GOLD SPONSOR PARTNERSHIPS 2022 INFRASTRUCTURE AND INVESTMENT CONFERENCE
Widespread lockdowns and border closures have made it a challenging period for transport and infrastructure sectors. At Macquarie Capital, we’re leading infrastructure innovation for our clients and communities as an adviser, investor and developer.
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Australia’s largest listed infrastructure transaction to date1
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PARTNERSHIPS 2022 1 Sponsor Directory 2 Chair’s Message 3 Digital infrastructure: three waves, three opportunities 4 Urban mobility trends: how we’re working and travelling 7 Green shoots in corporate issuance 9 Accelerating decarbonisation beyond energy 11 State Infrastructure Strategy 2022-2042 | Staying Ahead 13 Decarbonising Infrastructure 15 Delivering Victoria’s record infrastructure pipeline 18 Preserving healthy waterways through integrated water-cycle management 20 Energy transition and the role of the infrastructure sector 22 Victoria’s integrated transport network 24 Sponsor Directory 27 Contents
Sponsor Directory
Macquarie Capital 50 Martin Place Sydney NSW 2000 P: +61 2 8232 3333 W: macquarie.com ANZ 833 Collins Street, Docklands Victoria 3008, Australia P: 1300 883 798 W: www.anz.com/institutional Transurban Level 31, Tower 5, Collins Square 727 Collins Street Docklands VIC 3008 P: +61 3 8656 8900 E: corporate@transurban.com W: transurban.com Sydney Water PO Box Parramatta399NSW 2124 P: 132 092 E: stakeholderengagement@sydneywater.com.au W: sydneywater.com.au
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Victorian Government Department of Treasury and Finance 1 Treasury Place East Melbourne VIC 3002 Department of Transport 1 Spring MelbourneStreetVIC 3000 P: +61 3 9651 5111 E: information@dtf.vic.gov.au W: dtf.vic.gov.au P: + 61 3 9655 6666 E: DoTCorporate@transport.vic.gov.au W: transport.vic.gov.au
Infrastructure Partnerships Australia Suite 3.03, Level 3 95 Pitt SydneyStreetNSW 2000 P: +61 2 9152 6000 E: contact@infrastructure.org.au W: infrastructure.org.au
Infrastructure Partnerships Australia, Chief Executive, Adrian Dwyer will once again sit down with CEO of Macquarie Group Shemara Wikramanayake to discuss the outlook for the Australian economy, evolving ESG calculations, and the infrastructure investment landscape following a major boom in mergers and acquisitions.
I am delighted to welcome you to Partnerships 2022.
Twelve months ago, we came together to discuss Government’s and industry’s response to the major domestic and global themes impacting the Australian infrastructure sector.
Our annual Respected Leaders panel, featuring Jim Miller, Chair, Infrastructure Victoria, Tony Shepherd AO, Chair, Infrastructure SA, and Nicole Lockwood, Chair, Infrastructure WA will then discuss the state of infrastructure governance and reform in Australia, and the role of independent infrastructure advice.
To open the conference New South Wales Infrastructure Minister, the Hon Rob Stokes MP, will provide an overview of his vision for infrastructure in the State and the role industry can play in delivering the substantial pipeline.
I hope over the course of the day we provoke and challenge your thinking about how we can Refocus our approach and innovate as a sector to generate positive outcomes for Australians.
Thank you again for joining Partnerships 2022
Chair’s Message
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Over the course of the day, Australia’s leading political, public service, and business figures will share their insights on how the infrastructure sector can contend with these major themes to deliver a record infrastructure pipeline and provide ongoing economic and social benefits to Australians.
Through today’s program the newly appointed Federal Minister for Infrastructure, Transport, Regional Development and Local Government, the Hon Catherine King MP, will provide one of her first significant addresses to the sector as the new Government sets its forward agenda.
Over the course of the day, leaders of the sector will discuss the increasing volume of investment and scale of superannuation in Australia, how to deliver a pipeline under pressure, and consider the role of private capital in the pipeline asking; do PPP’s need a Therebrand?challenges and opportunities we face in infrastructure are not unique to our sector, which is why I am delighted that the Property Council’s Chief Executive, Ken Morrison, and the Australian Chamber of Commerce and Industry’s Chief Executive Officer, Andrew McKellar join us to discuss common themes and the critical role of collaboration.
Yours sincerely Sir Rod Eddington AO Chair, Infrastructure Partnerships Australia
Now, we look to how the sector can Refocus its proven innovation and resilience as the nation continues to contend with uncertainty in economic outlook, geopolitical instability, surging labour demand pressures, and supply chain insecurity, delivering the challenge of our generation as we decarbonise the sector.
“It’s only in the last five years that we’ve seen cloud computing become mainstream and it has already transformed the front office functions – such as sales, invoicing, payments and even customer service – of most businesses, even the smallest ones”.
The mainstream investment community already has a relatively good understanding of now-traditional digital infrastructure assets such as data centres and fibre networks,” he says.
Burley says the sheer volume of data being created – and the infrastructure needed to support it – can be seen in the rapid growth of Asia’s data centres. In 2016, Asia had just one sixteenth of the installed data centre base of the United States in term of megawatts. Now, just five years on, the data centre market is bigger than the US in terms of megawatt demand and the installed base of data centres is still catching up.
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As the rate of digitisation accelerates, digital infrastructure is becoming more crucial to our economy and more complex in its nature. Artificial intelligence (AI), cloud computing and 5G networks are combining to change the frontiers of digitisation and redefine what constitutes digital infrastructure itself, says Macquarie Capital’s Head of Digital Networks and Data, Edward Burley.
And yet, Burley believes that this trend still has a long way to go.
While the hard assets of digital infrastructure are still necessary, Burley says that cloud computing and AI have combined to create a different digital environment.
