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Climate action, renewable energy zones, and getting the ecosystem right

Australia has every reason to act on climate change.

Deloitte Access Economics has modelled that inaction could curtail Australia’s economic growth to the tune of $3.4 trillion in just the next 50 years1.

But action will create a new climate for growth – a $890 billion bigger economy, with over 195,000 additional jobs over the same period. 

Building renewable energy zones (REZs) is perhaps the biggest lever Australia has to fast-track climate action and lock in this growth.

The Integrated System Plan (ISP) forecasts that the capacity of utility-scale wind and solar will need to increase from 15GW today to 140GW by 2050 in the Step Change scenario and much of this will be built in REZs 2. There is no doubt that REZs are one of the biggest development agendas in Australia’s history. And our first REZs will be a chance to set a bold precedent for our future.

But to take full advantage of this opportunity we need to get a lot right, and this includes thinking about the broader ecosystem within which REZ development exists – across communities, workers, and industries.

REZs occur in people’s backyards. The REZ development needs access to a lot of land and skills for building both generation and transmission assets. So, while we can plan for as much renewable energy as we want, without the social licence, it simply will not get built.

Right now, we have the opportunity to access world-class renewable energy resources and build sustainable, multi-generational relationships with First Nations people. To deliver on the REZs we must recognise that sovereignty was never ceded, ensure First Nations people have access to qualified counsel for negotiations, pay attention to community priorities, and include First Nations people in the development of access and benefit sharing schemes3.

REZs will open new opportunities for workers and industries such as construction and operations (the usual suspects) but also upstream supply chain opportunities and potentially even larger industrial opportunities downstream (low carbon industrial facilities that can be powered by low-cost low-carbon energy). In NSW, the government’s $250m Renewable Manufacturing Fund will help to super-charge the delivery of local energy supply chains. And its $300m boost to the New Low Carbon Industry Foundations will accelerate the roll out of the state’s clean industry base.

Maximising employment opportunities for workers within local communities will be critical to achieving and maintaining social licence, particularly for workers impacted by the shift away from carbon-heavy industries.

Getting rapid investment and delivery right when it comes to communities, workers and industries will rely on ensuring the ecosystem is one of collaboration and learning, learning from one another and recognising different perspectives and expertise.

There’s also much we can learn from the past including previous renewable energy construction booms and even the LNG sector. To ensure that REZs deliver intrinsic value, we need to learn from projects that have fallen short.

In the solar farm construction boom from 2016 to 2019, the contractor RCR Tomlinson went into administration because of multiple unprofitable solar contracts and others, such as infrastructure investor John Laing and construction company Downer, announced their departure from the sector. If major parties such as these make these types of decisions, it constrains our ecosystem’s capacity and capability to deliver successfully. We need to ensure we don’t make the same mistakes and risk the same outcomes.

In the LNG construction boom from 2010 to 2014, delays and cost blow-outs were commonplace. Pluto, as an example, exported LNG 15 months late and $5bn over its initial estimate. Most in the industry have conceded that finding new and better ways to collaborate with local communities, working more effectively with contractors, and better managing concurrent projects would have saved a lot of pain and minimised costs4. Highly relevant learnings as we embark on the REZ development agenda.

More broadly, we can learn from the shift towards adopting a circular economy rather than repeat outdated linear approaches. This will ensure that REZs don’t become the next environmental and social issue of the future but deliver real value by addressing inequality and regenerating nature.

Delivering REZs that provide jobs, investment, and economic benefits for generations to come will require ecosystem action and an exceptionally high level of collaboration.

Australia’s energy future is of course decarbonised. There is no argument about that. But Australia’s energy future can also be inclusive, diverse, equitable and maximise economic and development opportunities. Let’s make that a reality.

This is an abridged version of the opening remarks delivered by Will Rayward-Smith at the 2nd Annual Australian Renewable Energy Zones Conference on 17 May 2022.