The notion of corporate social responsibility continues to dominate the corporate news cycle in Australia. In the mining, energy and infrastructure sectors this concept requires consideration of, among many others, environmental protection, decarbonisation, supply chain management, and the transition to clean energy.
Observations suggest industry is rising to meet the challenge. The Department of Climate Change, Energy, the Environment and Water’s 2022 State of Hydrogen Report noted that Australia has a pipeline of over 100 hydrogen projects planned, worth around $230 to 300 billion.
However, with this evolution of corporate objectives comes an inevitable need to reassess, and continuously manage, the challenges of project development. Many existing and emerging resources project developers now prioritise the sourcing of renewable power at the outset to align with its internal corporate social responsibility objectives and get ahead of the push to net zero by 2030. And, in the Western Australian resources sector where remote operations can be thousands of kilometres from the nearest port or city, these challenges are substantial. The ever-present consequences of the COVID-19 pandemic and other destabilising events only further complicate these matters.
In the case of renewable and hybrid power sources, which are fast becoming a necessity for miners looking to achieve their clean energy targets, the ability to achieve timely project delivery is put in peril by several significant risks. Supply chain delays and disruption, availability of capable power producers, and complex security arrangements all combine to challenge the viability of socially responsible enterprises.
A decision to focus on renewable energy generation for a mining project needs to appreciate the current commercial realities that supply for equipment (such as solar panels, wind turbines, control equipment and battery energy storage systems) is short. Lengthy lead times are the norm. Gone are the days where project developers could plug and play 100MW of diesel generators to satisfy its power requirements. In the current climate, any project developer looking to install a wind farm can expect to wait up to a year or even 18 months from the deposit date to receive its turbines. With rising steel, copper and shipping costs, project developers must maintain awareness of cost-push inflation and aim to lock in favourable prices as early as possible.
While easier said than done, project developers must also take care to select the right person for the job. Despite the current popularity of renewable and hybrid power solutions, their construction, installation and commissioning remains a relatively niche skillset. In particular, the combination of high demand and low supply means experienced independent power producers (IPPs) are having to turn away jobs. To avoid having to take the ‘next best’ option, project developers should consider commencing the search for the right IPP early on in the process.
Early IPP involvement may also be an important consideration for the success of any energy infrastructure project. Due to tight project timelines, supply chain disruption and price fluctuation is a material risk. One option for project developers to manage that risk is to fund early procurement activities for its IPPs during the negotiation of a power purchase agreement. However, this by no means resolves supply chain risk, not to mention the myriad other risks that need to be considered when adopting a relatively new technology in a remote location. With this in mind, project developers with tight delivery timelines must always plan for the worst-case scenario.
Future proofing is also as relevant and critical as it has ever been. Climate change is a reality and is already having a significant impact across Australia. The South Australian government announced in March that work had only just commenced to repair the Olympic Dam Highway that was badly damaged by flooding more than a year earlier. Infrastructure projects will need to appreciate, and design for, the consequences of climate change. Extreme and devastating weather events – like the floods of 2022 – will likely become more common. Project developers need to ensure their infrastructure is fit for purpose over its proposed life.
It is a positive and progressive step to see project developers embracing technological solutions to respond to governmental and societal demands for a cleaner future. But the practical and logistical enormity of that task in remote areas of Australia cannot be understated. While not solvable in its entirety, a number of the inherent risks in such a venture can be minimised by early and proactive project management, having regard to the current economic and commercial realities. This may mean the difference between a successful project or abject failure.
