Jeremy Maycock | Chairman, AGL

Jeremy Maycock

AGL Chairman Jeremy Maycock outlines the key challenges that the domestic energy sector in Australia is currently facing, with a focus on the efficiency of publicly owned networks, deregulated metering, reform of tariff design and scrapping the Small-scale Renewable Energy Scheme.

Key points:

• Australia had the second-lowest power prices among peer OECD countries in the early 2000s, but this advantage has been lost. • Flawed policy and regulatory interventions saw power prices grow faster than in any other country between 2007 and 2013. • Inefficient public ownership of networks in New South Wales and Queensland has been a significant contributor to costs. • The benefit of small-scale solar schemes should be reassessed, in light of high prices. • Smart metering and other reforms that engage customers offer real opportunities for better value.

So much discussion about energy markets and energy policy is very narrowly focused, without a broader consideration of the interrelated issues. For example, decisions relating to electricity network expenditure will influence consumer pricing. In turn, this will influence electricity demand, which will determine, at least partially, generator and retailer profitability.

Another example would be where renewable energy policy not only influences consumer pricing, but can also create material social inequity, as well as prematurely stranding generation assets with remaining economic lives – another cost of scarce resources that must be borne by society.

With all this in mind, it is important to ask the most basic of questions in relation to how we are tracking with energy markets. That is, what objective does energy policy try to achieve? In our view, in any modern economy, energy policy has three objective functions: • to deliver a reliable supply of electricity • to deliver at a cost-reflective price • to deliver in a way that minimises impacts on the environment over time.

You don’t need to be an energy policy expert to know that these objectives can collide, and so trade-offs must be continually made. For example, changing reliability standards means altering the flow of investments into generation and network assets, which changes end-user prices. Appropriately setting energy policy therefore requires trade-offs among these conflicting objectives, as well as catering for the inevitable introduction of new-generation technologies. It also requires an understanding of how micro-economic reform is best implemented – with ‘product market’ reform being prioritised, and an appropriate level of competitive tension enabled.

We would argue that the industry and policymakers have too often neglected ‘product market’ reform, and therefore the consumer, in policy decisions.

When you consider an analysis of past (and possibly future) electricity prices in New South Wales (see Figure 1), you can see the very rapid rise in electricity prices in recent years following a long period of price decline.

In the early 2000s, Australia had the secondlowest electricity price among our main OECD counterparts. Between 2007 and 2013, Australia’s electricity prices increased in absolute terms more than any other country. We’ve gone from first place to last. And the consumer is paying for this.

There are ways in which we can reverse this trend. Research that our organisation published in The Electricity Journal last year showed that a real price reduction of 10 per cent is entirely possible by 2020 – shown as the forecast, perhaps optimistically, on Figure 1.

It is this prospective future that I would like to talk about. My proposition is that there are four reforms that should be considered simultaneously to turn around the overall performance of the National Electricity Market (NEM) and place downward pressure on retail electricity prices: • firstly, we should revisit the ‘energy-only’ basis of the wholesale market and amend the Large-scale

Renewable Energy Target • secondly, we need to sort out small-scale renewables policy • thirdly, we need to reform tariff design • lastly, we must deregulate metering.

Figure 1: Historical and 2020 forecast – New South Wales prices

NEM energy-only market design

The NEM is often cited as one of Australia’s most successful micro-economic reforms. Generators are paid for their energy in five-minute increments, but, importantly, they are not paid for their capacity. Unless your generation is dispatched to meet demand, you don’t get paid. Power engineers and energy economists call this model the ‘energyonly’ market.

All around the world, people are grappling with market design issues. Simply put, revenues in the NEM have never recovered long-run marginal costs. Average wholesale electricity prices have been below newentrant costs in all years except the drought year of 2007. The obvious question is: how has new investment been possible with such sub-economic pricing?

The answer is that since 2004, generation has not been financed by investors without the backing of a Power Purchase Agreement (PPA) with an investment-grade, credit-rated retailer, and most of that generation has been accompanied with some form of levy or subsidy, which has in turn been funded by consumers. In other words, investors are asking retailers, and eventually consumers, through government subsidy policies to wear the risk that the NEM doesn’t provide adequate revenues.

Many of the issues we face today were certainly not considered by policymakers when the NEM was being designed: declining electricity demand, new renewable energy capacity driven by government policy, and barriers to exit in the context of the necessary replacement of the capital stock. In 2009, the policymakers who established the 20 per cent Renewable Energy Target (RET) expected electricity generation to increase by approximately 2.5 per cent per annum, from 230 terawatt hours to about 300 terawatt hours in 2020.

What has happened has been the reverse. Electricity demand has fallen. In fact, electricity generation in 2012 was just 221 terawatt hours – four per cent lower than in 2009. The combined effect of falling demand and adding more supply through government policies, in particular the RET, is the development of significant oversupply. In fact, recent analysis by AGL and the Australian Energy Market Operator shows that the market has 7000 megawatts of oversupply. This is the equivalent of three or four Loy Yang A power stations in the Latrobe Valley, and at market rates, about $13 billion of over-investment.

