant to do that?

Mr Swift : They complied with the instructions.

CHAIR: So you asked them to do it yesterday, but you did not ask why they did not do it the day before?

Mr Adamo : There is record keeping between control rooms. I am sure that will come out in any analysis that will be undertaken.

CHAIR: Okay.

Senator McALLISTER: I am interested in the answers you provided, Mr Swift and Mr Adamo, about the challenges in predicting supply and the behaviours of the suppliers rather than your acknowledged challenge in predicting demand. Mr Adamo, I think you said that there were some unexplained, unexpected and forced outages which exacerbated the situation.

Mr Adamo : That is right.

Senator McALLISTER: You explained that on the renewable side there was limited capacity because of the weather. On the fossil fuel side what capacity was unavailable?

Mr Adamo : Without going into the specifics of megawatts, those technical issues for those plants is what I was referring to for the thermal generation.

Senator McALLISTER: Which plants?

Mr Adamo : They were thermal generation plants. I do not have the names. I am happy to give you the names if they are not confidential in relation to our control room. But they are thermal generators that were forced outages during the period where it eroded our reserves in South Australia.

Senator McALLISTER: How many thermal generators?

Mr Adamo : My understanding is there were three.

Mr Swift : Yes, three smaller ones. My recollection is that is about 75 megawatts of shortfall due to those.

Senator McALLISTER: So they were three thermal generators separate to Pelican Point—

Mr Swift : That is correct.

Senator McALLISTER: in addition to the Pelican Point issue we have been discussing, which were not available at the time?

Mr Swift : Only one unit at Pelican Point was in that category. The other unit at Pelican Point was generating throughout the period.

Senator McALLISTER: Right. Do you understand the explanation for why the some of the other generators were unavailable?

Mr Swift : Yes, we have been provided preliminary information on at least three of those. There were some control issues. I do not want to go into those at the moment because we have not got full details on it, but there were some issues that we have been advised of.

Senator McALLISTER: Those issues relate to the operation of plant, not in relation to your control room?

Mr Swift : Absolutely, yes. They were technical issues, not—

Senator McALLISTER: I would like to know which plants were involved, where those three generators were located. You indicated that there was no market response to the request for support and nobody responded to the market signals. Does that surprise you?

Mr Swift : Yes.

Senator McALLISTER: The price was very high at that time.

Mr Swift : That is correct. We do not see any reason why all units would not respond to a price at that level.

Senator McALLISTER: But they did not.

Mr Swift : But they did not.

Senator McALLISTER: This is characteristically a market failure, I suppose. You have a market operating, you have got demand and you have got available supply but it is not bid into the system. Whose responsibility in the governance arrangements for the National Electricity Market is it to examine that particular dimension of this event?

Mr Swift : In terms of the real-time event and the behaviour on the day, that is clearly our responsibility. In respect of the behaviours of parties and whether they complied with the rules, that would be the AER's responsibility. Then when we look at policies and rules that gets back to the COAG Energy Council and the AEMC.

Senator McALLISTER: You will be aware that there are occasionally discussions about market concentration and the way that that interacts with the rules of the system. Are there any indications that that is a factor in the behaviour of individual businesses in this instance?

Mr Swift : It is really for the party themselves to describe why their commercial behaviour was like that. We are not aware of all their issues behind the scenes. It is certainly true that that unit has difficulty getting gas.

Senator McALLISTER: That is the Pelican Point unit?

Mr Swift : Yes. Its overall commercial position is for it to answer about.

Senator McALLISTER: Do you have the ability to direct an operator to turn on a unit?

Mr Swift : Yes, we do.

Senator McALLISTER: But you indicated that by the time you had realised that a problem had emerged, in terms of failure to bid, it was too late to make such a direction—that is correct?

Mr Swift : That is right. Obviously, there has to be something to direct and we have to be able to direct with sufficient time for them to respond. Our practice is that as soon as we hit what is called a 'Lack of reserve level 2', we would look at directing parties. That LOR2 did not arise until five o'clock, market time, which was too late.

Senator McALLISTER: Why is it that your protocols see you identify this problem too late to have a meaningful response, in terms of directing a market participant to switch on?

Mr Adamo : It is going back to the unforced and unplanned outages that eroded our reserves at that time in such a short period of time. Yes, we knew the wind would drop-off and we knew the solar would drop-off at a particular time, but our reserves were fine up until the point when we had forced outages. No signals from the market were being met. Together, in that combination, it meant we had to make a call. I reiterate, we made the call for the integrity of the entire power system.

Senator McALLISTER: Those forced outages you referred to were the three outages we were just discussing earlier—the thermal generation that was known about?

Mr Adamo : Correct.

Senator McALLISTER: Going back to the demand side, how far off was your projection of peak demand on Wednesday?

Mr Swift : About three per cent.

Senator McALLISTER: Could we have that in absolute numbers?

Mr Swift : We can provide that to the committee.

Senator XENOPHON: What is that, 350 to 400 megawatts?

Mr Swift : Sorry?

Senator XENOPHON: How many megawatts were you out by?

Mr Swift : It depends what time of the day, but earlier in the day we were out by about 300 megawatts—that is correct.

Senator XENOPHON: That is a lot of megawatts.

Mr Swift : At the end of the day, for a very short period—that is right.

CHAIR: At the end of the day when people are trying to get home to cook and wanting to make sure they can put the lights on at night.

Senator McALLISTER: I am also trying to unpack the events of Wednesday. Did the operator of the Pelican Point Power Station contact the AEMO chair on Wednesday to request that AEMO direct the operator to turn on the idle unit?

Mr Adamo : Not to my knowledge.

Senator XENOPHON: Could you check? Could you provide any correspondence or communication between AEMO and ENGIE? Could you take that on notice—any communication, correspondence, phone calls, notes or emails between ENGIE and AEMO? I think that goes to Senator McAllister's line of questioning.

Senator McALLISTER: It does. I am conscious that other senators wish to seek the call, but I am just interested to understand a little more about your contact with the minister and the minister's staff through the course of Wednesday and through the course of yesterday.

