For the private sector to deliver the huge pipeline of new generation needed to decarbonise economies, governments need to step in now to start some serious project management, writes Jeremy Chunn.
The shift to renewable energy is well and truly underway around the world. Steady improvements in efficiency – using less energy – will offset the amount of generation that needs to be built, but not by much. Governments have set targets to achieve net-zero emissions a decade or two in the future, which is their way of drawing a line in the sand.
But what will it take to pull it off?
“If you look at how infrastructure gets built around the world, typically you don’t try to build everything at the same time,” Partners in Performance head of Europe Guy Turner tells EcoGeneration.
If everything looks as though it’s going to happen around the same time, the cost of materials and labour will increase dramatically and force plans to be revised. When supply won’t flex to meet demand, that’s when the market works out for itself when things will be built.
“The problem we’ve got with the energy transition is we don’t have the opportunity to delay it or be late,” says Turner.
For governments to hit their renewable energy and emissions targets, new capacity must be completed on time. That may mean enduring the complexities of delivering during a peak in construction, or bringing forward plans to beat the rush.
Turner says constraints will be felt at all levels, from raw materials and manufacturing, to demand for skilled workers.
“Because everybody is trying to do it at the same time – every country in the world – we’re going to get a huge peak of critical items,” he says.
For example, take the UK, where 10GW of wind has been connected to the grid. However, to meet the government’s energy plan, a further 35GW of wind is required within 12 years. At the same time, the grid needs to be expanded with enough copper cable of the equivalent to reach from Perth, in Scotland, to Perth, Western Australia, and one-third of the way back.
Sure, there’ll be a big order for copper coming up, but Turner says there are only four vessels capable of erecting offshore wind towers suitable for the task in the UK. On top of that, there are only two plants capable of bending the steel required to make the required volume of towers.
But Turner adds it gets even tighter than that when it comes to the raw materials that are harder to source. The Netherlands accounts for about 0.1 per cent of global GDP, but needs around 25 per cent total volume of a certain rare earth element to make its energy transition happen.
“If you’re the UK Government and you want to be absolutely sure the contractors can fulfill your commitment to go net zero, you’d better make sure copper is available and that manufacturing capability is available sooner rather than later,” he says.
“If we leave it to the private sector, they will start motivating this in about five to seven years’ time, and do it exactly at the same time. That’s not going to work.”
If the private sector delays, as is its natural tendency, supply chains will lock up. Before that can happen, governments around the world should estimate their demand for materials, manufacturing and installation, with an eye on what other governments are planning.
“[It is about asking] what do I have to force to get into place so that when I want all of this built, I will have materials, manufacturing and installation capacity available,” says Turner, who speaks to EcoGeneration fresh from presenting at a Committee for Economic Development of Australia conference which posed the question: Is Australia’s big infrastructure build delivering value?
“The UK Government should probably go out and buy a cable manufacturing company,” he says. “Not only has it got to put in that transmission, it also has to distribute all of that electricity to houses.”
Without this level of business-government coordination to ensure the private sector has all it needs when the green light flashes, Turner says “it will be four to six years late, and we don’t have that time”.
Uncomplicated leadership by government is a beautiful idea, but in Australia there is the wee problem of a resistant Federal Government watching over states and territories that are variously eager to pitch out coal, or are still sitting on the fence.
But Turner says even the states that are most ambitious to replace polluting energy generation with clean alternatives might still find themselves unprepared.
“When you scratch the surface, the industry required to supply the private construction [of new generation in the major Australian states] is not going to be ready in time,” he says.
Government needs to engage itself to find ways to protect the supply chain and collaborate with the private sector. The private sector loves certainty, and global governments’ plans for renewables are looking very certain indeed.
For the Australian states with renewable energy zones to build, the opportunity is in talking to industry and conjuring incentives to ensure everything is built on time. However, there will have to be a federal ringmaster because “we do not want the states competing against each other,” says Turner.
“There are prizes to be had for collaborating,” he adds.
To not approach the task in a coordinated way and with collaborative spirit is to almost wish for a burst of mayhem, where everyone wants the same thing at the same time.
“If you leave it all to the end, you’re going to have five times as much work being done in one-fifth of the time, and it won’t happen,” says Turner. “It will be late.”