Let’s put that oversupply into perspective. Figure 2 shows the capacity utilisation or ‘capacity productivity’ of the Australian electricity system.

Two trends are worth noting. Firstly, the significant upward swing in capacity utilisation during the 1990s and 2000s as the Hilmer reforms resulted in the creation of the NEM, and allocative efficiency was promoted through a dynamic wholesale market.

Secondly, and disturbingly, is the significant decline in capacity productivity over the past few years as more supply has been added but demand has declined. With such significant oversupply, there has been a sustained reduction in wholesale electricity prices. In fact, forward contract prices in Victoria are now $30 per megawatt hour – around half the cost of a new entrant power station.

I don’t think that this situation will correct itself anytime soon. As of today, around three-quarters of east-coast steam plant is beyond the age of its original design life. Many of these ageing power stations are operating not as base-load power stations, but as peaking or intermediate power stations. As prices decline, some will be mothballed and some will remain in the market, theoretically available for immediate dispatch. But maintenance budgets will be slashed, and this will mean increased instances of forced outages. In such a scenario, it is feasible that even with so much oversupply, much of it mothballed and unavailable at very short notice, system security could ultimately be compromised.

It may take a decade to see this, but unless we deal with the issues related to wholesale market fundamentals, it is inevitable that maintenance and investment in aged asset replacement plants will not

Figure 2: Electricity capacity utilisation

Source: AGL

Figure 3: Household demand and solar PV output Figure 4: Net household demand and solar PV output

Source: AGL Source: AGL

occur. Without this investment, it is only a matter of time before reliability comes into sharp focus.

Furthermore, if wholesale prices remain low, new renewable investment will be increasingly reliant upon government subsidies under the RET. It is clear to me that the status quo is unsustainable. Energy throughput is paid for, but reliability is not. Reliable capacity is now more important as we move towards a market with more intermittent renewables. It is important that this reliable capacity has a price signal to ensure that it continues to be available when required.

Policymakers must consider how the RET becomes a ‘transitional’ rather than ‘additional’ policy. For each unit of renewable capacity added through the RET, the policy should incentivise a highemitting unit of capacity to be withdrawn – perhaps using a similar but reverse RET-style obligation on liable entities to contract with generators to facilitate permanent closure.

Public policy rationale for SRES

Moving to the second issue I outlined, it is important that policymakers question the public policy rationale for continuing to subsidise small-scale solar PV. There is little doubt that solar PV has been generously subsidised – with around $6 billion in capital subsidies provided by the Federal Government, and a further $6 billion to run via historic and future Premium Feed-in Tariff payments.

All Premium Feed-in Tariffs have since been closed to new households, but the schemes remain on foot until their termination date – some spanning until the year 2028. Explicit subsidies, funded by electricity consumers through feed-in tariffs, have resulted in some customers with PV significantly profiting at the expense of those customers without it.

AGL’s economists highlighted the social inequity with these policies, finding that the ‘implied tax rate’ of the lowest-income households was around three times higher than the ‘implied tax rate’ of the highest income households. But there are still two ways in which solar PV is being provided with an unnecessary cross-subsidy – firstly, poor tariff design, and secondly, the continued operation of the Small-scale Renewable Energy Scheme (SRES) policy. The way tariffs are currently set allows those with solar PV to ‘free-ride’.

We know, looking at Figure 3, that household peak demand occurs between 4 pm and 8 pm. Network costs directly relate to meeting this peak demand, and that is why distribution networks define the ‘peak period’ as 4 pm to 8 pm.

Now, let us consider what happens when a customer installs a solar panel (Figure 4). The profile of solar production is highlighted by the black line. At the time of peak electricity consumption, the solar PV unit is producing little energy. In other words, the cost of the network is broadly the same, irrespective of whether a household has solar, because networks are built to meet peak demand. Now, if we throw into the mix the fact that network tariffs are currently based upon ‘average cost’ energy throughput pricing, we can begin to see the significant cross-subsidy that occurs.

If you look at the ‘net consumption’ of the household and how they are charged under existing tariffs, it’s clear that network operators see significantly reduced energy throughput due to the solar PV unit ‘hollowing out’ electricity demand in the middle of the day. But peak demand is almost unaffected. It is reduced by five per cent, yet the average PV household is avoiding, to our calculations, 32 per

Figure 5: Global electricity price changes

Source: UBS, AGL

cent of network charges. With ‘average cost’ pricing in place, solar PV customers are effectively avoiding several hundred dollars in electricity costs, which are then smeared across the remaining customer base.

Looking at the extent of the cross subsidy, ACIL Allen, in modelling for the Energy Supply Association of Australia, found that avoided costs total around $241 per year for an average customer. AGL’s economists found the number to be about $264 per year. Importantly, these avoided costs must be paid for. Because the networks have regulated revenue targets, they are recovered through higher tariffs from the rest of the network’s customers.