Digital infrastructure: three waves, three opportunities
“With these types of traditional infrastructure assets, we’re looking at a long timeframe that stretched back to as early as the 1970s for fibre, and lasted up until the 2010s for 4G towers,” Burley says. “So, people have had time to understand how they work and the role they might play in a portfolio.”
“However, the sheer scale of opportunities available in a 5G and AI-enabled world – which could include everything from low orbit satellite networks to ‘soft’ and social infrastructure – still isn’t fully Theappreciated.”firstwave, the internet and the cloud Burley says that when many investors think of digital infrastructure, their minds still turn to the ‘hard’ traditional assets such as mobile towers, cables and wires. These, he explains, provided the initial means for digital disruption to occur by allowing the internet to develop and expand.
“We’re only about 20 per cent of the way there,” he says. “80 per cent of government and enterprise processes still need to be migrated. When this happens, it will create so much more data that needs to be transmitted, captured and stored.”
Most of this growth is likely to come not in personal communications devices, such as mobile phones or computerbased traffic, as it has to date. Instead, it will almost certainly be the result of machine-to-machine connections that form part of the internet of things. This will effectively digitise most processes in our lives and the economy more broadly, from smart home appliances (which automate things like ordering groceries online), to industrial-scale manufacturing.
As 5G and AI change the way we live, Burley says supply to regional and remote areas will begin to become an issue, just as it has for 3G and 4G networks. Here, he argues new technologies such as low earth orbit (LEO) satellites and edge data centres are likely to play an important role.
Chief among these will be the rise of 5G networks, which covered around 25 per cent of the world’s population at the end of 2021, but by 2027 they are expected to cover around 75 per cent. As this happens, Burley says that digital networks will become so entrenched in our lives that the roughly 3.6 internetconnected devices per person globally is likely to rise to more than 20.
“So far, telecommunications satellites have typically been geostationary, meaning they sit over one just part of the earth’s surface and need to be launched very high at great expense.
‘Soft’ infrastructure assets on the rise
5G and AI at a tipping point
“We’re only really still at the start of the cloud revolution. The ongoing structural demand for new data centres and other critical digital infrastructure remains acute.”
“These satellites sit between 200 kilometres and 2,000 kilometres above the earth’s surface and orbit the planet, and they’re already used by governments to perform tasks such as border patrol and domain awareness.”
New directions, new frontiers, new assets
It’s not just new physical assets that Burley says are emerging. As data becomes more crucial to the way governments and individuals function, Burley says it is starting to contain value in its own right. Various levels of government recognise this and have recently started commercialising, in conjunction with private sector parties, important information registries traditionally owned by government, such as lands titles offices (in NSW and Victoria) and motor vehicle registries (Victoria introduced private sector capital to commercialise the Victorian motor vehicle registry in June of this year).
But the commercialisation of space has made launching LEO satellites surprisingly cost-effective,” Burley says.
Despite this, Burley believes that even more significant forces than cloud computing will drive digitisation in the next few years.
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Burley says that what is now making this possible is yet another technology – AI. “AI allows devices to talk with each other and operate independently, further accelerating the rate of data creation,” Burley says. “This, in turn, will drive the need for more – and different forms of – digital infrastructure.”
“We’re likely to see a constellation of LEOs used to supplement 5G networks based on the ground, creating a new wave of potential digital infrastructure assets in space.”
3. Ericsson Mobility Report, ‘Network Coverage Outlook’, Accessed August https://www.ericsson.com/en/reports-and-papers/mobility-report/dataforecasts/network-coverage#:~:text=5G%20is%20the%20fastest%2Ddeployed,its%20first%20commercial%20launch%20year2022
“The perimeter of soft digital infrastructure is also likely to expand over time to include more data such as payment systems, credit bureaus, regulatory technology and even subscription-based businesses that automate government-mandated functions.”
“Fund managers will have to be mindful of the new political landscape in which digital infrastructure operates but they also have the opportunity to look beyond what’s traditionally been perceived as infrastructure to access new assets - both physical and non-physical.”
“If they can, he says, it will be private capital, more so than governments and corporations, who will play the pivotal role in standing up the infrastructure for the digital age.”
“These businesses aren’t like existing digital infrastructure assets insofar as their value isn’t in hard digital infrastructure such as a fibre network, mobile phone tower or data centre,” Burley explains. “But they still store and manage data required to facilitate core economic functions, such as the sale and transfer of houses and vehicles.”
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“Each of these could be packaged and financed in a way that resembles any other infrastructure asset, with predictable longterm cash flows.”
Capital at the ready Burley notes that, so far, private capital – especially pension funds – have been responsible for stepping up to fund much of the world’s future digital infrastructure requirements. However, those stepping in to capitalise on current opportunities will need to account for a more nuanced and complicated landscape.
4. Cisco Systems, Cisco Annual Internet Report, Accessed August PARTNERSHIPShttps://www.cisco.com/c/en/us/solutions/executive-perspectives/annual-internet-report/air-highlights.html2022 2022
There are tell-tale signs that things have changed though, for instance, when conversation lulls, I have noticed people now fall back on a new conversation starter – working arrangements. For those with the ability to work remotely like me, there is particular curiosity in how many days a week we travel into our workplace. For me, the answer is three days a week, which is about average according to Transurban’s latest Urban Mobility Trends report.
Urban mobility trends: how we’re working and travelling
Average Inner city Averageaverage Inner city average Brisbane 3.7 3.6 Australia - average 3.5 3.4 Sydney 3.4 3.4 Melbourne 3.4 3.3
The impact of increasing flexibility – whether it be in the form of working from home or working flexible hours – on transport networks is more complicated than it might appear on face value. It hasn’t just affected the frequency or time of travel, but also people’s preferences when it comes to the type of transport they choose to commute. Our research found around one in four respondents across Melbourne, Sydney and Brisbane have changed the mode of transport they use to get to work and/ or study, with most switching from public transport to private vehicles (Figure 2)
FIGURE 1 Average number of days people travel to their workplace or place of study (or travel around for their job/study) in the inner city, compared to all metropolitan locations –Melbourne, Sydney and Brisbane, Australia.