CHAIR: If we can get some of that information now that would be great, but if you do not have all the correspondence—there was a conversation with me earlier about wanting the conversations happening at the time—perhaps it would be good if you could provide us with a schedule over what conversations between the minister and the minister's office happened between Wednesday and Thursday this week.

Senator McALLISTER: That would be terrific.

Mr Swift : I could say that I know the control room had communications with Pelican Point, and I understand that they were advised that they would need two to four hours notice to start. I am not aware of any other conversations about whether they were demanding a direction or what.

Senator McALLISTER: I suppose the point is: are you aware of any reason why they would not have responded to the market request for them to bid into the system?

Mr Swift : No.

Senator McALLISTER: You are not aware. Thanks, Chair.

Senator BACK: I asked the commissioner and the regulator whether the federal government has any capacity to direct AEMO, and I was told they do not. So we will start from that.

Mr Swift : Yes.

Senator BACK: When the wind blows in South Australia, what is the maximum capacity in megawatts of the industrial wind turbines in that state?

Mr Swift : As at the end of the last financial year it was 1,576 megawatts. There is a further windfarm under construction at the moment.

Senator BACK: In terms of your planning, are you able to plan? We know that there is no reliability, predictability or regularity in wind generated power, but do you make any sort of an estimate day to day as to what you expect that you might be getting as a contribution? Or is that just too difficult to do?

Mr Swift : No, that is not too difficult at all. We do have a sophisticated wind forecasting system built into our market systems.

Senator BACK: And what is that? Perhaps you can take it on notice. I am interested to know what, of that 1,576, you would—

Mr Swift : Yes.

Senator BACK: It would be terrific if you could do that. Before going on, I just want to give all of you in South Australia some relief. West metropolitan Perth today created two records: the coldest maximum in February since records began and the wettest February day since records began. It is going to be cool, and you are going to get wet weather.

Senator XENOPHON: Are you BOM now, are you?

Senator BACK: No, but I have got that little bit of wool outside at home.

Senator ROBERTS: He is not BOM because he is not fabricating.

Senator BACK: Mr Swift, was there any legal barrier to Engie turning on its second generator on 8 February?

Mr Swift : Not that we are aware of.

Senator BACK: Okay, so it is your understanding there was nothing that would stop them. They were under no directive to not go in. And the length of time it takes, from the time they turn a genset on—it is gas powered, I understand?

Mr Swift : The Pelican Point Power Station is a combined cycle gas power station.

Senator BACK: Combined cycle, so five or six hours?

Mr Swift : No; generally the advice, as I said, on the day was it could take up to four hours to start.

Senator BACK: Four hours?

Mr Swift : Yes.

Senator BACK: We are talking about 6 pm, so back at 2 pm there was no circumstance that would have caused you to actually move to what I thought you said to the chair was level 2.

Mr Swift : That is correct.

Senator BACK: Can you describe to us what is level 2 and what actually triggered level 2 on Thursday that was not there on Wednesday?

Mr Swift : We have three levels of lack of reserves: level 1, in lay terms, is when we do not have sufficient estimated reserves to cover the two largest units in a region, level 2 is when the estimated reserves fall below the single largest unit in a region and level 3 is when we are predicting a deficit in reserves.

Senator BACK: Having got to the level where you could or did direct them, as I understand you did, can you explain to the committee does the generator get paid? If so, on what basis does the generator get paid for having their technology up and running, synchronised, ready to go when indeed it might not be needed and, therefore, not earning revenue from generation?

Mr Swift : Certainly. If they made the choice on the market signals, they would of course receive the market price, and market prices were very high. If they are directed, there are rules and there is an independent expert who sets that basically they recover their costs.

Senator BACK: Now I want to go to your Future Power System Security program. There was a progress report in August last year, and it seemed, from what I can recall, to focus on South Australia. It said:

Initial challenges are more acute in South Australia, due to the combination of its generation mix and risk of separation from the rest of the NEM—

which I prefer to call the eastern Australian electricity network, as you know. Can you tell us what these challenges are? Why are they more acute in South Australia than they are in other states, and what is your prediction for other states if they are acute in South Australia now?

Mr Swift : Because of its nature on the end of the grid, South Australia is vulnerable to islanding, as we call it, or separation from the main grid. That vulnerability presents a particular risk for South Australia, which is not evident in a number of the other states. South Australia also has a world-leading percentage of solar plus wind generation. I heard Mr John Pierce give you an explanation of what asynchronous generation is, and at times the South Australian power system runs with a very great amount of asynchronous generation.

Senator BACK: So can you tell us: is 'intermittent' another description of 'asynchronous'?

Mr Swift : 'Intermittent' and 'asynchronous' are different terms. 'Intermittent' means that it is variable, and, as I say, we have tools to try to predict what wind and solar are doing. Both of those, of course, are intermittent because they depend on the wind or sunshine. In most common terms, asynchronous generation is class IV wind turbines, batteries and solar PV, all of which feed into the grid through power electronics—through an inverter—rather than through a physical electromechanical rotating device.

Senator BACK: Now, realising that some of us on this committee do not know much about the technicalities, can you give us a layman's description of what is involved in balancing this intermittent generation and, more particularly from a consumer's point of view, are there added costs that would be over and above a different system of generation and a different source of electricity generators?

Mr Swift : Again I point you to Mr Pierce, who discussed the need for additional services in the grid. We do need to stabilise frequency and stabilise voltage—those sorts of things.

Senator ROBERTS: Excuse me. That involves an extra cost in the equipment to do that?

Mr Swift : In the future, it will require some costs to be able to provide those services.

Senator ROBERTS: So at the moment it just increases the complexity that needs to be managed?

Mr Swift : Whilst there are a number of conventional generators still in the power system, they provide an amount of physical inertia to the system. In the future, there are techniques to manage that, and that is what the Future Power System Security Program is looking at: what is the best mix of solutions that we should have to ensure that we maintain the security of the power system as it changes?

Senator BACK: In the UK, it is my understanding that they actually do pay generators to maintain—I understand this to be the term—'spinning reserve'.

Mr Swift : Yes, we do too. We have since market start. We have what are called the 'frequency control ancillary services', and generators are paid for the provision of those services. The supply of those services, though, diminishes as those conventional generators retire.