Apart from sub-optimal investment in PV units, policymakers must consider these issues on social equity grounds. It is grossly unfair that solar customers are cross-subsidised by other consumers. These payments are ‘wealth transfers’ between customers. The SRES policy, which provides an upfront subsidy, was never well thought through. The five-times multiplier adopted when the policy was conceived has resulted in subsidies being paid for 75 years’ worth of energy generation up-front.

Even with the multiplier now unwound, it has become clear that the policy is unnecessary. AGL estimates that the payback period for installing a three-kilowatt system for an average customer is currently a little under six years. Without the SRES subsidy in place, the payback period for installing the same system would be a little over eight years. The question that policymakers must ask is whether the payment of thousands of dollars in SRES subsidies for solar PV installations is a sensible use of scarce societal resources. Consequently, our advice to the RET review panel was clear – SRES should be abolished on both efficiency and equity grounds.

Networks and tariff design

Let me now turn my attention to the third issue: energy networks. Much discussion has occurred in recent years about the loss of economic competitiveness in Australia due to significant electricity price increases. UBS has looked at the increase in prices in various countries around the world and their drivers, broken down by networks, taxes and levies; and energy and supply – supply being the ‘retail’ component. What UBS found is that Australia’s electricity prices have increased by far more than other countries, driven primarily by network costs, as you can see in Figure 5.

In some states in Australia, network prices have more than doubled. In my view, there are two reasons: the reliability standards set for, and the performance of, government-owned businesses in Queensland and New South Wales; and lack of tariff reform, which has contributed to such poor outcomes.

In Queensland and New South Wales, network assets have more than doubled over the past 10 years, from $28 billion to $60 billion. To truly understand, though, just how significant the increase in network capital expenditure in New South Wales and Queensland has become, one needs to look to capital and labour productivity.

Let’s consider capital productivity first. Network capital productivity in Queensland has fallen from around three gigawatt hours per million dollars of regulated assets in 2005, to just 1.5 gigawatt hours today. In New South Wales, network capital productivity has fallen from approximately five gigawatt hours per million dollars of regulated assets to around just two gigawatt hours today. In other words, capital productivity in the northern states has fallen by 55 per cent. At the same time, overall capital productivity in the Australian economy has fallen by 13 per cent – and that’s in the context of a mining and resources boom where capacity is gradually coming onstream.

Labour productivity has fallen by around 20 per cent in the northern states; yet, over the same period, labour productivity in the broader Australian economy has improved by around 11 per cent. With declining capital and labour productivity, by definition average costs must be higher.

In New South Wales and Queensland, tariffs have risen from around five cents per kilowatt hour

to more than 12 cents per kilowatt hour today. While we may argue whether the capacity built was necessary or not, it cannot change the fact that such investment has occurred. What we can do is improve the incentives faced by consumers to ensure that capital productivity and utilisation improves in the future. This brings me to the most important topic in my presentation: tariff reform.

Tariff reform

As mentioned, when discussing the merits of continued subsidies for small-scale solar PV, networks currently price their electricity using ‘average cost’ tariffs. Increases in ‘average cost’ tariffs prompt a demand-side response. Customers use less energy, but at a time most convenient to them. As underlying demand falls, ‘average cost’ tariffs increase, and so it continues. It is what AGL’s economists call the ‘energy market death spiral’. Preventing such a death spiral occurring relies upon pricing structures that are more cost-reflective.

There are two main alternatives to ‘average cost’ pricing. Firstly, demand tariffs could be used. Demand tariffs are based upon the ‘capacity’ required to service a household rather than how much ‘energy’ it consumes. This was how electricity tariffs were originally designed back in the 1890s.

It would result in a higher proportion of fixed charges in the electricity bill, much like water and sewerage tariffs, and avoid inefficiently granting rooftop generators a ‘free option’ on the grid for when the sun doesn’t shine. The other type of tariff that could be used is a ‘time-of-use tariff’. These tariff structures price energy usage differently at different times of the day.

Either of these pricing structures would be more effective at preventing a ‘death spiral’ occurring; although, we are starting to form the view that under current conditions and given current regulatory frameworks, demand tariffs will be more efficient and more equitable.

This is not about ‘punishing’ customers. It is about a fairer system of pricing that is more costreflective, and incentivises consumers to use electricity more efficiently. As I mentioned earlier, peak capacity infrastructure has now been built – whether we like it or not, it exists and can’t be undone. Our challenge is pricing structures that improve its utilisation.

Metering

The fourth issue I wish to raise is around metering technology and the regulatory framework.

A critical part of the adoption of more efficient pricing structures is the rollout of smart metering technologies. Studies have shown that a consumerled rollout of metering technologies will result in a net benefit to society. That a ‘market’ might outperform a ‘regulated’ outcome is perhaps not entirely surprising. Research by AGL economists has shown that very poor metering services are materially impacting on customer experience. One in 13 meter reads is currently erroneous or estimated.