I have enjoyed reconnecting with family and friends this year – during weekends away, over a meal out, or at a backyard barbeque. In these moments it can be easy to forget the immense changes the world has undergone in response to the pandemic.
The report surveyed 3,000 people across Melbourne, Sydney and Brisbane and found most people have settled on 3.5 days a week.1 While CBD occupancy is still well below pre-pandemic levels, the office is far from “dead” as some have suggested. We found inner-city workers travel to their workplace just as often as those who work in middle or outer suburbs (Figure 1)
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While there are likely a variety of factors driving the change (such as ongoing public health advice around wearing masks on public transport), it could be that some people have changed their routines as a result of increasing flexibility. For example, someone who took the train or bus to work five days a week prepandemic may now choose to drive three days a week at a time that suits them.
FIGURE 2
Jessica O’Brien | General Manager Corporate Affairs, Investor Relations and Sustainability, Transurban
Proportion of people across Melbourne, Sydney and Brisbane who have changed the mode of transport used to commute to work since the start of the pandemic.2
Another factor in how people decide to travel to their workplace is the flexibility of when they can start and finish, which could give them the ability to avoid peak times. We found that 71 per cent of respondents in Melbourne, Sydney and Brisbane now have access to varied start and finish times, which is substantially higher than the 37 per cent of respondents who said they had access when we first asked in January 2021.
1. Independent survey commissioned by Transurban of 3,000 people ages 18+ with a driver’s licence across Melbourne, Sydney and Brisbane, reported in Transurban’s Industry Report, Urban Mobility. Trends August 2022. The survey was also conducted in Greater Washington Area and Montreal (1,000 people in each city). 2. See above
At Transurban we support a range of flexible work options. While I head into the office most days, some days I’ll start work later to meet a tradesperson at my house or leave early to do the school pick up. Small changes like this don’t just have a big impact on my wellbeing, but role model behaviour to my colleagues and helps to contribute to a more sustainable transport system.
These changes in people’s travel habits appear unlikely to revert over the short term, given the survey found that most people expect their use of all modes of transport to stay more or less the same over the next 12 months.
FIGURE 3 Congestion levels from June 2019 (pre-pandemic) to June 20223
Transurban Insights hub
3. TomTom traffic PARTNERSHIPSdata2022 8
Finding ways to maintain, and improve upon, the adoption of flexibility, such as varied start and finish times will be vital to manage future demand across the road network.
The fact that people expect to travel to their workplace for the majority of their work week, coupled with a significant proportion of commuters switching from public transport to private vehicles has the potential to increase pressure on our cities’ road networks as population growth eventually resumes. Our research found that more people use arterial roads and motorways to commute to work, when compared to toll roads. This extra demand is likely to lead to higher levels of congestion, on what are already relatively congested roads and motorways.
While the past two years has seen rapid tchanges when it comes to people’s work habits and transport preferences, it seems we are entering a period of relative stability. We now have a clearer picture of how people are working and getting around their cities, allowing us to evaluate the impact to transport networks and consider how cities should respond.
Technology and data drive everything we do at Transurban, including helping make every one of these two million+ trips as safe and efficient as possible. The information we collect and analyse can also reveal lot about how cities grow and function. We use this information to improve our roads and ensure we continue to support our cities as they evolve over time. Take a dive into our data and learn more about the role our roads (and our operation of these roads) play in city life at insights.transurban.com
Increasing congestion could be offset by greater flexibility helping to spread the AM and PM peak. However, despite increasing availability of varied start and finish times we are observing a return to AM and PM peak hour congestion on the road networks across Melbourne, Sydney and Brisbane (Figure 3)
Read the full Urban mobility trends report on our new Insights hub
Every day, more than two million trips are made on our Australian and North American roads. Whether heading to work, visiting friends or delivering goods – every trip made contributes to the productivity and liveability of our cities.
There are signs of green shoots in the corporate bond market, according to Gwen Greenberg, Head of DCM Australia, ANZ Institutional – but issuers remain wary amid ongoing volatility.
“Whenever you look through periods of volatility, the loan market typically is a little bit more active than the bond market because banks can fund a little bit easier than what corporates can,” Chappell said. “Loans are a little bit more attractive than bonds at that particular point in time. You do see spikes in loan market activity whenever there’s points of volatility in the cycle.”
“From a loan perspective I’d say: don’t wait,” he said. “Come now. Because I think the trend is only going to be up for a little bit further from a pricing perspective, so take advantage of it now while you can.
“We’ve had inflation increasing quite dramatically,” she said. “We’ve had the impact of supply chain issues - there’s a lot of factors outside of our control that have increased volatility. “[This has] flowed into the investment-grade, high-grade [bond] market, both domestically and offshore.”
Speaking ahead of the ANZ Debt Conference earlier this year, Greenberg said while she is becoming more positive on the outlook, many market participants continue to take a wait-andsee approach. “I do see green shoots ahead in terms of corporate [bond issuance],” she said. “But we need to start seeing a little bit more primary coming through before other corporates are ready to come to the market.”
Green shoots in corporate issuance
Greenberg said the volatility seen in the last quarter of 2021 had accelerated through the start of this year, primarily driven by rising interest rates.
The news is better in loans, according to Chappell, where he expects the market to continue to benefit from volatility.
Chappell noted the loan market has been slower to react to the volatility than bonds, with the recent fourth quarter the second highest for activity on record. This year has kicked off slightly slower, he said, but primarily due to high volumes from late 2021.
Greenberg called the market for loans “compelling” and said there was potential for activity to increase significantly in the second half of the year - especially among “borrowers that are rated”.