Senator BACK: Thank you. Finally, Ms Sewell, the information that was given to me by the department on 30 November was that there are 76 new power stations approved for construction. As I look down them, there are 66 solar of various capacities, five wind, three hydro, one landfill and one waste, with an installed capacity of 459 megawatts, which you expect to deliver between 1,000 and 1,200 gigawatts. Is it possible to provide, either now or on notice, any update beyond that number of 76?

Ms Sewell : I would have to take that on notice. That sounds like fairly recent information, so we may not be able to update it, but we can certainly take it on notice.

Senator BACK: Well, in updating it for me, I would be really appreciative if you would pick up on those 76 and perhaps give an indication on which, if any, have actually completed their construction and are now commissioned and operating, which of them are under construction, and—not which one individually, but in numbers—which ones have not yet started.

Ms Sewell : Yes, happy to do that.

Senator BACK: Thank you.

CHAIR: Mr Swift, I would like to go back to this question around the timing because I think it is really important. You are going to take on notice the timing and schedules of communication with the minister and the department, but today I want to know what time you had communication with Pelican Point ENGIE—when they told you it would take two to three hours to turn the plant on.

Mr Adamo : That information I dare say is recorded. It is recorded—

CHAIR: I bet it is recorded, and I reckon you have people back in your office listening and watching what is going on here. I think if we can get that information today, that would avoid any kind of perception that you are perhaps not willing to tell us.

Mr Swift : It is not that we are not willing to tell you. We do not want to tell you something that later proves to be incorrect.

CHAIR: All right. If we can get the time, I think that would be good. I assume you have some people sitting behind here who might be able to organise that.

Mr Adamo : No, we have not.

CHAIR: Okay. Let me ask you: what point in the day did that conversation first occur? You may not be able to give us the exact time.

Mr Swift : That is a rather tough question. There are a lot of generators in the market, and our control room is talking to all of them all the time.

CHAIR: Come on! This has been a big issue for the last 48 hours. I do not believe for a second that you do not have any idea about when you first had that conversation with ENGIE.

Mr Swift : I do not have a record in front of me of exactly all the conversations—

CHAIR: Was it in the morning? Was it at lunch time? Was it at 3 o'clock?

Senator BACK: Chair, the gentleman has answered the question.

Mr Swift : We certainly will provide information on that, but I much prefer to look at the facts before I answer a question to a Senate select committee.

CHAIR: Senator Xenophon, did you want to add something there?

Senator XENOPHON: Further to your line of questioning, this is of particular interest and concern to a number of members of this committee. It seems to be quite a critical question. It is fairly straightforward: when did ENGIE contact AEMO about offering Pelican Point? With whom were the communications with? At what time of day? What was the nature—the details—of the communication? I will obviously be guided by the committee; I am a participating not a voting member. But I would have thought that, given the nature of the inquiry and its critical importance, it is something for which you ought to be excused from the committee for five or 10 minutes to make those inquiries and get a response.

CHAIR: I think that is a fantastic idea. Mr Swift, would you like to see if you can take a couple of minutes to see if you can get us some answers.

Senator McALLISTER: In a similar vein, I think understanding the location or the ownership structure for the three thermal generators, which it appears were so significant in causing the unpredictability of this event, would be a piece of information the committee would value.

Mr Swift : I would point out to the committee that we are going through a very tight time in New South Wales and the ACT at the moment. We are happy to get some information, but we do have to be careful about interrupting the control room at this point.

Mr Adamo : And this is where the information will come from.

CHAIR: There has been no discussion or collection of that information to date? Is that what you are trying to tell me?

Mr Swift : We do produce, after the event, detailed logs of everything that happened. That would not be normally available until sometime next week. I understand our operations division are planning to publish a report around about Wednesday next week.

CHAIR: Mr Swift, you have come in here today and you have told us that you know that there was communication, and that ENGIE told you it would take two to three hours to fire up the power station.

Senator XENOPHON: Four hours—up to four.

CHAIR: It took up to four hours. You know that that occurred. I am baffled at how you cannot then give us a sense of what time that was, if you know that conversation happened. It is just not believable.

Mr Swift : We came here prepared to talk to your terms of reference about the resilience of the power system and batteries.

CHAIR: How about you take a couple of minutes and see what information you can get to us. You can take on notice the details of the communications back and forth, but the key question we want answered today is: when was that first communication?

Mr Adamo : Sorry, Senator. You are going to have to be a little bit more specific. The first communication with ENGIE during the day or the first communication at what particular point?

Senator XENOPHON: If I may assist, wasn't the question when ENGIE contacted AEMO about offering Pelican Point? I think that was one of the questions.

CHAIR: That is right, yes.

Senator XENOPHON: There may be other questions.

Senator McALLISTER: That was certainly my question.

Senator URQUHART: I want to see some clarification of some questions that Senator McAllister raised earlier, because my understanding was that you said that AEMO was not contacted by ENGIE before the market notice regarding Pelican Point unit 2 being directed to turn on. Is that correct?

Mr Adamo : With respect, that does not sound correct.

Senator URQUHART: Okay. Then that is a question.

Mr Adamo : We give out market notices to instigate market responses from all the generators. When we did not get market responses—

Mr Swift : Those market notices are general distribution to all participants in the marketplace. We have a live system to talk to all participants, so that was not a specific communication to ENGIE.

Senator URQUHART: Were you contacted by ENGIE at any time regarding Pelican Point unit 2 being directed to turn on?

Mr Swift : I am sure there were discussions between our control room and ENGIE at various times during the day. The exact nature and a log of those we do not have in front of us.

Mr Adamo : That is why I was asking for the specifics of the exact question, because our control rooms will be talking constantly to each generator in the NEM, including South Australia.

Mr Swift : Of course, one of the units at Pelican Point was running throughout the period, so again they would be talking to ENGIE on a consistent basis.

Senator URQUHART: When was the first communication and who initiated it?