Imagine doing your shopping at a supermarket and the assistant telling you that one in 13 items scanned through the checkout is incorrectly priced. I am glad that regulators understand my concern with the monopolistic status quo in metering. It is pleasing to note that the Australian Energy Market Commission is currently considering how best to change the regulatory state of play to facilitate competition in metering services. This will be the catalyst for more dynamic pricing structures, in my view.

A more enlightened set of metering policies and rules, together with the retailer-led rollout of smart meters, has the potential to unlock significant value for consumers, and remove probably the largest source of frustration for retailers and consumers. In a world where distributed generation and storage will become increasingly important, smart meters are a critical enabler.

Energy policy settings

This brings me to the final point of discussion – the lack of integrated supply chain consideration of energy policy. Many of the issues addressed have been the result of poorly coordinated energy policy. Decisions relating to network infrastructure have failed to consider the value that consumers place on reliability. Continued use of ‘average cost’ pricing structures impacts underlying electricity demand and the fairness of tariffs. Climate change policies were too rigid and failed to account for falling electricity demand in the operation of key schemes such as the RET.

We need to learn lessons from these mistakes. Policymakers therefore need to better consider how all these policy pieces fit within the broader energy policy jigsaw puzzle. We need to stop making uncoordinated short-term policy decisions that increase investment risk and undermine long-term

Electricity pricing structures must be changed. Pricing must become more cost-reflective through ‘product market’ reform

policy objectives. The Energy White Paper process currently underway provides a unique opportunity for policymakers to present a more integrated ‘policy’ narrative for electricity and gas markets, and a smoother runway to a sensible future. Microeconomic reform of Australia’s east-coast energy markets was appropriate for the time in which it was implemented; however, times have changed.

Electricity pricing structures must be changed. Pricing must become more cost-reflective through ‘product market’ reform. If we don’t adopt such product market reform, the decline in electricity capacity utilisation and productivity will continue, and our energy competitiveness will get worse.

At the same time, we need to accept that changing energy generation technologies require us to rethink both the design of our wholesale energy market, and how best to integrate large- and smallscale renewables so that the system is robust.

We need to take advantage of the opportunities for distributed generation and storage, but we will also need an efficient and robust grid-based supply chain for many decades to come. If we get this reform right, consumers will benefit over the long term. Not just households, but businesses, too. The research I talked about earlier could become our future if we make the right decisions – a 10 per cent real reduction in electricity prices is something that would materially improve our energy productivity and standard of living.

Fixing these issues will not be easy, but major reform never is. To paraphrase a well-known United States President’s take on space exploration, we should choose to tackle these problems, not because they are easy, but because they are hard.

Jeremy Maycock, Chairman, AGL

Jeremy Maycock has been a Non-executive Director of AGL Limited since 2006, and Chairman since 2010. Mr Maycock is also Chairman of Port of Brisbane Pty Ltd and a Director of Nuplex Limited and The Smith Family. Previously, Mr Maycock has been Managing Director and Chief Executive Officer of CSR Limited and held senior management positions in Australasia and South-East Asia over 20 years with Swiss multinational construction material group Holcim Ltd. His commercial experience spans 39 years, with his early career being with Shell Oil in the United Kingdom and in New Zealand.

VICTORIA’S REGIONAL RAIL LINK

The true landmarks in a nation’s infrastructure do more than bring change and long-term benefit to their communities. They bring change and long-term benefit to the industry of infrastructure itself.

Victoria’s Regional Rail Link (RRL) was the largest public transport infrastructure project undertaken in Australia. Announced in December 2008, with the first ground broken in August 2009, the $4.1-billion project is now scheduled for completion in early 2015.

RRL liberates ‘bandwidth’ for both regional and metro services by untangling the train lines on Melbourne’s doorstep, and introducing a dedicated bypass through the booming western region to Geelong. It creates a vital channel for future projects, such as the Melbourne Airport Rail Link.

Even more impressive, however, is the approach to governance, contracting and culture that has the RRL now on track for completion six months ahead of schedule, and $900 million under budget.

In every key performance indicator – safety, innovation, environmental sustainability, and community relations – RRL is the new benchmark for major infrastructure projects.

From the mid-19th century, Melbourne’s metro and regional rail network grew in a piecemeal way. A by-product of this early growth is that Southern Cross Station – one of the city’s two main stations, along with Flinders Street – accommodates metro (electrified), regional (diesel) and dualgauge interstate services from all across Melbourne’s west.

All have had to converge in a bottleneck north of Southern Cross Station. Regional services for major centres like Bendigo and Ballarat endured some 12 kilometres of choked metro tracks between Sunshine and Southern Cross.

The Geelong regional service, peeling off to the south-west, similarly had to share a metro line out to Werribee for almost half of its 70-kilometre journey. Scheduled trips would often be extended by 10 or 15 minutes for the simple want of finding track space among the metro trains.