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These borrowers will aim to ensure they have the correct “mix” of bank debt and bond debt for their ratings, she said – and that the mix is not too heavily weighted to one market. Those that are overweight bank debt will likely look to “term [it] out” in the debt capital markets. For Chappell, the outlook is clear.
Slower to react
“There is plenty of liquidity. It’s just price sensitivities among investors, and how they’re willing to deploy cash has certainly become more discerning.” Greenberg made the comments in conversation with Gavin Chappell, Head of Loan Syndications at ANZ Institutional.
“Last year there was both corporate and private equity M&A, whereas this year I think probably a little bit more focus on private equity M&A,” he said.
The experts also discussed the shift in customer activity between bond and loan markets, and ANZ’s growing private placement capability in the United States.
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But volatility will continue, Greenberg said, at least “until we get past the medium-term of inflation” - in Australia, the US and even “YouEurope.just have to manage the current volatility,” she said. “It can be done. There’s plenty of liquidity available, you just have to time it [correctly].”
For Greenberg, the silver lining for bond market is the presence of liquidity. “I think there is liquidity there,” she said. “You can get deals done; you just have to be flexible.
“There are some days that are not good days and some days that are great days. When you get a great day, you don’t think tomorrow will be better. You take your good day, and you go.”
To hear more, listen to the ANZ podcast “Green shoots in corporate issuance” by scanning this QR code.
“It’s increasing all the time and it’s only going to grow further,” Chappell said. “I mean, I don’t see any let up in the amount of money being generated to invest in loan assets. I think that’s more about the supply side than the investor side.”
ChappellSwitch
Asked about the rise of so-called ‘private-credit funds’ in the loan market, Chappell described it as closer to institutional investors simply moving into loans. But he sees a growing trend there.
“I think if you come to speak to me in three months’ time or six months’ time, loan pricing is probably going to be wider.” said the merger and acquisition activity factor from 2021 had continued to play out in 2022 - but noted the details were a little different.
“It will likely require more transitional solutions, to accompany the significant long-term investment needed in new technologies and asset replacements.”
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The vast majority of this reduction has come from just one factor: electricity generation. This has involved replacing coal power generation with less carbon intensive gas and zerocarbon renewables, including wind, solar and low-carbon energy storage, such as batteries and pumped hydroelectric power.
Reducing waste management methane Entschemissionssayswaste management is one area in which Australia can make ‘quick wins’ when it comes to further reducing emissions. Although it currently only accounts for less than 3 per cent of the country’s emissions,2 Entsch notes that a disproportionate amount of methane emissions is the result of decomposing organic material in landfill. “Methane is up to 30 times worse than carbon dioxide for global warming, and Australia’s methane emissions are actually growing,” Entsch notes.
“However, with the right signals from government, we will see a new wave of opportunities for investors relating to decarbonisation in these new areas.”
1. Ministers for the Department of Industry, Science and Resources, 31 August 2021, ‘Australia’s Emissions Continue to Fall’, Accessed 3 August 2022
“Solving this part of the decarbonisation puzzle in these other sectors is likely to be even more complex – and often more expensive – than the former,” says Macquarie Capital’s Nick Entsch, a director in Macquarie Capital’s Energy Transition Team.
Accelerating decarbonisation beyond energy Bolder sustainability goals open opportunities in more sectors
Up to today, the vast majority of efforts to reduce greenhouse gas emissions have tended to focus on increasing the utilisation of renewables. Now, as corporates from a broadening set of sectors announce more ambitious decarbonisation goals, and Australia’s newly elected government announces more ambitious decarbonisation targets, attention is expanding to the emissions of sectors beyond energy, such as transport, industry and agriculture.
https://www.minister.industry.gov.au/ministers/taylor/media-releases/australias-emissions-continue-fall
A picture of emissions
Improvements to the sustainability of buildings has also started to make a more meaningful contribution to Australia’s emissions reductions to date. But, while emissions from electricity have dropped markedly, in other areas they have remained stagnant - such as from industrial processes - or have even risen - in the case of transport. It is in tackling these factors that Entsch sees that most work needs to be “Thedone.deployment of renewables, decarbonisation of the grid and electrification of sectors like cars have a lot of momentum and are easier to tackle, because it can be solved by implementing proven solutions that affect the way we generate electricity. Decarbonisation in sectors where clean electrification is not a solution will require industry-specific solutions, as well as removing fossil fuels from processes that release greenhouse gas emissions.”
2. Australian Government, Australia’s Long-Term Emissions Reduction Plan p 74, Access 3 August https://www.industry.gov.au/sites/default/files/October%202021/document/australias-long-term-emissions-reduction-plan.pdf2022
Measured globally - emissions are still growing. However, and as with most mature economies, that is not the case in Australia. In 2021, the country’s emissions were 20.8 per cent lower than in 2005, which was the baseline year for the Paris Agreement.1
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industry accounted for as much as 18.1 per cent of Australia’s carbon footprint. Embodied emissions - or those associated with the material and processes used in building - were responsible for around a third of these, and frequently come as a product of steel and cement production.4
He also says that, although there has been some advancement in recent years - such as the introduction of higher landfill levies in most jurisdictions - the right signals could ‘pull the levers’ of private capital and lead to rapid developments. Investment in waste infrastructure is encouraged by sustainable policy (e.g. landfill levies) applied consistently across states, ongoing education, improved source separation and waste processing technology that allows treatment of residual waste streams.
Enabling faster progress with voluntary offsets
“Australia has lagged many other well-regulated, developed countries when it comes to the circular economy and reducing emissions from waste. For example, with 20 years of consistent national policy, the Netherlands achieved a 13 per cent reduction in waste generated per person whilst also improving its rates of recycling and resource recovery and eliminating organic material to landfill. For household waste, 1 per cent is landfilled, 72 per cent recycled, 26 per cent to energy from waste.”
