The Hon. D.W. RIDGWAY (Leader of the Opposition) (16:03): I move:
That the final report of the select committee be noted.
It is with pleasure that I present the final report of this select committee. Members would know that it was established earlier in the year—I think it was around about the beginning of March this particular calendar year—as a result of the statewide blackout we had on 28 September 2016, which I think everybody thought might have just been a once-in-a-lifetime blackout, and then of course we had subsequent blackouts and power disruptions on 27 and 28 December, and also on 8 February 2017. I think everybody thought, 'Obviously there is something that needs a closer look.'
Before I get into the main body of my contribution, I would like to thank the members of the committee: the Hon. Mark Parnell, the Hon. Gail Gago, the Hon. Terry Stephens and the Hon. Robert Brokenshire. Unfortunately, there was a clash with the Natural Resources Management Committee meeting, so the Hon. Robert Brokenshire came to part of a couple of meetings early in the piece. He did not formally resign from the committee, but also did not attend any other meetings. It is unfortunate, but I guess he has a bit of an interest in the proceedings.
I also thank the committee secretary, Ms Leslie Guy, and the committee research officer, Ms Christine Bierbaum. Without those expert people to bring the evidence together and formulate it into a report, the committee would be all the poorer. I would also like to thank all the people and companies who made submissions. All the people who were invited to give evidence and did so were an important part of the whole process.
I will briefly go through the terms of reference: the causes of the blackout, delays in recovering electricity supply, credible warnings of potential for such an event, the cost to households and businesses, the lessons learned from the blackout, the power outages on 27 and 28 December and 8 February that we added to the terms of reference, the role of power companies in the state and national electricity regulators, and the reforms that would improve electricity reliability and affordability in South Australia whilst reducing carbon emissions, which I think is one that the Hon. Mark Parnell put forward. We also included the state electricity plan, because the government released that while we were taking evidence, and any other relevant matters.
I think the report speaks for itself. I know we have a very large day of private members' business ahead of us, but there are a couple of points I would like to make on the terms of reference. Regarding the causes of the blackout, there has been quite a lot of discussion and debate around whether it was because we had renewable energy or because we did not have a coal-fired power station anymore, or because we lost three of the four main transmission lines going to the north of the state, or because the ride-through settings were wrong on the wind farms. It does not matter which side of the argument you are on, you can find evidence to suggest that one of those things was a factor.
Clearly the ride-through settings on the wind farms were an issue that nobody knew much about. One of the recommendations is that AEMO should have known about it and should have made it its business to know about it. Certainly, the fact that they stopped producing electricity at the wind farms when the Heywood interconnector was at almost its maximum meant that we had no other supply and the system tripped. As I said, you could spend half a day arguing over exactly what the cause was and which particular component of our electricity system was at fault, certainly with some of the other events when we had load shedding. SA Power Networks probably got it wrong in the February event.
Nonetheless, the first reference was the causes of the blackout. Clearly, we had a very high demand. The Heywood interconnector was at its maximum and we no longer had a coal-fired power station, so there was a good case to say that the north and the west of the state may have stayed on, and if they did not stay on they could have been restored much more quickly.
Of course, the ride-through fault settings on the wind farms were set to such a point that they could not withstand the faults they were getting with the transmission lines going out. They were shorting to earth, so they shut down to protect the wind farms. So, there are a number of reasons, and maybe it was the fragility of our system that led to it, but there was no clear bit of evidence that said it was one thing that was the reason that it all went black on us on that particular night.
With regard to delays in recovering electricity supply, the system restart is quite a difficult mechanism to manage. All evidence we received suggested that if the Northern power station had still been operating, the north and the west of the state—Roxby Downs, Arrium and all the ones down to Port Lincoln and other areas—would have been much quicker to start. We may have been able to restart the rest of the state a bit more quickly, but certainly that part of the state would have been back on supply very quickly. The government took a decision to close that power station. I think it was the Hon. Mark Parnell who talked about Robert Mugabe last night. Was it Robert Mugabe, Mark Parnell?
The Hon. M.C. Parnell: Yes.
The Hon. D.W. RIDGWAY: Yes, and how he was gaoled for blowing up a power station in another country.
The Hon. M.C. Parnell: No, that was Nelson Mandela.
The Hon. D.W. RIDGWAY: That was Nelson Mandela, not Robert Mugabe. It is interesting that we had a government blow up a power station here in the last couple of years, so maybe it might be worth considering that as a place where we could punish them just for a week or two! There is good evidence to suggest that if the Northern power station were still operating, the extent of the statewide blackout would not have been as great and as far-reaching as it was.