The solution: separate the regional and metro services by giving the west a dedicated regional channel all the way into Southern Cross.

The RRL entailed the weaving of new, paired tracks through the thicket of existing lines, passing through (or briefly bypassing) impossibly pinched parts of the corridor, and the replacement or modification of virtually every bridge – and four of the six stations – between Southern Cross and Sunshine.

But the RRL would do much better yet for Melbourne’s west. The Geelong services that formerly shared the metro line between Southern Cross Station and Werribee would also use this new, westbound portal.

Beyond outer-suburban Sunshine, Geelong services turn south onto 26 kilometres of all-new RRL route that delivers rail services into the heart of the rapidly urbanising region of Wyndham, and pass through two all-new stations, Tarneit and Wyndham Vale.

The RRL creates the capacity for an extra 10 regional services and 23 metro services in each morning and evening two-hour peak period – that’s a potential 54,000 more passenger trips per day.

Associate Professor Colin Duffield of the University of Melbourne’s Department of Infrastructure Engineering led an August 2014 survey of community and business leaders on the RRL route. Professor Duffield sought to quantitatively interpret the project’s impact on issues like economic growth, housing, travel times, mobility and health.

Beyond the mathematics, wherein the gains anticipated from RRL across all categories averaged at almost double their current levels, Professor Duffield distils the RRL project to one word: ‘magnificent’.

‘The view is that this project has been spectacular in terms of its input to the socio-economics, the health benefits and the economic growth potential of their communities. And it has added positively, if not to the same massive extent, to accessibility, mobility and housing.’

In practice, RRL has been hugely ambitious, requiring the laying of 90 kilometres of new track – about 10 kilometres of that through dense urban areas – and the construction of no fewer than 40 bridges and grade separations in both urban and greenfield sites.

The journey has gone from the pioneering design of environmentally sustainable railway stations, and large-scale geotechnical challenges, to the study of a unique orchid that grows wild in a small reserve among the train tracks at Sunshine – and literally nowhere else on earth.

Every task in the RRL project has been undertaken with a commitment to best practice. And yet, it is well ahead of time, and well under budget.

The exploration of new and better ways began with the very structure of governance. The Regional Rail Link Authority (RRLA) is a public-sector authority reporting to an eightmember advisory board, whose members read like a who’s who of engineering, infrastructure, finance and government relations. Its Chairman is Peter Watson, a former Chief Executive Officer of Transfield Services.

Corey Hannett, with a wealth of experience in major road and rail infrastructure projects, was appointed CEO in 2009. After leading the RRL project for five years, in July 2014 Hannett was appointed Coordinator-General, Major

Transport Infrastructure Program. In the new role, he will oversee a number of largescale projects and ensure a coordinated and collaborative program approach.

‘Collaboration was a key driver in the success of the Regional Rail Link,’ says Hannett. ‘I knew right from the start we needed people with different skills and experience, from both the public and private sectors, working together and interacting with the community, the constructors and the government. I made sure we had the right people who shared our vision and knew what we had to do to deliver it. ‘RRL has been undertaken in a different manner than normal,’ Hannett explains. ‘This project has actually been delivered by the RRLA. We haven’t just packaged it up and funded it and outsourced it – we’ve delivered it. We’ve broken it up to deal with the terrain and the difficulties, and we’ve had to manage the risk of all those packages to deliver one railway corridor.’

Extensive market research and discussion with Victorian and interstate agencies prompted the division of RRL into six work packages to contain the cost and complexity of each. It was a key decision.

Hannett explains: ‘The Southern Cross Station Work Package was delivered by the rail operator Metro Trains Melbourne (Metro), as it was so complex and had so much interface with their business. The next two work packages covering the area between Southern Cross Station and Sunshine were delivered as alliances because they needed the horsepower of big, private construction and design companies, combined with the rail operator expertise and RRLA knowledge and influence. Out into the greenfields, we were able to open it up to broader competition and delivered the works under design and construct contracts. The final work package, another alliance, covers the train control systems, or “traffic lights” for trains’.

Challenging baselines were established for safety, environmental sustainability and community relations. Contractors were incentivised to surpass them, yielding better value should they succeed.

The environmental targets alone comprised 22 separate goals, taking best-case examples from earlier projects and raising the bar in areas like embedded carbon, energy use, the re-use of material, and zero use of potable water for construction.

Allen Garner, formerly RRLA’s Chief Operating Officer, has followed on from Corey as CEO. Garner has extensive infrastructure delivery experience in both private and public sectors.

‘The use of potable water was a big issue during the drought period,’ says Garner. ‘When that went away, people took the view that we can use drinking water for construction again. We decided: let’s not. We’d found a way to do it before…

‘In the end, everyone solved it in a number of ways – using saline water from the Maribyrnong River, and catching rainwater run-off and holding it… And it doesn’t cost much if you mandate it up front. It just needed our team pitching in and holding a line on sustainability.’