“We have reached a strong consensus around the solutions needed to decarbonise the energy sector and we’re starting to see the impact of moving away from fossil fuels,” Entsch concludes. “But if we’re serious about reducing global warming, we have to find solutions for these other major parts of the economy rapidly, and the reality is that this will actually be more “Ultimately,challenging.”it requires that we lean onto sometimes imperfect interim solutions, whilst we work towards the longer-term deployment of new technologies backed by private capital and government.”
Entsch explains that while most Australians are now used to self-segregating waste to help prevent needless landfill, further reducing emissions will require more behavioural changes, as well as better harmonisation between states, councils and federally.
The Government’s National Waste Policy Action Plan3 has introduced targets and actions which complement statebased policies. This aim to deliver a greater level of central harmonisation across waste treatment standards, as well as more centralised data collection, planning and policy development on a national level and improved economic incentives to stimulate prevention and recycling, including a high level of activity in packaging and product stewardship.
“Through measures such as low carbon cement, smart grids and more efficient heat pumps, we can really start to bring down construction-related emissions,” Entsch says. “Like waste, it’s also an area that really lends itself to recycling and multiple use.”
Voluntary offsets enable corporates to deliver comprehensive and urgent action whilst more climate solutions mature as they bridge the gap between the emissions reductions that can be implemented now, and the longer lead time structural decarbonisation solutions that require more investment and/or innovation, and a longer implementation runway. This, he says, is relevant for many sectors – from aviation to heavy industry – where fossil fuels may still need to be used in the short to medium-term whilst technologies such as clean hydrogen and carbon capture and storage mature over the coming decade.
Accounting for construction and embodied Inemissions2016,theconstruction
4. Yu M, Weidmann T, Crawford R, Tait C, ‘The Carbon Footprint of Australia’s Construction Sector’, International High- Performance Built Environment Conference – A Sustainable Built Environment Conference 2016 Series (SBE16), iHBE 2016. Accessed 3 August 2022 https://www.sbe16sydney.be.unsw.edu.au/Proceedings/34621.pdf
5. Clean Energy Finance Corporation (CEFC), ‘Australian Buildings and Infrastructure: Opportunities for cutting embodied carbon’ Accessed 3 August 2022, PARTNERSHIPShttps://www.cefc.com.au/media/ovrkk5l3/australian-buildings-and-infrastructure-opportunities-for-cutting-embodied-carbon.pdf 2022
“Overcoming these challenges is not something any government can solve by itself, and it is likely to require enormous amounts of private capital from around the globe.”
Entsch concedes that the size and complexity of the task involved in permanently decarbonising these harder to abate sectors is something that will take time, development of new technologies as well as Australian government regulation.
Corporates that have a significant part of their footprint in construction and the built environment are increasingly turning to these solutions to deliver on their goals. For example, Macquarie’s new headquarters in Sydney’s Martin Place have been designed to achieve the highest possible sustainability credentials – the Green Building Council of Australia’s Design and As Built 6 Star Green Star rating. Features will include the capture and re-use of rainwater, landscaping and greening throughout the public spaces, implementing smart technology and maximising natural light throughout the journey from platform level.
The Australian Government’s Clean Energy Finance Corporation (CEFC) found that through better design, infrastructure projects can reduce embodied carbon emissions by up to 33 per cent.5
3. National Waste Policy Action Plan, 2019, https://www.dcceew.gov.au/sites/default/files/documents/national-waste-policy-action-plan-2019.pdf
• Competitive digital infrastructure • Services that support a healthy, educated and engaged population. For all that, delivering infrastructure has become more challenging than ever. In mid-2021 we were looking down the barrel of 17 major projects, comprising 27 contract packages, to be procured from 2021 to 2023. That was a challenging enough task without waves of COVID-19 variants, heavy rainfall, lockdowns in China, and the Russian invasion of Ukraine. Yet despite these events, we have made good progress. However, each contract involves significant amounts of work from contractors, engineers, architects, sub-contractors and Government. In the foreseeable future, the rate at which large, complex projects can be delivered will be influenced by the effective delivery of existing projects, as well as how successfully government and industry implement procurement practices that de-risk projects, reduce the cost of bidding, draw on capacity of tier 2 and tier 3 contractors and increase the size and skills of the Serviceworkforce.reliability is a key priority in the 2022 SIS. Recent experience has reminded us that we need to plan better for the unknown, in the certainty that the unknown will eventuate. We know that we face extreme weather events, moving between droughts and fires to floods, pandemics and cybersecurity threats. Good preparation requires better information on which communities and assets are most at risk, defining investment pipelines to maintain, strengthen and duplicate at risk assets, and making multi-year commitments that outlast the latest crisis. In this context, the 2022 SIS proposes increased investment on improvements in technology, augmentation, strengthening of current infrastructure and networks, and structured maintenance. Infrastructure Strategy Ahead Supplied
NSW has delivered a suite of transformational infrastructure projects over the past decade. The major rail and road networks have been transformed and many transport projects are currently in delivery. The State’s hospitals, schools, correctional facilities, sporting complexes and cultural assets have all benefitted from strong levels of investment. Ongoing investment is necessary to keep up with population growth, boost productivity and competitiveness, and accomplish the Government’s social and environmental policy goals. Like many advanced economies, our productivity growth has been below par. In infrastructure, our job is clear:
State
In May this year, Infrastructure NSW presented the State Infrastructure Strategy 2022-2042: Staying Ahead (2022 SIS). It sets out Infrastructure NSW’s advice for the coming decades, and its development is now an established feature of good infrastructure planning and decision-making in NSW.