Mr Adamo : Again, the first communication relating to what specifically? With respect, the control rooms, as you can appreciate, operate in the market in real time. So they are talking to each other in real time. We are happy to oblige with the response to these questions—

Senator McALLISTER: The question I am interested in is whether ENGIE or the operator of Pelican Point gas power station made a specific request to AEMO for them to intervene and direct them to participate. Did they initiate contact with you to request that intervention?

Mr Adamo : Did ENGIE initiate a conversation with AEMO to request AEMO to direct them?

Senator McALLISTER: Correct.

Senator URQUHART: Can I seek clarification? So ENGIE did not contact you before the market notice was put out?

Mr Swift : Again, we are in discussion with generators all the time, and especially in these periods where we have high demand. We are talking to all the generators. What we normally would do with this—it will take about a week—is to download the whole log of correspondence, which is quite complex, as you can imagine.

Senator XENOPHON: We can ask for that on notice, Chair.

Mr Swift : Certainly.

CHAIR: We will ask those questions on notice, but the direct question around when the operators at Pelican Point or ENGIE communicated with AEMO about whether they could be directed to turn on the second plant is what we want to know today. I would like you to take five minutes and see if you can get us an answer.

Senator XENOPHON: Chair, to be fair to AEMO—I think Senator Back may have picked up on this—if it is chaos in the control room, we obviously do not want to be seen to be interfering with the operations. But, if there is capacity to tell us without interfering with anything else AEMO is doing, that would be very helpful.

Mr Swift : Yes. We will have to ask some of the off-line managers if we have any transcripts from yesterday. We are happy to do that.

CHAIR: In five minutes. We will suspend.

Senator BACK: Perhaps the department might be able to answer some questions for five minutes.

CHAIR: All right. Let's do that. That is a very efficient use of energy, people. Senator Roberts, have you got questions for the department?

Senator ROBERTS: What transformation has the grid undergone, in recent years, and what has been the cost of accommodating wind and solar?

Mr O'Toole : You have probably heard from a number of witnesses that have transitioned and are going underway in their electricity market. What we have seen is a growing proportion in the generation mix of renewables, particularly wind but also solar, and a displacement of conventional generation. So we have seen a number of, particularly coal, generations close.

Senator ROBERTS: Do you have any idea of the cost to accommodate wind and solar and also the cost from shutting down the coal?

Mr O'Toole : Not a quantitative figure. I think you heard some evidence earlier in the day about wholesale prices, in terms of the network impacts. I think Mr Pierce flagged what he expects in the future and what is driving those.

Senator ROBERTS: Who pays for the cost? Is it lumped onto the conventional and efficient power?

Mr O'Toole : It depends what you mean when you talk about costs.

Senator ROBERTS: The costs of accommodating the solar and wind.

Mr O'Toole : Again, it depends if you are talking about a price figure or a broader definition.

Senator ROBERTS: So it is difficult to assess.

Mr O'Toole : It is difficult to assess.

Senator ROBERTS: It is very difficult to assess, okay. Thank you. I am wondering about the cost to the grid of renewables and whether or not it is hidden, and no-one seems to be able to discuss it quantitatively. It is a very complex issue, isn't it?

Mr O'Toole : It is, because of the way the market operates. And I think it has been touched on previously, in evidence, by other parties—in fact, I think it was Mr Pierce again. What consumers and businesses face is often divorced from what is actually going on in the wholesale market, because of the overlaying finance market. In terms of hedge contracts et cetera, they may not be seeing what is, in fact, quite a lot of volatility going on in the wholesale market.

Senator ROBERTS: We have seen a number of policy changes. We have seen our Prime Minister, for example, for 10 years saying we needed to stop the use of coal and now, very suddenly, saying we need to build coal fired power stations. What I have become aware of as a senator is that the use of cost-benefit analysis is almost non-existent, even in financial areas. So is there any way of assessing, afterwards, the cost of these many policy changes, not only the direct cost in dollars and cents to the consumer but also the cost to potential power providers who might be scared off by the uncertainty?

Mr O'Toole : I think you are, basically, asking me to comment on government policy, which I do not feel very comfortable about doing.

Senator ROBERTS: The changes, rather. Is there any way to cost the changes to policy? I would not expect you to comment on whether or not the changes have—

CHAIR: Just remembering that officers cannot give opinions, Senator Roberts.

Senator ROBERTS: Yes, I recall what you said at the start, and Mr O'Toole is reminding me of that. Just the cost.

Mr O'Toole : I am doing my best, Senator, yes. I think you are going very close to asking me to comment on policy. I am sorry about that.

Senator ROBERTS: Okay, that is fine. I am getting that it is a very difficult area to quantify.

Ms Sewell : I might just add to that. Where a proposed process involves some regulatory change, then departments are always required to go through a regulatory impact statement. Part of that is a cost-benefit analysis. That is only in relation to implementing policy that requires some sort of regulation.

Senator ROBERTS: I am aware of where that has not happened, but I am understanding what you are saying.

CHAIR: Is that it?

Senator ROBERTS: Yes. I have questions for Mr Swift.

Senator XENOPHON: Can I direct you to a report that was done back in July 2007 by Dr Tony Markson in his capacity at Nous consulting. It related to the January 2007 electricity supply drops in Victoria and it made a number of recommendations and observations about those power blackouts, load shedding and a whole range of problems that occurred in the network as a result of the bushfires. He talked about avoidable errors and recommendations to change the rules, change the power of the regulators and the like. Are you familiar with that report?

Mr O'Toole : No, I have not seen that.

Senator XENOPHON: It was quite a similar report in the context of deficiencies in the rules and the way that NEMMCO, the predecessor to AEMO, was operating. It is interesting that Dr Markson went on to become chair of AEMO. It is a pity that he is not here today to be asked what he did about his report being implemented.

I will put some questions on notice to you; firstly, about that report—whether the department has a role in following up whether that report was followed through, specifically on a number of recommendations that I will not traverse now. Secondly, I do not know if you have knowledge of this because it is more a question for AEMO—I understand today that the federal minister for energy has made requests of large users of electricity in New South Wales to limit their consumption of power or to reduce their demand on power to deal with the extreme weather conditions in New South Wales and the ACT today. Are you aware of any requests made by the federal energy minister to AEMO?