The way Garner tells it, the stunning success of the RRL is owed not so much to any specific new technological breakthrough, but to major efficiencies that arose from collaboration and understanding among the government and private sectors, and a well-informed community.

‘As it happened, at the time we went to market, there was a lull in the construction market in Victoria – so we hit a bit of a sweet spot, resulting in strong competition and great outcomes.

‘You can draw a line in the sand and say, “Let’s go for that,” and because you’re big enough and have the resources, you can make it happen,’ says Garner.

If there is one overarching reason for the RRL’s streamlined success, it’s the use of long-term occupations of the rail corridors to undertake extensive works. The strategy was enabled by collaboration between key parties associated with the RRL project, strong community relations, and an up-front requirement for contractors to submit binding schedules of public interruption periods.

The longer-occupation strategy, typically in blocks of two to three weeks, reaped immense benefits in terms of work efficiency and employee safety.

‘We took the view that just working at night and on weekends was not practical,’ explains Garner. ‘We couldn’t complete the project in that time frame, and the risk profile of shutting down the rail, setting up, doing a little bit of work, turning it on, shutting it down, packing up – annoying everyone, constantly – wasn’t the right way.’

During the July 2011 school holidays, there was a two-week trial of buses replacing trains between Sunshine and Footscray. The rail closure affected passengers from as far afield as Bendigo, Ballarat and Sunshine; but the smiling faces of RRL staff and volunteers – who staged sausage sizzles at the stations, provided free coffee to commuters on cold mornings and explained the works one-onone – smoothed the way. They proved to the community, and to the industry, that it could be done.

‘Two weeks is a bit of a pain,’ Garner says, ‘but when people came back and saw how much had been done – to see the skeleton of a station rising out of the ground – suddenly, wow!’

As part of the RRL, two new platforms – 15 and 16 – were constructed on the western side of Southern Cross Station, anchoring the new RRL lines.

From the comfortable cabin of a V/Line (regional) train departing Southern Cross, it seems just a matter of seconds before one is whizzing along at 80 kilometres per hour, and then at 130 kilometres per hour. But such speed and efficiency belies the needle-threading art of rail line placement undertaken by the RRL’s designers, engineers and workers.

For those V/Line trains that continue to use the station’s platforms 1 through 8, a rebuilt flyover and ‘country bypass’ track section links them to the new RRL line just beyond Dynon Road, two kilometres upstream, near a junction known as Spion Kop.

The Southern Cross Work Package, managed by Metro, with the major track and civil works contracted to a joint venture between John Holland and Coleman Rail, platform works contracted to Brookfield, and a new signalling system to Alstom, was the first RRL package to be completed. The new platforms and track they built became operational in December 2013.

Delicate handling, if on a much larger scale, was also required where the RRL corridor squeezed past Scalzo Food Industries, on Kensington Road, immediately adjacent to the Maribyrnong River.

This task fell to the City-to-Maribyrnong River Work Package Alliance (comprising John Holland, Abigroup, Coleman Rail, AECOM, GHD, Metro, V/Line and RRLA). This package also included 4.5 kilometres of new track, major modifications to three existing bridges and the construction of a one-kilometre-long rail bridge over the Maribyrnong River.

The package’s Director, Evan Tattersall, explains the need for a careful touch. ‘The Scalzo family’s food manufacturing business relies on sensitive measuring and hygienic equipment. The excavation of rocks, heavy bridge building and the laying of rails all took place within a smidge of their facility’s walls.’

An innovation employed for the Maribyrnong River Bridge was the use of a launching truss, a heavy frame laid across the span to be covered. Machinery travelled along the truss to construct the bridge beneath it, obviating the need for heavy cranes and scaffolding.

‘It was one of the largest pieces of machinery used on the project,’ says Tattersall, ‘and ideal for use for construction in such a tightly constrained area.’

RRL’s community interactions have perhaps been most visible in the stretch of suburbia of the Footscray to Deer Park Work Package. This work package was delivered by an alliance comprising Thiess, Balfour Beatty, Parsons Brinckerhoff, Sinclair Knight Merz, Metro, V/Line and RRLA.

It embraced the colourful and characterful communities of Footscray and Sunshine. In both locations, the rail corridor dissects the urban centre, and the stations serve as both a civic focus and quite literally a 24-hour bridge between neighbourhoods.

Brett Summers was the Director of this package, having previously directed the

outlying section from Deer Park to West Werribee Junction Work Package, as well as the small work package at Werribee Junction, a Leighton-Downer joint venture, which built the rail-over-road flyover to join the existing Melbourne–Geelong regional passenger line. From surveying the vast, open landscape, including the junction, Tarneit and Wyndham Vale, Summers was now working within an existing rail corridor in an urban area.

‘It was quite a challenge to build a new station, while preserving a heritage station, and also keeping the trains running,’ Summers reflects on Footscray’s latest landmark. ‘You’re trying to keep a heritage building intact, build new weather canopies, match an existing station structure, do all new ramps, stairs, lifts – and keep people moving through a construction site to get to their trains.’

