AUSTRALIA Trends and Developments Contributed by: Alexander Danne, Roy Groom, Rohit Venkat and Georgia Summerhill, Clayton Utz
Clayton Utz Level 15 1, Bligh Street Sydney NSW 2000 Australia
Tel: +61 2 9353 4000 Fax: +61 2 8220 6700 Email: adanne@claytonutz.com Web: www.claytonutz.com
Australia’s power industry is navigating a significant transition due to the intensifying effects of climate change and economic incentives to shift to renewa- ble generation. This article identifies five key develop- ments of note within the industry and discusses their relevance, how they will affect the power industry and the electricity and gas markets, and their expected impact on key stakeholders. Australia’s Net Zero Ambitions The Australian Federal Government has legislated a target to reach net zero greenhouse gas emissions by 2050, aiming for 82% on-grid renewable genera- tion across the National Electricity Market (NEM) and the South West Interconnected System (SWIS) by 2030. This will require a 240% expansion in annual additions of new generation from 2026–30 to 23,000 GWh. These targets reflect Australia’s drive to sup- port major investment in renewable energies, further underscored by the significant funding allocated to the Capacity Investment Scheme (CIS) and the Rewir- ing the Nation transmission upgrades. The CIS is the Australian government’s flagship rev- enue underwriting scheme designed to accelerate investment in renewable energy generation and clean dispatchable capacity such as battery storage. The scheme provides a long-term revenue safety net that reduces financial risk for investors, making renewable energy projects more attractive, with a target of deliv- ering by 2030 an additional 40 gigawatts of capacity comprising 26 gigawatts of renewable generation and 14 gigawatts of dispatchable storage. The Rewiring the Nation programme rounds this out by delivering
the transmission infrastructure needed to connect new generation to the grid, with the AEMO’s 2024 Integrated System Plan forecasting that about 4,581 kilometres of new transmission lines are required to meet 2030 targets. Substantial funding has already been committed across the states, including up to AUD4.7 billion for New South Wales, AUD2.25 billion for Victoria, and AUD3 billion for Western Australia. Split Scope Contracting Australia has seen a marked shift over the last ten years from fully wrapped turnkey project delivery models to a split scope model. This change has often been driven by “wrap premiums”, volatility that exists in the supply chain and a reticence from contractors to take on absolute risk. The advantages of this model include the potential to reduce project costs through the elimination of a general EPC margin. However, there are also some downsides to the model. These include the upfront cost of multiparty procurement, the absence of a wrap or “whole of pro- ject” warranty and insurance, and increased delivery, interface management and “gap” risks. Risk alloca- tion to contractors will not necessarily assure delivery if the relationship is not appropriately managed by the owner. Scope-of-work documentation should be reviewed carefully to ensure that there are no irregu- larities, and that all of the work is covered, guarding against gaps. There is also the risk that contractors may rely on one other’s defaults to avoid their own contractual obligations, making the overall contract administration significantly more complex.
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