Mr O'Toole : I was aware that there were some calls made. I think they may not have been limited to our minister.

Ms Wilkie : The New South Wales government has made that request. AEMO did put out a press release at 11.30 am and the head of the Commonwealth Public Service, Martin Parkinson, has requested that Commonwealth agencies in the ACT attempt to reduce energy usage today.

Senator XENOPHON: It is not a criticism. I am trying to understand the role of the Commonwealth in respect to that.

Ms Wilkie : It is the role of the New South Wales government to do that on behalf of the New South Wales jurisdiction as part of the NEM. The federal energy minister, even in his role as chair of the energy council, does not take that duty away from the New South Wales minister.

Senator XENOPHON: But you do not know whether the federal energy minister also added to the New South Wales energy minister's calls to deal with this problem.

Ms Wilkie : He may have; I am not aware of whether he has made any statement in public about that, but he has not made any formal directions or media releases.

Senator XENOPHON: That is fine; thank you.

CHAIR: We have the representatives of AEMO coming back, so that is great. Thank you.

Mr Adamo : The answer to the specific question of when ENGIE initiated a conversation with AEMO to ask for us to direct them is that they did not initiate. The answer is that AEMO, as per normal operating procedure, sent out a market notice at 17:13 market time on the 8th.

Senator BACK: Is market time local South Australian summer time?

Mr Adamo : Yes, it is.

Senator BACK: It is not eastern—I know 30 minutes is not much, but—

Mr Swift : Market time is eastern time.

Senator BACK: So that is quarter to five, South Australian time.

Mr Swift : No, because of daylight saving it is the other way.

Senator BACK: South Australia is half an hour behind the eastern states, isn't it?

Mr Swift : But this is summer and you have—

CHAIR: Come on—Eastern Standard Time; 17:13 Eastern Standard Time—yes?

Mr Adamo : Yes. The market onus went out to all generators. AEMO waited for a market response. At 17:39, AEMO control room then rang the control room of Pelican Point. At that time, AEMO asked what the availability of that plant was.

CHAIR: And that is when they said 'two to four hours'?

Mr Adamo : Their response was 'up to four hours'.

Senator McALLISTER: I have been asking you about the thermal generation capacity that was unavailable on that day. You were unable to tell me. On the Renew Economy site, the journalist Giles Parkinson has indicated in an article today that the 56 megawatt gas plant at Port Lincoln was off-line, 'apparently due to "transmission" issues', and that 'AGL, which has the most customers in South Australia, had one 120MW unit of its Torrens Island gas plant closed for "maintenance".' Are those reports correct?

Mr Swift : We would need to take that on notice, and the reasons that are given there—I am not sure that they are correct. I do not believe that the whole Torrens Island unit was off-line; I think it had a reduced output.

Senator McALLISTER: As senators this is a little frustrating. You indicated in your earlier testimony that you did not know which thermal generation units were unavailable. Now you have indicated some knowledge of which ones were available. Can you confirm in a clear way for this committee which thermal generation units were unexpectedly unavailable and contributed in this very significant way to the supply shortfall on Wednesday?

Mr Swift : I do not have any written advice as to exactly what those units are, so I am reluctant to go and name them without actually having firm advice as to which those ones were.

CHAIR: I just do not understand how you cannot have this information.

Senator BACK: You can take it on notice and provide it to the committee.

Mr Swift : We certainly can.

Senator BACK: There would be confidentiality circumstances, wouldn't there?

Mr Adamo : Yes. It is not that we do not have the information; there is confidentiality in relation to what those—

CHAIR: Okay. Let's be clear here. Do you have the information and you just do not want to share it, or do you not have the information?

Mr Adamo : No, what we said was it is not like we do not have the information—and I am looking in my notes; I have the information now. Port Lincoln was one, Quarantine was another and Pelican Point was another. There is also another one. So from our perspective—

CHAIR: What was the other one? You have named three.

Mr Adamo : Quarantine, QPS, and Pelican Point.

Senator McALLISTER: Port Lincoln, Quarantine—QPS?

Mr Adamo : QPS is Quarantine.

Senator McALLISTER: Right—and Pelican Point. It is those three?

Mr Adamo : Yes.

Senator McALLISTER: There is not a fourth; it is just those three? Previously, you had said those thermal generation stations were in addition to the Pelican Point issue.

CHAIR: That is right.

Mr Adamo : Yes.

Senator McALLISTER: But now we are saying that Pelican Point is included in the list of three thermal generation units that were not available.

Mr Adamo : No, we will take that on notice. They are on the list in my notes here, so I would rather take—

CHAIR: Of course, Pelican Point would have been available if it had been turned on.

Mr Adamo : Available if it had been turned on?

CHAIR: Well, if you had requested that it be turned on.

Mr Swift : Early enough. That is correct.

Senator McALLISTER: Can I just ask one follow-up, because I think the testimony today has been confusing. To be very clear, had Pelican Point been turned on in time or had those other two thermal generation plants been available and not in scheduled maintenance, there would have been enough energy supplied to the system to avoid the incidents on Wednesday; is that correct?

Mr Swift : If Pelican Point second unit had been available and running through the period, that is right; that would have avoided the load-shedding, most likely.

Senator McALLISTER: Thank you.

CHAIR: When did you know that the other generators would not be available?

Mr Adamo : They were forced outages. They were unplanned. We did not have any forewarning of those. So we can take specifics on the logs of the recordings of when the control rooms identified them. But, as we stated earlier, they were unforced and unplanned and they happened in a short space of time.

CHAIR: So you had no idea prior to 17:13 eastern standard time on Wednesday that there was going to be any type of a shortfall?

Mr Swift : I believe it was at 15:00 market time. The run of the systems there were the first time that it produced a Lack of reserve level 2.

CHAIR: When did the generators themselves know there was going to be a shortfall, that they would be offline?

Mr Swift : There were lack-of-reserve notices, which generally show that the situation is tight, going out for some time.

CHAIR: That was known for some time?

Mr Adamo : Sorry, could you please replay that question?

CHAIR: When did the generators themselves understand that they would be offline, that they would not be available?

Mr Adamo : Based on whatever technical issues they had? That is a question for the generators. I am sure that it is on our logs, when we would have been notified. But that is a question for them.

