Delivering successful energy projects in the renewable revolution

1. Getting connected

Improving the grid connection process and making it quicker and easier to connect is key to accelerating the energy transition.

The time it takes to develop a project and reach financial close has progressively increased and often takes more than three years – yet it only takes a few weeks to connect solar PV to a rooftop. As a consequence, the amount of distributed renewable energy added to system capacity has exceeded 3 GW for each of the past two years.

The proposed concept and design of REZs, with their significant upgrades in transmission infrastructure, is likely to shorten the process of grid connection and reduce the likelihood of curtailment. Batching power system and connection studies, as proposed for the Central West Orana REZ, will speed up connection compared with undertaking these sequentially. 

Investments in transmission in the REZs will be essential for fast-tracking new renewable generation so it is ready to meet the accelerating timeframe of coal retirement.

2. Supply issues across the energy value chain

The pipeline of infrastructure projects in Australia is already significant. Adding REZs to this picture raises a burning question: will there be enough appropriately qualified personnel available to build the REZs to the expected quality and schedule? One aspect of the solution is likely to be upskilling and retraining workers displaced from industries such as coal mining. While this will be positive for affected communities, it is unlikely to be sufficient in itself to achieve the build out, so early preparation and resource planning will be essential.

Beyond personnel, will there be enough of the necessary technologies, materials and equipment for forthcoming renewables, storage and transmission investments? It is likely that pressures will emerge right across the value chain. Giga projects such as Sun Cable’s Australia-Asia Power Link will require a huge amount of transmission lines and HVDC cables, with the quantum required potentially too great for a single supplier or even a single region. New renewables projects will need to consider alternatives early.   

Another significant challenge is availability and cost of key critical energy minerals required in renewable energy technologies. The cost of minerals such as silicon, lithium and cobalt has skyrocketed and is likely to escalate further under the pressure of the energy transition and global geopolitical dynamics. 

For projects that have already locked in their power purchase agreements (PPAs) and expected internal rates of return (IRRs), rising equipment costs and changing cost assumptions will have implications. Some solar projects have already encountered much higher than expected costs for solar panels. Who will bear the impact of these escalating costs? Will the project still be viable? This dynamic needs to be factored into a project’s expected returns and considered by potential offtakers.

3. Giving weight to all three aspects of ESG

Environmental and social licence can make or break a project, so it’s vital that environmental, social and governance issues remain at the front of the agenda. Mere compliance with the basic requirements of legislation is unlikely to win over a community or build a positive reputation. 

Social licence will be a key issue when developing REZs. Many of these areas currently have limited transmission infrastructure, so routes, land access and easements for new infrastructure will need to be negotiated carefully with landholders and local communities, and with a particular focus on First Nations peoples. Early engagement will be very important so that everyone can understand the scope and intended outcome of the project, potential visual or environmental impacts, alternative routes or construction methods, and possible community benefits. 

Although some examples of best practice in community engagement are beginning to emerge in Australia, there is still much to be done to build greater trust with communities across the country to support the energy transition. 

Consideration should also be given to ethical and human rights issues throughout the value chain, such as the risk that materials or components may have been extracted or manufactured under conditions of modern slavery, or other socially and environmentally harmful practices.

4. Obtaining an offtake 

Ultimately, most projects will not secure financing or progress to construction without an offtake arrangement to underpin the revenue stream. The demand for offtake is changing. The days of the ‘big 3’ retailers being the predominant offtakers has passed, and the corporate PPA market continues to grow as companies seek to reduce emissions and control their exposure to volatile power prices. 

In NSW, it will be interesting to see the interplay of offtakes and the long-term energy service agreements (LTESAs), which will offer an option to access price guarantees for eligible generation, long-duration storage and firming projects.