The next term of reference was 'Credible warnings of the potential for such an event'. There were freak weather conditions and there is certainly evidence to suggest that tornados tore down transmission lines. They were quite exceptional and that clearly had a significant impact on the transmission network.
We also concluded that there were some changing factors in the market with less synchronous generation, and our market was getting more and more fragile. We certainly had a lot of warnings. When the Hon. Gail Gago, the Hon. Tom Koutsantonis and I were on the ERD committee in 2003, we had evidence back then to suggest that if you had too much renewable and intermittent energy, you risked the stability of the network.
There was some suggestion that the love affair that we have with renewable energy also left our state somewhat exposed during this particular event. There were lots of warnings over the last decade that we were perhaps getting the balance wrong. The government currently talks about transitioning to a low-carbon future. Perhaps that transition should have started differently, not just blowing up the power station and hoping like hell we can get through.
AEMO stated that the planned closure of the Northern power station in May 2016 would create significant challenges for transmission networks and voltage control in the Upper North and Eyre Peninsula regions of South Australia. The Australian Energy Market Operator warned that the removal of that power station was going to create some problems across the rest of the state, and suggested that we saw that with the poor ability to restart the system.
AEMO also went on to say that the likelihood of widespread or regional blackouts after non-credible events increases as the region becomes more reliant on energy imports over the interconnector, and local wind and rooftop photovoltaic generation. The warnings were there that with more intermittent and renewable energy and less base-load generation, and also with the Heywood interconnector being at its maximum, we were getting ourselves into a place where we were vulnerable, and if something went wrong, we would be unable to restart and provide electricity supply to South Australian consumers. There were plenty of credible warnings.
Term of reference (d) was 'Costs to households, businesses and the South Australian economy as a whole'. Initially, Business SA estimated it could be $367 million and they revised that figure upward to $450 million, so $400 million to $450 million is a significant impost on South Australian business and I think that should be taken into consideration. The government has just announced that they could have kept that Northern power station open for $8 million a year for three years. That may not have totally solved the problem or stopped the statewide blackout, but it certainly would have meant that we could have started the north and the west much more quickly, and I am sure that figure of $450 million would have been significantly less.
There are a couple of other terms of reference I would like to address before talking to some of the recommendations. I think we have all learnt some pretty valuable lessons from the blackout. We need a much more resilient and robust network, and that is the focus of the government's electricity plan. Clearly, it is the opposition's electricity plan, going to the next election, that we do not have the Northern power station. While I will continue to complain about it, it is gone. We have seen it blown up. It is now an opportunity to say, 'What is the way forward?' I think the community does not want to see itself exposed to being blacked out.
We are living in a modern, First World country and in my view the lessons learnt are that the community is very upset with losing the supply. It is pretty upset with the cost of electricity, but in the time of an election campaign reliability and price are the two biggest issues, and I think the events of the last two or three lots of blackouts have highlighted or focused the community's interest on reliable electricity. In a modern, Western society when you pay the top premium price you usually get the best quality service; we do pay a premium price but, sadly, as was shown last year with those blackout events, we do not get that premium quality service.
Just one other point, as a select committee we had a quick look at the state energy plan. I do not particularly want to delay the chamber any more, but I do want to make a couple of comments about the state energy plan. We took a lot of evidence from the government agency as well as from a number of other stakeholders and, interestingly, there was not one bit of evidence, not one shred of evidence, that this would have any impact on the cost of electricity. That is an interesting thought.
Clearly the government has focused on and panicked about reliability of supply but, as I said, you should go doorknocking. Everyone should; a lot of members in this place do but a lot do not, and they should go out and actually look into the eyes of the mums and dads, and especially the pensioners, who simply cannot afford their electricity bills. So while the government talks about an electricity plan that gives some sense of reliability, it has not addressed pricing. There was no evidence given to the select committee that there would be any downward pressure on price from the state government energy plan.
As I said, we have a large amount of work ahead of us today, but I will quickly address some of the recommendations. Despite it being a select committee that did not have a political party majority we tried to work through the recommendations, and it was interesting that we were able to come up with some that we all thought were worth pursuing. I will briefly run through a couple of them.
The first is that the South Australian government continues to contribute to a cohesive national policy on energy and climate change and encourages a coordinated, consistent approach by all governments in the design and operation of energy markets. I would like this government and any future government, whoever it is, to say that we should be looking at that sort of cohesive national policy. That is something that has been missing and I am pleased that the committee, as a whole, has recommended that.
The second recommendation is that the South Australian government continues its work with other jurisdictions to ensure that the NEM has adequately incentivised, efficient and timely investment in low-emission electricity that meets system strengths and security requirements. Again, I think we all accept that renewable energy is here to stay, it is probably going to be an important part of our energy mix going forward, but we have to make sure that the National Electricity Market works properly.
