Australia's commitment to achieving net zero emissions by 2050 has significantly expanded the pipeline of renewable energy projects. Delivering on these projects is fraught with challenges, from labour shortages to supply chain issues, grid connection complexities, and insurance difficulties. Remote renewable energy projects in particular often face the competing elements of overcoming challenging environments, where specialised infrastructure management is a non-negotiable. In this blog, we explore some of these obstacles and share with you current industry responses and strategies for overcoming them.
The growing pipeline of renewable energy projects in Australia has heightened the demand for skilled labour, increasingly so in regional and remote areas. According to Net Zero Australia’s "Downscaling – Employment Impacts'' report, the energy workforce needs to grow five-fold by 2035 to meet decarbonisation targets. This surge in demand is compounded by a decline in labour productivity. For example, the Queensland Major Contractors Association noted a drop in average worker output from $679,000 per year (2011-2015) to $276,000 per year (2016-2020).
To address these labour challenges, the industry is focusing on attracting more workers. This has seen the enhancement of many training programmes, and improvements in retention strategies. Simultaneously, global supply chain pressures, exacerbated by COVID-19, have led to increased costs and delays in the procurement of construction materials. Prices of wind turbines and PV modules surged by 10-25% in 2021, affecting project timelines.
Project proponents and contractors are mitigating many of these issues through early procurement of materials and incorporating 'rise and fall' clauses in contracts to manage cost escalation. However, this approach requires accepting lower levels of cost certainty, which can be challenging for project financing in the renewables sector.
Connecting renewable energy projects to the electricity grid presents a significant challenge. As more projects come online, grid instability risks increase, complicating the approval process regulated by the National Electricity Rules (NER). This process has historically been opaque and slow, causing significant project delays.
Efforts are well underway to streamline the approvals process and enhance grid stabilisation technologies, such as battery energy storage systems (BESS). In the interim, project advocates are shouldering more grid connection risks in contracts, although this risk allocation is often heavily negotiated.
Securing insurance for renewable energy projects is increasingly difficult due to higher premiums and more exclusions, driven by natural disaster risks and the emerging nature of some technologies. This can prevent projects from proceeding if insurance is unobtainable on commercial terms.
Many project leaders are increasingly taking on the procurement of contract works insurance themselves to achieve better cost and coverage outcomes. This shift helps manage the financial risks associated with tightening insurance markets in the short term.
The renewable energy sector faces a significant skills shortage, with a growing demand for knowledgeable engineers skilled in modern technologies. Attracting and retaining talent is a constant challenge, compounded by the need for high levels of computer literacy, data analytics skills, and regulatory knowledge. To this end, global workforce mobility is essential, particularly for projects in remote locations. Companies must support workers with travel, accommodation, and communication infrastructure. This kind of mobility allows experienced teams to be deployed where needed, reducing costs and ensuring smooth project execution.
Enhanced Branding and Marketing: companies need to build strong brand awareness to attract high-quality talent.
Training and Career Progression: offering robust training programmes and clear career progression paths helps retain employees.
Competitive Salaries and Benefits: ensuring salaries are competitive with other industries is crucial for attracting and retaining skilled workers.
Many countries are increasingly setting nationalisation targets for their labour forces, requiring a percentage of the workforce to come from the local talent pool. By necessitating training of local workers to fill high-demand roles over time, this will reduce reliance on expatriate contractors.
Employing Third-Party Resourcing: Using local resource specialists familiar with regional hiring practices can streamline the resourcing process.
Employer of Record (EOR) Services: An EOR can manage visa applications, work permits, payroll, and compliance, ensuring legal and efficient workforce management.
While the challenges in delivering renewable energy projects in Australia are significant, they are not insurmountable. A multi-faceted approach of streamlined grid connection processes, increased investment in local talent and training, and effective risk management strategies, is what will move the needle. By addressing these challenges head-on, Australia can stay on track to meet net zero emissions targets by 2050, ensuring a sustainable and prosperous future for its renewable energy sector.
29 Aug 2024