Senator McALLISTER: I think it may be, Chair, that we do wish to speak to AGL and ENGIE about this at some point, and that might be something we need to investigate.

CHAIR: Yes. Just to be clear, before 17:13 on Wednesday you did not know that there would be a shortfall. I want to be really clear about that.

Mr Adamo : We had no reason to believe that we were going to have a shortfall. We had unplanned outages, as we have articulated today. We can explain further, on notice, the technical issues with those generators.

CHAIR: What were those problems?

Mr Adamo : Again, I do not have that information and they are and/or commercial problems.

CHAIR: Are they back online now?

Mr Adamo : I do not have that information.

Mr Swift : It is not unusual, especially under these high-temperature conditions, to have a forced outage—that is a breakdown in a lay sense.

Senator ROBERTS: Having operated businesses in the real world, I understand what you are talking about.

CHAIR: The concern I have, as a resident of South Australia, is we have seen some of the generators behave in this way previously. It was very well documented that in July last year generators actively did not come into the system and participate in order to push prices through the roof—price gouging. I am a little bit cynical hearing now that the same kind of games have not been played.

Mr Swift : We could not comment on that. Obviously, ENGIE withPelican Point 2 chose not to generate for whatever reason. We have no reason to suspect that the other ones were not other than forced outages.

Senator XENOPHON: I did refer to the report prepared by Dr Tony Marxsen—I think he is familiar to you—when he was running Nous consulting back in 2007. I will put some questions on notice. He made a number of recommendations to NEMMCO, your predecessor, as to what ought to be done with rules. I will be putting questions on notice as to whether those changes were done and to what extent were they done. If they were not done a few people will be saying, 'They were recommended 9½ years ago. Why weren't they done in terms of real changes and for changes and operations of what is now AEMO.' My understanding is that on the day in question, on 8 February, there was one Pelican Point unit at 240 megawatts, one Quarantine unit of 20 megawatts, one at Snuggery of 18 megawatts and one Torrens Island unit of 120 megawatts. Does that sound right to you? Do you want to take that on notice? I do not want to get bogged down in the figures.

Senator McALLISTER: No, not on notice actually.

Senator XENOPHON: What?

Senator McALLISTER: I do not think that they need to take this on notice. This is information that ought to be presented to the committee. We have had a number of these confirmed. We have had contradictory testimony about how many units were unavailable of the thermal generation units installed in South Australia. You made reference earlier to the fact that there were unexpected outages in relation to three thermal generation plants. You subsequently could name two thermal generation plants. Senator Xenophon, I think, has now named four.

Senator XENOPHON: Four.

Senator McALLISTER: How many thermal generation plants were unavailable, and what were the names of those plants? Not on notice. Now.

Mr Swift : I understand that one of the Quarantine units failed—one of the smaller ones. We have talked about Pelican Point unit 2. That is a different kettle of fish.

Senator McALLISTER: It is.

Mr Swift : I am not familiar with the Snuggery unit. I was advised that we had problems at Port Lincoln.

Senator XENOPHON: Right. Also, in terms of the 1,482 megawatts of wind generation, only 84 megawatts was available. Is that correct?

Mr Swift : I think in South Australia, at the moment, there is about 1,576 megawatts.

Senator XENOPHON: Okay.

Mr Swift : In that period there was between about 70 and 90 megawatts of wind generation.

Senator XENOPHON: I do want to very briefly ask some questions about 28 September 2016 in South Australia. You issued a forecast of demand—I think my colleagues asked some questions about this—and it seems that there was an underestimate of what the demand would be. You kept revising it upwards, but it did not catch up. Is that a fair analysis? I am not being pejorative about it; I am just trying to understand it.

Mr Swift : Yes.

Senator XENOPHON: One of the Pelican Point units was mothballed, for want of a better word. Is that correct?

Mr Swift : That is what the debate is about today—that unit.

Senator XENOPHON: That means yes. AEMO had previously said it would need three months notice to start that up. I do not have the document in front of me, but there is a document out there that says, 'We can't start up that mothballed unit'—for want of a better word—'for three months.' Does that ring a bell?

Mr Swift : I know there have been discussions about the availability of that plant and how long it would take to get back into action.

Senator XENOPHON: My understanding is that AEMO had said it would need three months notice before it could be started up. What is your understanding?

Mr Swift : Our understanding is that, on speaking to them even recently, they can start within four hours under most conditions—

Senator XENOPHON: But AEMO had previously said that mothballed unit would take a significant period of time—three months—to start up. Do any of you have a recollection of that?

Mr Adamo : I do not know.

Senator XENOPHON: You do not? All right. I may have to put questions on notice and put that to you.

Mr Adamo : Sure.

Senator XENOPHON: However, AEMO did issue a direction yesterday for Pelican Point to ramp up that mothballed unit. Correct?

Mr Swift : That is correct.

CHAIR: How long did that take?

Senator BACK: Three to four hours, wasn't it?

Mr Swift : That was actually foreseen in the forecasts and was managed. We would have to look at it to be exact, but I believe they took just over two hours to restart.

Senator XENOPHON: Let's cut to the chase here, or as Senator Dastyari would say, 'Let's not pussyfoot around.' My understanding is that AEMO previously said that the mothballed plant would take up to three months to start up. However, you issued a direction yesterday to ramp up that plant. It was ramped up within a matter of hours, as Senator Back said, in terms of that time frame. The question is: if you had issued that notice the day before, on the Wednesday, that would have avoided the load shedding in all likelihood. Is that right?

Mr Swift : If we had been aware of the situation early enough and directed them to start early enough, that would have avoided the load shedding.

CHAIR: On Wednesday the reason you did not direct them to do that is that you thought it would take four hours. Yesterday—

Senator XENOPHON: There was a suggestion of up to three months.

Senator BACK: Just hang on a minute, if I may. The term 'mothballed' does not mean a genset that is sitting there ready to go. One that is mothballed is one that is cold and that is not anywhere near the actual generation distribution of a power plant. The term 'mothballed' that you are talking about with September last year might have been when it was in parts on the floor. We are not talking about a 'mothballed' genset here; we are talking about one that was not actually operating. It was not spinning.