2022-2042 | Staying
Simon Draper | Chief Executive, Infrastructure NSW Daramu House Solar image:
by Lendlease
• Highest and best use of land with good infrastructure
• Efficient movement of people and materials
• Get the best out of existing assets for productive purposes
• Efficient decarbonisation and climate change adaptation
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Infrastructure has a big role to play in housing affordability. We firmly believe Government and investors should capitalise on new transport hubs and metro stations to support new homes, in conjunction with local infrastructure. Established communities and new residents will only support the creation of more housing when they can be sure there will be good amenities and services, green space and thoughtful civic design. We also need our utilities to transition successfully. For some time, the energy and water sectors were mature, stable and not budget-dependent. This can no longer be guaranteed. In electricity, NSW has a path to net zero, and Australia is now finding one too. New private sector investment is at the core, and investors require confidence that the rules will not change. We should be steadfast in sticking to the market-based principles embodied within the roadmap. Beyond electricity generation, the challenges in transmission are great and novel. We do not build transmission networks of this scale very often, and the places they will pass through require sensitivity and deep community engagement. In that, we can draw on experience and best practice from other infrastructure sectors where we have heavily invested in recent decades, particularly our transport projects. Water infrastructure needs to be less reliant on regular patterns of rainfall. We know from bitter experience that our rainfall is anything but regular. Recycling, desalination and water efficiency are well-proven sources of water security in other places, but, like electricity, our transition in water will require enormous community engagement to build confidence. This should start now, while the dams are full.
The 2022 SIS also urges the State to double-down on data and technology in two ways. First, technology upgrades can offer a solution in their own right, either by expanding the operating capacity of systems or by reducing the need for new physical assets. Second, there are great opportunities in design, public consultation and ongoing management of assets. In all this we need partners. We should put a premium on projects that generate private sector co-investment, which is often many times greater than our own infrastructure investment, particularly in precincts. Second, we should work with the Commonwealth regarding incremental project planning and long-term funding. Third, Local Government needs support to develop and sustain capability to deliver on their own responsibilities in roads and town water. Finally, the success of our program is tied to a modern and prosperous construction industry. We are proud of the progress made to date and we pledge to continue that work. - Adam Hollingworth
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Infrastructure itself should transition. Our sector will need new tools and resolve to pursue sustainability. Decarbonising infrastructure assets will have to travel alongside energy and transport on the path to net zero.
New Windsor Bridge 2021
So too are the risks to Australia’s economy. Reduced access to – or higher cost of – increasingly competitive, climate (or carbon) risk-averse global capital, the potential for carbon border levies and weaker demand for our exports would cost Australian jobs and filter through to increased costs of living – something we are currently all too familiar with.
But these risks and costs should not be our focus, as they have been over many years of futile political debate in Australia.
Australia prides itself on being a global leader in many areas, but with other parts of the world pushing forward in their transition strategies, national leadership in our decarbonisation journey has slipped to laggard status. To date, individual state and territory governments have been driving the nation’s decarbonisation agenda with commitments focused on differing state-level priorities, leading to piecemeal outcomes at the national level. There have been pockets of great progress in our transition, but other areas where we trail significantly.
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In April 2022, Infrastructure Partnerships Australia released Decarbonising Infrastructure, a report setting out a pragmatic agenda for Australia’s governments and industry to drive emissions reductions across all forms of infrastructure, including a set of recommended actions. All Australian states and territories have already committed to net zero carbon emissions by 2050. Most recently, the current Federal Government introduced a Bill into Parliament proposing to legislate a 43 per cent reduction in net greenhouse gas emissions from 2005 levels by 2030, and net zero emissions by 2050.1
Energy contributes over half of Australia’s greenhouse gas emissions annually. Electricity generation accounts for a third of our emissions, and energy use from construction and other manufacturing industries make up another 21 per cent. Transport contributes a further 18 per cent, and even more emissions are generated through the construction and operation of community infrastructure like schools, hospitals, and waste facilities.2
The sooner we fully commit to the challenge, the better.
The environmental risks of inaction are immense. The risks of climate change, mounting for decades, were laid bare during the Black Summer bushfires in the summer of 2019-2020, and again in this year’s floods in South-East Queensland and New South Wales, with the health, safety and livelihoods of millions of Australians seriously exposed. Severe weather events are becoming more intense and frequent, while Australia’s ecosystems – from the Great Barrier Reef to the Murray-Darling Basin – are rapidly deteriorating in the changing climate.
Decarbonisation of infrastructure has progressed over the past decade, largely driven by the uptake of renewable energy. But in transport, emissions have been rising, with improvements in fuel efficiency and electrification of the vehicle fleet outweighed by rising demand. Similarly, progress in project-level construction and waste management methods have been lost in record levels of investment and growth.
Decarbonising Infrastructure Infrastructure Partnerships Australia
There is a clear need for Australia to decarbonise, and infrastructure has a major role to play in driving us towards a zero-emission future.
• As transport electrifies, decarbonising the movement of goods and people becomes an energy industry Constructionchallenge.
• This transition is two-fold, where first, Australia’s electricity production needs to shift to clean, renewable energy sources, and second, Australia’s remaining energy demand need to be electrified.
Transport • Transport emissions continue to increase in Australia, which is a fraught challenge to tackle given that the industry’s performance is often tied to economic activity.
• The technology required to drive zero-emission transport either already exists or is under development across the transport of both people and goods, albeit at starkly different rates of change. Decarbonising these asset classes efficiently and rapidly will require close collaboration between the transport and energy industries.
Energy and Electricity
• Construction is complex and requires the integration of many disparate components and techniques, so no single breakthrough is likely to unlock major benefits. Sustained effort over a multitude of fronts is required.
• Successfully transitioning Australia’s energy is fundamental to our decarbonisation transition, not only because of its predominant role in our annual emissions, but it is also a pre-requisite for the majority of decarbonisation efforts in other infrastructure industries.
• Better planning of transport networks to incentivise people and goods to move in the most efficient way, and remove points of friction, is the other major policy lever state and territory governments should prioritise.
