A visit to Ballina, a coastal town in northern NSW, shows that Australia can build big things. Ballina’s Big Prawn has lured visitors since 1989 and, in 2013, scored a $400,000 revamp.
The same goes 200km south in Coffs Harbour. In 1964, John Landi, who owned a roadside banana stall, wanted to stop more traffic. Having seen the Big Pineapple in Hawaii, he engaged local builder Alan Harvey to construct a giant banana.
Harvey began work in September, and, on 22 December 1964, the 13m-long Big Banana opened.
Our impressive collection of Big Things – which Australia Post celebrated in September with limited edition $1 coins – proves Australia has the ability to deliver major projects with tight deadlines and strict budgets.
And that’s exactly what we’ll need to do to make the transition to green energy. The Australian government has promised to cut national emissions by 43% and make 82% of the grid’s energy renewable by 2030.
We spoke with experts last week about the need for tax incentives and regulation to prompt change in support of achieving the emissions reduction target. Achieving the renewable energy target will require infrastructure, which is why it’s concerning that, roadside attractions aside, our track record on infrastructure projects includes some spectacular failures.
A failure to plan is a plan to fail
When it comes to major projects, budget blowouts and delayed completion dates are all too common.
Take the Inland Rail, a 1,700km rail network currently underway. It will ferry freight between Melbourne and Brisbane, reducing emissions by decreasing trucks on the road. Expected to cost $8.5 billion when announced in 2017, it’s now looking like a $31 billion behemoth.
If our transition to green energy isn’t to create a slew of financial liabilities, we’ll need to prepare better.
This requires “detailed project planning and feasibility studies, and effective risk assessment and management strategies,” Jacob Elkhishin, National Leader, Resources, Mining, Energy and Sustainability at audit, tax and consulting firm RSM Australia says.
Elkhishin also notes the importance of “robust project governance and oversight, and a commitment to transparency and accountability”.
Robust oversight, transparency and accountability need not come at the expense of efficiency either – better processes may offer opportunities to optimise all four.
“For example, when companies submit proposals, each submits an environmental impact statement [EIS], 90% of which contains replicated content,” Tim Buckley, Director, Climate Energy Finance says.
“How about we streamline the process and hire an expert to independently advise the government, rather than having the government assessing multiple self-serving statements?”
Challenges: Workers, materials, ‘hearts and minds’
Australia will need up to 400,000 skilled workers over the next 15 years, according to the Clean Energy Council.
“A huge number of resources is required – planners, engineers, construction personnel, logistics, among others,” says Tallaesen Fleming, Vice-President, Large Scale and Project Solutions, SMA Australia, which provides renewable energy solutions.
Buckley believes the solution lies in upskilling local workers, with other countries competing for the same pool of skilled migrants Australia has traditionally relied on. He welcomed the Federal Government’s announcement in October of the five-year National Skills Agreement, which will invest $12.6 billion in vocational education and training.
At the same time, he argues that Australia should reduce its dependence on international products to limit exposure to supply chain challenges.
“We need to build out the domestic supply chain – not only to avoid budget overruns, but also to make sure we value-add onshore and don’t leave ourselves exposed to underinvestment,” Buckley says.
Elkhishin agrees that research and development to drive innovation is an essential part of overcoming resource constraints.
The third common obstacle, particularly for clean energy projects, is community opposition. In the past two years, not a single wind farm has been approved in NSW – largely due to disgruntled locals.
“A disproportionate share of the costs is felt by regions, and they’re not seeing the benefits,” Buckley says, explaining that this is largely a communication issue rather than an immovable reality, with community consultation and increased financial incentives vital.
Moving away from regional areas and communities, Co-founder and Chief Sustainability Advisor at Planet Ark Paul Klymenko offers urban solutions to an urban problem.
“We always think we’ve got to keep building bigger and bigger things,” he says, arguing for careful small-scale deployment of resources in the right places to deliver increased benefit.
Klymenko offers an example: instead of building wind and solar farms in regional areas, adding solar panels to cover roofs in cities – where 80% of people live – could power the entire grid with a 20% surplus. And this is not a pipe dream – Klymenko’s Planet Ark Power has constructed Australia’s largest commercial microgrid on Ikea in Adelaide.
Learning from the past
When it comes to building things bigger than the Big Banana, our track record might not be great, but at least we can study the past.
Here are a few examples of projects that went haywire – and what we can learn from them.
Sydney Opera House: An epic blowout
The Opera House might be an icon, but the road to its creation was a shemozzle.
Construction began in 1959, with a $7 million budget and a four-year timeline. But it wasn’t until $102 million was spent and 14 years had passed that the white shells were ready for a performance.
“The project’s difficulties […] can be attributed to the lack of clear project goals, inadequate planning, lack of definition around scope [and] poor oversight,” Fleming says.
“The design changed multiple times during construction. Poor communication between stakeholders led to misunderstandings, and inexperienced staff did not implement an effective regime of monitoring and control, allowing risks to go unchecked.”
The lessons: Leadership that oversees the project as much as the dream is essential – bring finance, HR and governance leaders in alongside design and construction.
Queensland LNG: Too big, too soon
In the 2010s, work on three LNG projects in Queensland began simultaneously – one run by Santos, one by Shell and one by Australia Pacific, which is led by Origin Energy.
Each project involved building hundreds of kilometres of pipeline, to transport coal seam natural gas from inland gas fields to the coast – where it is liquified and then exported.
Within a few years, all three had reported blowouts of billions of dollars.
“That was just ludicrous – a total failure of planning, which was entirely preventable,” Buckley says.
“Why build six trains [gas liquefaction production lines] concurrently, when you haven’t built one in Eastern Australia in 240 years? Why not build them sequentially?”
The need to bring skilled workers in from overseas to resource the concurrent projects added significantly to the costs.
“We didn’t have the engineers to build two, let alone six trains,” Buckley says. He argues that government intervention leading to collective efforts might have been effective in minimising costs.
The lessons: Take a cold look at the financial requirements of resourcing a project end-to-end, considering workforce risk, and consider partnerships and resource sharing where financially advantageous.
Snowy 2.0: Lack of due diligence
Snowy 2.0 aims to increase the Snowy Hydro Scheme’s capacity by a third – enough to power an extra 500,000 homes. This requires connecting two dams via 27km of tunnels and constructing a subterranean power station.
On launching the project in 2017, the Federal Government announced it would cost $2 billion and be completed by 2021. With 2021 having come and gone, the budget has reached $13 billion – an estimate that assumes delivery by 2028.
Much of the delay is due to a tunnel boring machine called Florence becoming stuck after unexpectedly hitting soft ground – despite $100 million spent on engineering studies.
“How could […] they not realise there was a geological problem?” Buckley says.
Buckley also identifies shortcomings in due diligence. He explains that forging ahead despite a lack of due diligence in developing the project budget meant that an announced $2 billion project soon became $5 billion.
“But [they] forgot to include grid transmission, which cost another $3 to $5 billion, and so on – it became $13 billion.”
The lessons: There are two lessons here – both related to budget. Buckley argues that the issue with Florence reveals a lack of value-for-money from the $100 million engineering studies. And it’s clear that the sharp budget changes are a lesson in the importance of due diligence and feasibility.
What will happen if we don’t learn from these mistakes?
If the emission reduction targets are to be met, Australia can’t afford delays and budget blow-outs on its green energy projects.
“Consequences could include delays in reducing carbon emissions, increased costs for taxpayers, and a potential lack of stakeholder confidence,” says Elkhishin.
“The best time to invest in this stuff was yesterday. But today is the second-best time to start investing.”