South Australia is the lead legislator, and we have had nearly 16 years of Labor government as the lead legislator, yet at times the Premier and the Minister for Energy have said, 'Oh, the system is broken.' My understanding of it is that they pretty much have their levers on the system, and they clearly have not been playing the leadership role that the state government should.
Something I think that is quite telling is that the South Australian government should abandon the idea of a new state-owned power station. The state government decision to install emergency backup diesel generation over the next two summers is an appropriate response to the potential short-term shortfalls in the electricity supply; however, the government should now prioritise other electricity supply solutions which make these emergency generators redundant within the shortest possible time frame.
It is not often that the Greens and the Liberal Party come together on recommendations, and the Hon. Mark Parnell will say that he wants to abandon it for a different reason to the Liberal Party, but I think we want to abandon it for similar reasons. However, it is interesting that the majority of the committee, and I am sure the Hon. Robert Brokenshire would have been there, said that the idea of buying this new—
The Hon. G.E. Gago: He was never there. He didn't turn up for one meeting.
The Hon. D.W. RIDGWAY: If he had been there I am sure—
The Hon. G.E. Gago: He never turned up for one meeting.
The Hon. D.W. RIDGWAY: No—well, he did turn up to some of the meetings, but perhaps you were not there. It is a shame when members interject about their attendance because the Hon. Gail Gago missed a couple of meetings as well. In regard to investing in a power station, it cost $110 million to lease it. I still cannot understand how you enter into an arrangement where you are going to rent something for a couple of years and if it is any good you are going to buy it. The government has gone and bought it, or agreed to buy it, before they have even tried it. Only the Labor Party would actually do that, I would think. It costs $300-odd million to buy it. That is 300 million reasons why the Greens should not preference the Labor Party at the next election.
The Hon. M.C. Parnell interjecting:
The Hon. D.W. RIDGWAY: The Hon. Mark Parnell throws his head in the air. He has his little deal with the Labor Party on the GM moratorium The very least the Greens could do is have the courage of their convictions and not preference the Labor Party when it comes to this part. It was something he felt strongly about. I would hope that the Greens see some merit in my suggestion in regard to the 300 million reasons why they should not preference the Labor Party.
The next recommendation was about the benefits of interconnection. Undoubtedly, something that came out of the select committee from a number of witnesses was the benefits of being better interconnected. Everywhere in Europe, they talk about countries that have high penetration in renewable energy but they do not have blackouts and that is because pretty much all those countries are well interconnected.
In fact, one of the figures that was suggested at one stage—and I will use South Australia as an example—if you have a rough average daily load on an average day of about 1,500 megawatts, you should have 1,500 megawatts of interconnection so that you can actually supply your average daily load via interconnections. It is a bit like building an irrigation system to make sure you can meet the needs of the plants at any given time.
I know that the reason the Hon. Mark Parnell wants to abandon the power station is so that we can have more renewable energy. Partly, having a larger interconnector to New South Wales means that you do have the benefit of energy flowing both ways. It gives us the benefit of having some backup from New South Wales during times of shortage and it also gives us a really good opportunity to export green energy to the Eastern States.
There was a little bit of discussion around that recommendation. There was a bit of debate. You cannot have it both ways. You cannot have an interconnector that flows only one way. If you want the benefit of exporting green electricity, you have to have it there to bring in electricity when the wind does not blow and the sun does not shine. Moving on, I was pleased to see that ElectraNet has issued some statements to say that it looks like the Eyre Peninsula network is going to be upgraded. That was a recommendation the committee was going to pursue, so I am pleased to see that that—
The Hon. M.C. Parnell: We made them do it.
The Hon. D.W. RIDGWAY: We made them do it. We forced them to do it. I am not sure that a parliamentary select committee is going to force anything much, but it was pleasing to see that a recommendation we came up with was one the industry has backed. I look forward to that with some interest. I know they are doing their regulated infrastructure test on the interconnector to New South Wales and my understanding is that there will be some preliminary draft report, maybe towards the end of December, and then a final report earlier next year.
I have some hope that we get a positive recommendation there because the evidence we got was, I think, a PwC report that it would put about $108 downward pressure on consumer prices annually at the cost of about $8 per consumer. If you take the $8 off, it is about $100 a year benefit. That is over 40 years, but those big bits of regulated infrastructure are paid for over a very long period of time, so I think there are some benefits from that.
I just want to touch quickly on some national reforms we looked at. There was one around the South Australian government considering recommendations on this and other relevant reviews into reliability and security and the security of South Australia's electricity supply in formulating the state's energy policy. I think it is important that we make sure we have good consistent policy. I wanted to make sure that the government considered these recommendations in their deliberations over our energy policy. I think it is important that, while the government wants to go it alone as a state—certainly, it is not my view, and not shared by other committee members perhaps—you have to make sure that whatever policy formations you have fit in with the national market.