Adequately responding to this challenge requires deeper levels of government involvement to set the terms for decarbonising each asset class, then step away to allow the market to respond to those Infrastructuresettings.Partnerships
• Urgent reform on calculating and reporting emissions from infrastructure construction, operation and waste activities is needed to improve visibility of the sector’s embedded emissions.
Australia’s leaders need to stop tinkering with the past and set about transforming the economy – and infrastructure’s place within it – in line with a vision of the future we want to create.
Australia’s Decarbonising Infrastructure paper considers a range of different policy mechanisms to transition the infrastructure sector to a zeroemission future rapidly, efficiently and affordably, laying out potential actions by the public and private sectors against some of the biggest emitting forms of infrastructure (see box below). However, with the increasingly convergent and dynamic relationships between historically separate infrastructure asset classes, overcoming challenges and unlocking progress towards decarbonisation will require collaboration across the sector.
• The Federal Government must lead in this space through creating a clear, national energy transition plan in consultation with state and territory governments, relevant agencies and key industry stakeholders. It should set the rules of the game, not take to the field itself.
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• Continued innovation will be required through construction and design methods, as well as production of construction materials and waste management.
• Solar and wind energy-based production will be the backbone of our future energy mix, with a diverse firming base to aid the transition, and fast-paced roll out of largescale transmission upgrades across the country.
Instead, our focus should be on the rewards and opportunities from this change, which are enormous. The time for political debate is behind us. It is time to get on with the job. No country in the world has more sun and wind than Australia, while our technology, finance and professional services expertise is globally sought after. In the energy hungry, rapidly growing region of the Asia-Pacific, Australia can transform this comparative advantage into an engine for growth, domestically and abroad. We have the chance to become the literal powerhouse of the Asia-Pacific – and there is a mass of private capital looking for opportunities to drive decarbonisation in Australia, particularly for projects with strong ESG credentials. But this window of opportunity is closing. For the benefit of current and future generations of Australians, we need to act now to ensure this opportunity to build a lasting comparative advantage in energy does not pass us by. Change is already underway in the sector. Corporates are signalling their own drive to decarbonise their assets and adopting net-zero targets themselves. Many are driving real change, supported by shareholders that are increasingly focused on ESG-oriented outcomes. Infrastructure operators and owners have been taking steps to address climate risk and decarbonise their assets. Transport operators and constructors have been making incremental changes to reduce emissions and prepare for a low-carbon future. Electricity providers and grid operators have been seeking to support a rapid transition to renewables. Many companies have committed to reach net zero emissions in their own right by 2050 or earlier. However, change is piecemeal, and there remains a gap between intent and action. This owes in a large part to a historical lack of national leadership, with no clear vision of a low-emissions future, including the role infrastructure will play in achieving this – or the actions, incentives and regulations required to accelerate positive change.
• Procuring agencies must look beyond lowest price for best value and set ambitious lower-carbon outcome requirements for contractors to respond to.
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While many of the changes required will be complex, the policy direction and vision required to make them happen are not, and they can build on commitments and actions already taken by industry and governments. With a change in mindset, a little imagination and a lot of leadership, Australia will be well on its way to a zero-emission future, propelled by action in the infrastructure sector.
3. Climate Change Bill 2022 (Fed).
The changes needed to the sector will not be delivered overnight and will be easier in some asset classes than others. The energy transformation will play a foundational role during this decade to support the transition of transport, construction, and other carbon-embedded industries. While land use-based carbon offsets may provide an interim measure in getting the sector to zero, they will become scarce and expensive over the coming decades as competition for credits heats up, particularly for hard-to-abate industries. As such, they cannot be seen as a lasting solution to decarbonise infrastructure when we can do better long-term. It is important to note that a market-based mechanism for pricing carbon could provide a highly effective and efficient way to drive rapid decarbonisation in Australia, including for the infrastructure sector. There is clear evidence to support this from Australia’s own experience of carbon pricing, as well as from similar, more comprehensive mechanisms internationally. While Infrastructure Partnerships Australia would support the development of a new carbon pricing mechanism in Australia, change can equally be driven by a myriad of policy, regulatory, commercial and technology solutions across the economy – and these are the focus of this paper.
4. Australian Government Department of Industry, Science, Energy and Resources, 2022 Quarterly Update of Australia’s National Greenhouse Gas Inventory: December 2021.
Many other forms of infrastructure generate emissions through construction, and then through electricity use, so are dependent on progress in those parts of the sector. Governments, regulators and operators of these assets should focus on levers to incentivise innovation and accelerate decarbonisation up their respective supply chains. Other forms of infrastructure like waste would benefit from utilising the circular economy model as an organising principle to help re-prioritise government agendas on how to best decarbonise these asset classes.
The Suburban Rail Loop comprises a program of investment that will support urban renewal in Melbourne’s middle suburbs. DTF has supported project activities through the development of a funding and financing strategy. This work has used learnings from past investments and explored approaches adopted on large-scale international projects like London’s Crossrail and the Grand Paris Express. These inter-generational projects required a diversified approach that leveraged a range of funding sources and value creation opportunities. Much of the value from the new Suburban Rail Loop will accrue over time, so leveraging a range of funding sources and value creation opportunities will support provision of the upfront finance required to deliver the project.
Delivering Victoria’s record infrastructure pipeline
Victoria’s Value Creation and Capture Framework provides guidance to Victorian Government departments, business, industry and community sector partners on maximising the value created by infrastructure projects. Harnessing the value creation and capture opportunities in Victoria’s infrastructure pipeline to improve infrastructure delivery and long-term performance outcomes is important, particularly when it comes to large scale projects like North East Link and the Suburban Rail Loop, as well as regional infrastructure like the Geelong Convention and Exhibition Centre. The recently established North East Link State Tolling Corporation demonstrates a different way government can leverage value capture to meet the funding task for major infrastructure. A State-owned corporation has been established by DTF to collect tolls for the North East Link road, which is currently under construction. The State Tolling Corporation is a commercial enterprise that utilises the value of the future toll revenue stream, providing funding capacity to deliver the project.