Senator XENOPHON: It was a coal unit.

Senator BACK: As I understand it, the first time conditions got to the stage where they would have excited a level 2 was at 15:00 market time on Wednesday—15:00.

Mr Swift : 17:00.

Senator BACK: No. 17:45 market time was when you had these communications. I think someone said it was at 15:00 market time that the first stage had got to where you thought you might be in a level 2. If that is the case, 15:00 is actually a quarter to 3 in real time, if you had your watch on in South Australia, so you are still looking at a four-hour gap.

CHAIR: Except that it only took two hours yesterday.

Mr Swift : Sorry, I am misunderstanding where you are getting—17:00 market time was when the LOR2 arose.

Senator BACK: 17:45, was it?

Mr Swift : 17:00.

Senator BACK: In other words, the horse had bolted?

Mr Swift : Yes.

Senator BACK: You said it was only out for how many minutes?

Mr Swift : Our direction—

Senator BACK: How long did you load shed for?

Mr Swift : Our direction was for 27 minutes; it would have taken—

Senator BACK: So the horse has bolted; 17:00 is the first time you get to level 2. Even if it were two hours, that would be 19:00—everything is back on again.

Mr Swift : That is right.

Senator BACK: So you could not have predicted that. You would have to have got to level 2 at about noon—

Mr Swift : That is right.

Senator BACK: to have actually got the thing up and running and up to its capacity, with synchronous power going in there, to have avoided the circumstance you found yourselves in?

Mr Swift : That is correct, and that is what happened yesterday.

CHAIR: What time did the first power plant that was offline—you have listed three of them—go off?

Mr Swift : I do not have a log of each of those.

Mr Adamo : We can provide you with the log.

CHAIR: They could not have all happened instantaneously.

Mr Adamo : I personally do not want to answer that without knowing, because it quite possibly can happen instantaneously. I would rather wait till I get the logs, and share them.

CHAIR: I would like you to take this on notice: we want the confirmation of which power generators were thought to be on that day, those that then were not, what time that occurred, what time the operator was informed that they were being turned off and for what purpose. We still have not got an answer about why we had three, possibly four, out all at the same time.

Mr Adamo : We do know that they were technical issues.

CHAIR: All technical issues?

Mr Adamo : Yes.

CHAIR: Except Pelican Point, of course.

Mr Adamo : Correct.

Senator McALLISTER: And the issue with Pelican Point was that they elected not to bid and required a directive from you to participate?

Mr Adamo : Well, let us be very careful. Our conversation, with respect, was with Pelican Point to ask them, like we do with all available generation at the time, if they were available to come on, based on the lack of reserve we were facing. We outlined what time that conversation was: 17:39. Their response was, 'It will take us up to four hours.' That 'up to four hours' was not enough time for us as a market operator to make the system safe. I cannot speak for any further conversations that were had post that initial conversation, but you asked us to go back to what our original conversation was, and that is the response that they gave us.

Senator XENOPHON: Chair, there is a premise here that the forecasting was accurate or not, whether the contingencies allowed for were adequate or not, and that is something that this 2007 report refers to. It was critical of NEMMCO, your predecessor, for not factoring in sufficient contingency. It is apropos all the comments that have been made.

If I may, Chair, I want to go quickly to the events of 28 September 2016, because it is related in terms of forecasting and contingencies. There were weather forecasts that we were expecting severe storms, almost cyclonic in nature, through the state, with gusts of 160, 170, 180 kilometres an hour or thereabouts—maybe not that, but 90 miles an hour?

Senator ROBERTS: Senator Xenophon, wasn't the peak wind gust 87 kilometres an hour?

Senator XENOPHON: Well, there were forecasts for 90 miles an hour, from what I read in—

Senator ROBERTS: The day after I read that 87 was the peak.

Senator XENOPHON: Okay. Well, there were forecasts for storms, correct?

Mr Swift : There were forecasts for high winds. The highest wind actually recorded at a normal bureau measuring point I believe was 113 kilometres per hour, and that sort of wind speed should not be enough to damage transmission infrastructure. However, there is a very good report put out by the bureau examining the event, where they outline that there were seven tornadoes which actually hit the transmission line, and those, they estimate, had wind speeds up towards 250 kilometres an hour.

Senator XENOPHON: Okay, but the Heywood interconnector was at full bore that day—correct?

Mr Swift : Pretty much—quite high loading, anyway.

Senator XENOPHON: Quite high loading. There was no frequency control on the part of AEMO for the network.

Mr Swift : There was no frequency control specifically within South Australia at the time. There was plenty of frequency control in the National Electricity Market.

Senator XENOPHON: But not in South Australia.

Mr Swift : That is right.

Senator XENOPHON: In terms of contingencies and managing the risk, if you have an interconnector operating at full bore, basically, that interconnector could easily get overloaded and shut off if anything goes wrong with local power supplies within South Australia. Is that right?

Mr Swift : When we say the interconnector is running at high levels, as with all powerlines in the National Electricity Market we run at secure limits, so that would still be able to withstand the most severe credible contingency at that point.

Senator XENOPHON: But you put all your eggs in that interconnector at Heywood, didn't you? If anything went wrong with local power supplies, such as the wind generation having to be switched off because of high winds—because wind generators have difficulty operating with very high winds, correct?

Mr Swift : Wind generators do have, ultimately, a shut-off point. We have a wind forecaster, and we look for that kind of behaviour.

Senator XENOPHON: So did they take that into account that day, about the forecast winds?

Mr Swift : I believe there might have been a very small amount of wind shut-off caused by that factor. That was not an important factor in the events of the day. As I point out, all lines, in fact, in the market are run to ensure that they are secure against the next credible contingency, so it is not that any action that happened in South Australia would overload it; you need an extreme event to overload it from that point.

Senator XENOPHON: Can I just clarify something; you may want to take it on notice. Looking at the data, Port Lincoln did not operate as well on that black start event. Was that the plant that actually failed that day?

Mr Swift : The Port Lincoln plant, as I recall, had some problems in starting after the event, because it would have had to run separate from the rest of the market.

