A series of over-runs and delays have hit some of the contractors in the middle of delivering Australia’s new solar boom, and the inability to get new projects connected and online is causing energy companies to seek damages.
The struggle to complete projects quickly and without any sacrifice in efficiency or quality has yet to bear fruit, with three new sites in New South Wales already finished but not connected. This has led to French company Neoen receiving damages to the tune of $22m as it waits for a connection to the grid.
Contractors in engineering, procurement and construction (EPC) have found it difficult to agree on contracts with the developers, and some projects have gone over budget as a result.
This is due in part to additional scrutiny from networks and the Australian Energy Market Operator (AEMO). As more solar projects and other renewable investments begin to take hold, there is a clear need to ensure that they are all delivered above-board and in line with regulations. When a market moves above the level that a regulator can keep up with, this can lead to delays until the eventual reaching of agreements.
RCR Tomlinson, a contracting giant in the sector, admitted that it has run $57m over budget across two sites in Queensland and found that the only way to deal with this is to soak up the loss and issue new shares to raise capital funds to balance everything out.
The contractor blamed “external” delays and conditions at the local level for each site plan. Some had a worse ground condition than expected, which added to costs, as did unexpectedly difficult weather periods.
The apparent difficulty in getting new projects connected to the grid is a result of tough new rules as well as some delays by the networks in question.
Neoen received “liquidated damages” from its contract disputes. It released these details as part of its IPO, which is looking to raise up to $850m.
The company cited stricter AEMO rules as a current problem for contractors who had not yet adjusted to them. It noted that some “may have difficulty assessing construction risk due to the uncertainty”
Meanwhile, Genex Power has received further encouragement in its aim to develop a multi-faceted renewables plant in Kidston that covers solar, storage, wind and hydro facilities.
The Etheridge Shire Council has granted approval for the pumped hydro element of this plan, which is still on track for completion before the end of next year.
Genex Power, listed on the ASX, said that this was an important checkpoint to reach at this stage of the project, which is set to go into an existing gold mine pit in Kidston.
This should provide 250MW of power in addition to the already-built 50MW of solar on site. Genex Power hopes to supplement this with an additional 270MW of solar and 150MW of wind.
Its initiative ties in with the wishes of AEMO, which seeks what is known as “synchronous generation” that will rely on storage facilities to offer 24-hour energy provisions. The world will be watching for its potential success as Australia looks to maximize its resources to become a leader in renewable power.