That lovely heritage-listed building, and its sister originals, are reliving their glory days.

‘All of the roof tiles are original slate tiles from Wales,’ Summers says. ‘So, to replace them, we had to get genuine Welsh slate out of the mines in Wales.’

Footscray’s major works extended beyond its impressive new station. Road bridges on Nicholson, Albert, Hopkins and Victoria Streets had to be replaced.

Nicholson Street’s original bridge had, unusually, carried a row of narrow shops along one side. The bridge links the communities of Little Ethiopia and African Town and is well-travelled by students from the nearby Victoria University Footscray Nicholson Campus.

Engineering Director Brendan Driscoll recognised that this, and the nearby Albert Street Bridge, deserved a new landmark. And so, the new Nicholson Street bridge, a handsome white tubular arch, has conjured an inviting combination of width and weather protection. Albert Street’s new crossing is almost as striking, with its blue truss design.

‘Both bridges were constructed largely off site, and their main beams craned into position – a time-efficient technique that benefited both the project and the community,’ says Driscoll.

Footscray’s transformation is already visible in the new 1 McNab Avenue office tower that brings hundreds of people daily to work in the community. The new Café Cui, on Leeds Street, could be anywhere in trendy inner Melbourne; yet, it’s only metres from the Footscray Markets, whose colour and noise still recalls the 1960s.

But here’s Footscray in one, delicious bite: sometime in 1979, Nick Tsiligiris parked a caravan at the train station and began serving his Olympic Doughnuts. The sugar-dusted treats were jam-filled from a ceramic dolphin dispenser, destined to become a Footscray icon itself.

In the station’s transformation, the RRLA replaced the dilapidated caravan with a purpose-built kiosk. Tsiligiris, now edging into his 80s, is delighted with his new kiosk, and with the changes he’s seeing daily in Footscray. ‘It’s nicer now; different people coming, younger people,’ he smiles. ‘I’m very happy.’

A little way up the track, the elegance of the new West Footscray station belies the fact that it has been relocated 160 metres to the west. It, too, tells a local story, with ‘picture-perforated’ steel panels on the overbridge – a 24-hour crossing, enhanced with CCTV and night security staff – featuring historic photographs overlaid with the faces of local children. Parkiteer bicycle parking is likewise a feature of the new stations.

Footscray’s rebirth is being mirrored in Sunshine, now truly poised to take advantage of its position as the western gateway to Melbourne. Here, preservation has taken on an eternal dimension.

The Sunshine diuris orchid is a critically endangered plant. Examples are being cultivated in a nursery at Laverton, hopefully to ensure the species’ survival, but it grows wild only in a grassy little area among the tracks in Sunshine.

Consolidating all the tracks to accommodate the new RRL lines, maintaining the trains’ original distance from the reserve, was not the matter of a moment. But then, neither is the extinction of a species.

Nearby, the brand-new H V McKay footbridge commemorates the industrialist Hugh McKay, whose vast combine-harvester enterprise was established on the adjacent land in 1906. The 66-metre bridge, hoisted into position with one extraordinary lift in January 2014, has its supports decorated with murals, which are helping to reveal Sunshine’s rich history to its modern residents.

Pre-dating even H V McKay’s tractor works were the level crossings on Anderson Road. The branching of train lines beyond Sunshine – continuing west for Ballarat, turning north for Bendigo – had blighted this major north-south thoroughfare with a pair of level crossings just 450 metres apart.

The southernmost line now runs beneath a new, longer road bridge. Like many in the RRL project, it’s been built wide enough to accommodate future, additional lines beneath it. (The line to Melton is said to be a strong candidate for electrified metro services in the future.)

Just to the north, the Bendigo line crossing lent itself to a rail-over-road separation. Innovation again attended the construction of this new rail bridge, built ‘offline’ in an adjoining worksite. Train services were interrupted for just one weekend, while the completed bridge was literally slid across into place. The road underpass was then dug beneath it.

The RRL has been characterised by an atmosphere of innovation, best practice and one of competing for excellence – and all have contributed to the project’s extraordinary safety record. Safety is built into the RRL’s foundations.

Garner says: ‘Alliancing has driven a big shift; safety performance isn’t incentivised, it’s penalised – so that drove a whole mind shift for teams to go the extra yard. Before we went to market, we drove a campaign to get our team into a different safety paradigm. It empowers everyone to enforce that responsibility.

‘The rail sector traditionally hasn’t had a good safety record, compared with other sectors. There were many work practices that have “always been done that way”… When you challenge it, it turns out you don’t necessarily have to do it that way.’

Safety awareness across the project was maintained in the reporting of every incident, no matter how minor, and workshops to challenge and refine procedures. The workforce was trained, respected and nurtured, and began joining the push to make things better.

One nifty innovation encapsulates the mood perfectly.

