The significant demands for new infrastructure and renewable energy mean that greater investment is needed, and quickly, by the government
This year, my hope is that there is a return of some normality to life and business conditions. I am hoping that normality includes the stabilisation of supply prices, improvement in lead times and availability of the supply chain, improvement in the availability of labour, interest rate increases stalling and a drier year – all resulting in a return to sustainable profit margins.
The Bureau of Meteorology’s modelling is suggesting a breakdown of the La Niña event and a possible return to El Niño conditions throughout the year. Whilst the probability of high rainfall decreases under these scenarios there is still some uncertainty. We need a break, so fingers crossed that the numbers fall our way.
Unfortunately, the headwinds will continue into this year but will hopefully be more manageable.
Inflationary pressures have put a strain on infrastructure programs. The dilemma is how to manage budgets in the light of an increasing need for more infrastructure to be delivered.
An easy solution would be to deliver fewer projects. In Queensland the demand for infrastructure development is outstripping delivery. This is due to the current and projected population growth and a slowing of new projects.
Considering our ageing population is signalling a further increase in international migration, it would seem the demand for infrastructure is only going to increase.
Added to this is the infrastructure required for the Brisbane 2032 Olympic and Paralympic Games and the renewable energy infrastructure to be delivered by 2030 to 2035.
The release of the last November’s report from the Clean Energy Council paints a depressing scenario regarding our current pace of delivery of renewables to meet 2030 targets. The rate of renewable energy infrastructure has dropped below the required level and an acceleration of projects is required.
Chris Bowen, the Federal Climate Change and Energy Minister, has estimated that Australia will need to install 22,000, 500-watt solar panels every day for eight years in addition to 40 wind turbines every month. An additional 10,000km of transmission lines need to be installed to meet federal government targets.
It was reported in the Australian Financial Review by Dylan McConnell, a renewable energy and energy system analyst at the University of New South Wales, that to meet the federal government’s 82 per cent renewables target by 2030, the rate of development needs to double and almost quadruple for the hydrogen superpower scenario.
Queensland has committed to being a hydrogen producer. In addition, the Queensland government has committed to building pump hydro storage facilities.
There seems to be growing resistance on environmental and ecological grounds to deliver some of this infrastructure, as exampled by Chalumbun Wind Farm cutting half the proposed turbines, Mackay’s pump hydro flooding a town and a general resistance to increased overhead transmission lines. These delays are adding to the urgency to accelerate renewable energy projects.
This acceleration and volume of renewable projects, coupled with the demand for transport and other civil infrastructures, will not help the inflationary, supply and labour pressures we have been experiencing. There is no doubt that the problems China is facing with COVID-19 will add to the supply and cost issues.
So how do we tackle this dilemma?
There is no doubt that governments will need to increase their budgets for infrastructure. Considering the debt they are carrying, there is little room for large increases. The private industry will need to play a larger part in financing and delivering infrastructure.
The industry will need to deliver more for less. This is possible, but reform of the planning, design, procurement and delivery of infrastructure projects needs to be implemented immediately. These reforms should be supported from other productivity-enhancing policies such as industrial relations.
Planning needs to be streamlined to reduce barriers and speed up the process. Designers need to be incentivised, through better renumeration and liability sharing, to explore and embrace innovation in their designs. Whilst designs are procured at lower cost, the designer wears all liability for its designs and the boundaries of true innovation will not be challenged. This is needed to provide cheaper and better performing infrastructure.
Standard specifications, which are prescriptive, need to be performance- based. Where prescriptive specifications are required, standardisation across jurisdictions should be forced wherever possible.
The procurement process needs to be quick, with tenders being easy to price and risk adequately shared.
Collaborative contracting is the tool to link all this together.
The light at the end of the tunnel is there will be sustained high level of opportunities for the foreseeable future. Interest rate increases will abate. Fuel prices will be stable. China’s COVID-19 wave will subside. Collaborative contracting will continue to evolve, providing a path for a better way of doing business, and the year should be drier. Unfortunately, the demand on materials, plant and labour will continue to make delivering projects difficult.