There are a few other recommendations in relation to the national reforms. There is the one around having greater clarity and transparency regarding responsibilities held by different levels of government, network operators, network participants and generators. That was a bit of a revelation to me. The number of layers of bureaucracy in our energy market is quite large. I wonder how much duplication there is across all these different layers of bureaucracy. It is something that has evolved over a long period of time with all the member states. We are probably never going to be doing anything about it, but I think it is important that we recognise that, wherever possible, they should look to remove that level of duplication. I have a couple of quick ones on the national recommendations and reforms:
AEMO improve its collection of relevant technical information from generators in order to prepare for possible issues that affect the stability of the grid. This includes information about connection arrangements, power output levels, risks and fault procedures. AEMO should use this information to correctly inform its modelling. It was somewhat concerning that AEMO did not have sufficient information available to it to predict the disconnection of wind farms during the September 2016 storms. It now seems that whilst AEMO did know about ride-through settings, it was unaware of other settings that resulted in disconnection…
I think it is beholden on AEMO to make sure they are aware of all of the technical aspects. Maybe this all came as a bit of a shock and they are probably doing a lot better now, but it is certainly something we needed to make sure that they focused on. Another one was:
AEMO pay closer attention to local weather conditions and seek to secure emergency electricity supplies from generators or storage much earlier in the process. AEMO’s policies should recognise the different constraints that different types of generation exhibit and the amount of time it takes to bring generation on-line.
One that the Hon. Gail Gago suggested, and I think we all agreed with, was:
Telecommunication companies be required to keep in place more effective power back-up arrangements which ensure that communications work in times of blackouts.
I know that for telecommunication companies it was almost unheard of to have a system black event, but clearly there were some issues in regional South Australia with the backup power for mobile phone towers going down and therefore people lost the use of their mobile phone. Members would know that the old copper wire network worked when you did not have electricity. Now, of course, in this modern time when everything relies on electricity, when you run out of it things do not work. Just quickly, four recommendations that I put in as my little personal statement:
The South Australian Government ensures that action it takes to improve power system security and reliability in South Australia is the most cost-effective and imposes the lowest possible cost on electricity consumers.
It is something that the rest of the committee could not agree with me on, but, as I said earlier, you go and talk to the consumers out on the street and the number one issue is the cost of electricity. They are almost begging us, 'Whatever you can do, please, please give us some cheaper electricity.' I think that is a really important thing. I was disappointed that the committee would not share those views with me. My second point is:
Australian governments support the development of national policy frameworks to achieve objectives for electricity system security, reliability, affordability and emissions which are technology neutral and promote innovation.
Clearly, other members wanted not to have it technology neutral. Again, affordable, reliable, green energy is, I think, the order wanted by most people on my side of politics. They want it affordable, they absolutely want it reliable and as green as you can possibly have it. I find it bizarre that people would say, 'Actually, we don't care if it's all green and therefore really expensive and maybe not as reliable.' I think you have to have a mix there. Certainly, I was disappointed I could not get support for that particular recommendation.
Interestingly, I recently went to an opening of a green energy business in Adelaide and Mr Basil Scarsella, the boss of UK Power Networks, was there. He said, 'Reliable, affordable, green energy—you cannot have those three things in the one statement. You can have two of them, but you can't have three.' It is interesting. He runs one of the biggest power networks in the world and they are shifting away from a fair bit of their fossil fuel energy; nonetheless, he was saying that it is really difficult, even right now, to have those three things in one sentence.
The second to last recommendation to the South Australian government is, through its membership of the COAG Energy Council, to work to ensure that regulatory arrangements for the energy industry, including the division of roles within the various state and national regulators, operate as efficiently as possible to achieve agreed national energy objectives. Of course, members here did not want it. I could not get support from the rest of the committee because, of course, they wanted to go it alone and do their own thing. Clearly, we are in a National Electricity Market. We are a small player. Everywhere else in the world, it says you have to be better interconnected, you have to be part of a national market. They have made a decision they did not want to support that.
The final recommendation was that the approach to system planning, renewables and carbon reduction be based on national approaches. Certainly, it is my side of politics' view that you cannot have different state emission targets and different parameters in which to operate. You have a National Electricity Market, which should be agreed upon and should be done with a national approach.
With those few words, I recommend the report to the chamber. I thank all the members for their time in coming and listening to the evidence. It was conducted in a very earnest and good way. We tried to probe the issues and come up with a list of recommendations that give the government, and especially the new government after the next election, whoever that may be, some clear direction from the select committee. I recommend the report to the chamber.