Typically, track workers are warned of approaching rolling stock or equipment by flagmen. That is, until some of the workers on the City-to-Maribyrnong River Work Package, with inspiration almost certainly received during a coffee break, suggested that they carry wi-fi buzzers like those used in cafes and restaurants to alert customers that their order is ready.

‘In 14 million man-hours, we’ve had nine LTIs (lost-time injuries),’ reports Kelvin Doyle, the project’s Director of Safety.

‘The most serious was when a person in the head office broke her ankle walking down the stairs. Three of our nine LTIs are office-based. From what this industry was before – 30 or 40 TRIFR (total recordable injury frequency rate) – we’re down to around 10 and trending further south.’

The RRL’s safety record is even more commendable when one considers the scale and difficulty of so many of its components. One such component was the excavation of some 450,000 cubic metres of rock and soil to create a cutting at 2.5 kilometres long, and up to nine metres deep, for the Wyndham Vale Station.

The cutting project alone took close to 18 months. For six of those months, residents became accustomed to the weekly ritual of ‘blast half-hour’. Brett Summers paints the picture: ‘Every Friday at 2.30 pm, when the kids were in school, the sirens would go off and the traffic would stop. There’s a pop underground and a bit of a rumble, and 15 minutes later, everyone’s just going about their business again.’

The Deer Park to West Werribee Junction Work Package is the longest, geographically, of the RRL phases, spanning some 26 kilometres. Almost the entire length comprises all-new rail, and 13 new road and rail grade separations. The package was a design and construct undertaking by Baulderstone and Leighton.

In these greenfield sites, new histories are ready to be written. In the 2013–14 financial year, around 7000 people, or 2400 families, moved into Wyndham: the state’s fastest-growing municipality.

The railway line is a beauty to behold, a silvery slice across the region’s agricultural expanses, stitched with crisply new bridges and crossings, dashing past new urban developments. It could be a snapshot of France or Germany.

The European imagery certainly carries through to the 250-metre-long stations installed at Tarneit and Wyndham Vale.

‘Futureproofing’ is the mindset that pervaded the entire RRL project. And with futureproofing in mind, both stations were built with provision for corridor widening. In the more immediate future, Wyndham Vale’s class of 2014 Year 12 students now have the choice to pursue university study in either Melbourne or Geelong, living at home and commuting to either with equal ease.

‘All of the RRL’s new train stations are at the very forefront of public infrastructure design. No “green building” environmental sustainability guidelines existed for railway stations, so the RRLA, in consultation with the Green Building Council of Australia, set about developing some,’ says Hannett.

‘Green Star rating guidelines were adapted to take in elements like collecting rainwater in underground tanks for station cleaning and toilets, solar panels to supplement energy, and low-energy consumption lighting.

‘The RRL’s car parks are lit by lowenergy consumption LED lamps, made possible by new security-camera technology. Both Tarneit and Wyndham Vale each have provision for parking 1000 cars, along with the Parkiteer bicycle kiosks.

‘All five of our stations have now been awarded the four-star “green” rating,’ says Hannett.

Associate Professor Duffield acknowledges that the project’s success began with this kind of preparation. ‘It’s been planned not just as a train set, but with people sitting down, looking at the urban growth corridor, and asking themselves what the community really needs and how to make sure it’s robust for the future.

‘It’s people building rail for the community, which is what our survey demonstrated. And I understand it’s being delivered and actually giving some money back. It’s got to be ticking all the boxes, hasn’t it?’

The train control systems have also had to embrace and upgrade five decades of disparate signalling and communications technology. This work was undertaken across the project by Work Package G, delivered in alliance of RRLA, Metro, V/Line, UGL and RPS.

‘We’ve delivered some of the most complex signalling works undertaken in Victoria for many years,’ explains Deb Spencer, Project Director of the Rail Systems Work Package. ‘Regional Rail Link has installed a new state-of-the-art train control and signalling system, and delivered the project’s communications and passenger information technology.’

The scale and nature of the RRL project has spawned an unprecedented transfer of project and construction knowledge among all stakeholders: the government, the contractors and the community. A new benchmark has been set for all future infrastructure projects, and that potentially means exponential benefit to Victorians’ quality of life and the state’s productivity.

‘Because of the way this project has been split up, we virtually had every major construction and design company in Victoria working on it,’ explains Hannett.

‘Up to 10 construction companies and a dozen design houses, in different packages, all having to work together – that is unique.

‘And so we worked very hard to make them open up and share their knowledge. We introduced the industry to itself – not as competitors, but as co-workers.’

For both Hannett and Garner, personally, there’s been a huge satisfaction in pulling the puzzle together ahead of time and under budget. But it’s really about what they see in the faces of colleagues, and on the streets of communities being reborn.

‘Big projects create opportunities for local communities and councils to participate, and get a bigger benefit than just putting in new sets of tracks and a new railway station,’ says Hannett.

‘It’s what true engineering is and what it used to be – building infrastructure for the community: something it can be proud of. That’s the goal, which we believe has been achieved,’ concludes Garner.