Senator XENOPHON: This is the message I have from someone in the electricity sector. I will not repeat exactly what they say, but is that plant just a piece of crap?

Mr Swift : That plant is contracted to ElectraNet to provide support to the system over there. I do not have a view that it is a bad plant or anything like that, no.

CHAIR: Senator Xenophon, if you do not mind, if there are other questions that we can put on notice, that would be good.

Senator XENOPHON: Thank you, Chair.

CHAIR: I just want to ask a question about the communication with the minister. The Premier of South Australia yesterday said that AEMO did not direct Pelican Point to be turned on, and then the federal minister said in question time yesterday that he had spoken to AEMO and that AEMO had disputed the Premier's version of events. Can you shed some clarification on this. Did AEMO speak to the minister yesterday, and did they dispute what the South Australian Premier had told publicly?

Mr Adamo : I personally did not, so I cannot answer that.

CHAIR: I am happy for you to take it on notice, but it was raised by the minister in question time.

Mr Swift : Did I understand that the question was that the South Australian Premier said that we did not direct Pelican Point?

CHAIR: Yes. Is that true?

Mr Swift : Yes, that is true. We have actually appeared and provided evidence today that we did not direct them.

CHAIR: You did not direct them even though the federal minister in question time yesterday said that he had spoken to AEMO and that that was not true. So the federal minister misled the parliament then?

Mr Adamo : Are you talking about today or the Wednesday event or Thursday?

CHAIR: I am talking about yesterday—

Mr Adamo : Yesterday, we directed Pelican Point.

CHAIR: in question time when the minister was reflecting on what had happened.

Mr Adamo : We directed Pelican Point yesterday. Yes, that is correct. On Wednesday, when we had the unfortunate incident of load shedding, we did not direct them. We asked them. There is a difference.

CHAIR: I am referring to not being directed on Wednesday.

Mr Adamo : We did not direct them on Wednesday. We asked what their availability was. They said to us, 'It would be up to four hours.' We had to make a call by then. It was too short.

CHAIR: Did AEMO, at any stage in communications with the federal minister yesterday, say that the South Australian Premier was wrong?

Mr Adamo : Again, not to my knowledge.

Senator ROBERTS: Thank you all for appearing today. I need to start by putting things in context. I am going to point to something on the Queensland LNP's website from when it was led by John-Paul Langbroek as opposition leader. Their policy on energy said, 'We need to make energy independent of climate; therefore we are going to wind and solar.' That is the kind of world we are now living in. It is mad.

I want to congratulate you, Mr Swift, because you made a statement here and you are the only person who has said this: we are not climate scientists and we cannot confirm whether we are getting more severe weather events more often or not. Thank you for your honesty. And you also recognise the challenge of asynchronous power. You alluded to contingencies, which lead to increased cost and increased complexity. I am guessing—I am not asking you to comment—that leads to gaming of the system, which is something Senator Hanson-Young has talked about, which further reduces reliability and increases complexity, and complexity increases cost and reduces security and reliability. I am empathising with what you have to do. Manufacturing simplicity leads to increased reliability, increased quality and decreased cost, and you are facing the absolute reverse, completely. You have a dog's breakfast in front of you.

I think the point of Mr Swift's opening comments is that the policies that are being pushed in South Australia by federal and state politicians have made the system complex and costly. Correct me if I am wrong. I want to congratulate you on your direct and very clear answers. You have not waffled on, but you have answered the questions. Market signals were not read and, when the market is so distorted, that is to be expected. We have regulations. We have RETs. We have subsidies. We have politicisation. We have gaming. And now, worse, we have a highly variable asynchronous power source in the wind farms. Because of regulations and artificial changes, do you now work with your hands tied behind your back?

Mr Swift : No, we do not. It is clear that the power system is going through a big transition. I heard Mr John Pierce talk about that and the things that are going on in that space. That is driven by technology. It is driven by customer choice and customer behaviour as well as being driven by government policy and climate change driving emissions reduction. AEMO does not see it as our role to push against these changes. Our job is to ensure we adapt, move forward and keep the power system secure. It is up to governments to set those policies and not us.

Senator ROBERTS: Okay. Thank you for that. My final comment is: Mr Swift, you have mentioned COAG oversight. I talked before in one of my questions in the preceding session about how our Constitution is based on competitive federalism and state responsibilities, and very little is actually done by the federal government in the way of looking after people and providing services. It should be done by the states. When we see COAG providing oversight, that destroys state responsibility, and voters at state and federal level can no longer hold anyone accountable in this feast of confusion. To me, the question would be to get it back to the states to organise so we can get responsibility back for the power supplies that are so essential to this.

Mr Swift : I understand that point, and I leave you to argue that point. The COAG Energy Council does seek to coordinate activities. I point out that every state depends on every other one at various points in time. Whilst there were difficulties in South Australia on Wednesday, they still received 800 megawatts of supply from the rest of the NEM. At various times each state is an importer or an exporter, so, in the modern world, it is hard to imagine total islanding of states. There are benefits to trade, but I will leave others to judge how that works with accountabilities.

Senator ROBERTS: Is it possible then that, as South Australia and Victoria keep going on their suicidal energy policies—sadly Queensland is heading that way too—if South Australia needs power, or Victoria needs power, especially after Hazelwood is shut down next month, feasibly they could take electricity from New South Wales and Queensland, and that would drive up prices in Queensland and New South Wales?

Mr Swift : We are part of an interconnected market, and the behaviours and actions in one state will affect another.

Senator ROBERTS: In other words, my constituents in Queensland, who I represent here, will be hurt by the stupidity of South Australians and Victorians in shutting down—in fact, dynamiting—perfectly good power stations.

CHAIR: Senator Roberts, we are about to lose quorum, so we are going to have to leave it there. We have gone a little bit over time. Thank you, Mr Swift and Mr Adamo. I appreciate we have not got all the information that we wanted today. There are a number of things you have been asked to get back to us on notice. We will make sure that you communicate with the secretariat over the next couple of days to put some time frames around that.

Thank you to the Department of the Environment and Energy. I close the hearing for today.

Committee adjourned at 16:07