Victoria’s infrastructure pipeline has grown significantly in recent years and continues to play a vital role in driving the state’s economy. To ensure the effective delivery of the Government’s historic pipeline of works, the Victorian Department of Treasury and Finance (DTF) continues to explore opportunities to plan, procure and deliver projects in more innovative and efficient ways.
Value capture and creation is also a key project objective for the Geelong Convention and Exhibition Centre, where value will be created in the surrounding precinct and then reinvested in the project. Reinvesting that value will help deliver an outstanding facility and enhanced precinct outcomes for Geelong. The final form of the Geelong Convention and Exhibition Centre’s value capture opportunities and their delivery method will be determined by the market through the Public Private Partnership (PPP) tender process.
Creating and capturing value in Victoria’s infrastructure projects
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An Nguyen | Executive Director and Head of Partnerships Victoria – Infrastructure Delivery Group, Victorian Department of Treasury and Finance
DTF continues to update and expand the Victorian suite of standard form infrastructure contracts to ensure they are responsive and fit for purpose. The enhanced contract suite will provide greater consistency in the State’s procurement processes and increase industry participation by reducing the time and costs associated with legal reviews. Efficiencies will also be realised by reducing duplication during project transactions and ensuring state contracts remain aligned with industry best practice. Further enhancement of the standard contract suite
• Medium Works.
These new contracts, together with comprehensive guidance notes, are expected to be finalised in the coming months and will be published on the Victorian DTF website.
Recognising the need for standardisation across Australia’s two most populous states and largest public sector infrastructure markets in the country, DTF and the New South Wales (NSW) Treasury have been developing a common PPP project deed and guidance material for major social infrastructure PPP projects for use in both states.
policy and guidance
Common PPP Project Deed
As part of an ongoing program of reforms, DTF is developing a range of new standard form contracts, replacing out-of-date contracts and withdrawing and retiring obsolete contracts. New standard form contracts in development include:
• Incentivised Target Cost (ITC)
The ITC Deed introduces a Targeted Outturn Cost model. This model involves payment on a cost-reimbursement basis, transparent open-book arrangements, a percentage fee for corporate overheads and profit, and a painshare/gainshare mechanism to incentivise performance.
The new Medium Works Contract addresses an existing gap and introduces a modern and user-friendly contract structure, which will be adopted with future contracts in the broader suite of Public Construction Contracts.
DTF has consulted with government stakeholders and expects to release consultation versions of the contracts for industry input.
DTF is continuing to progress several important workstreams, including the development of new guidelines to support delivery of projects through collaborative procurement models. The new policy and guidance will outline collaborative models, key principles, approvals, commercial drivers and success factors for all types of collaborative procurement. DTF is also updating its Procurement Strategy Guideline and the Partnerships Victoria Framework, among several others.
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The Partnerships Victoria Standard Project Deed has been used as the base documentation, but the new deed also adopts key elements from the NSW Toolbox Project Deed. Beyond seeking to harmonise the PPP project deeds, improvements have been made to address common industry ‘pain points’, and incorporate feedback received and learnings from recent PPPs.
Industry and government stakeholders were consulted in the development of this harmonised PPP project deed and a legal peer review has been conducted. It is anticipated final versions of the Common PPP Project Deed and guidance material will be published in the coming months on the DTF and NSW Treasury Frameworks,websites.
• Collaborative Design and Construct (D&C)
Updating the Victorian Government’s suite of standard form contracts
Victoria’s Public Construction Procurement Framework requires agencies to use standard form contracts for public construction.
These pieces of policy work will play an important role in helping drive improved project outcomes, and DTF looks forward to consulting further with industry and government stakeholders as these important initiatives develop.
The new Collaborative D&C Deed will provide a modern contract form based on a fixed-price D&C approach but with targeted risk-sharing elements responding to specific delivery issues and market concerns.
In one of Australia’s firsts, Sydney Water will integrate stormwater and recycled water supply across the Mamre Road precinct, part of a $3.5 billion investment over five years to ensure circular economy principles overlay Western Sydney’s greenfield potential.
Roch Cheroux | Managing Director, Sydney Water
Natural creek lines, not concrete
To meet the NSW Government requirements for waterway health, stormwater will be collected in constructed wetlands where it will be treated and harvested as recycled water and distributed back to the precincts for the irrigation of parks, sports fields, trees and open spaces.
Preserving healthy waterways through integrated water-cycle management
At Sydney Water, we see carefully designed blue infrastructure transforming the Western Parkland City, one of the hottest, driest parts of Sydney, into a cool, green, safe and ecologically sustainable city. This transformation is key to the success of the Aerotropolis’ initial precincts. To help achieve this, Sydney Water will integrate stormwater and recycled-water supply across the Aerotropolis’ pivotal Mamre Road precinct in one of Australia’s firsts. We will invest around $3.5 billion over five years to ensure circular economy principles maximise Western Sydney’s greenfield potential for a sustainable approach to infrastructure, including Mamre Road, which covers 6,500 hectares, an area 10 times the size of Sydney Olympic Park.
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The NSW Government has appointed Sydney Water as the trunk drainage authority for the Aerotropolis, including Mamre Road.
In this role, Sydney Water will be responsible for delivering, managing and maintaining the regional stormwater network, along with operating our drinking water, wastewater and recycled water networks.
The Western Parkland City, home of the Aerotropolis and its precincts surrounding the new Western Sydney International Airport, is an opportunity to implement new levels of sustainability, urban amenity and liveability offered by competitive cities worldwide.
drainage authority will allow Sydney Water to ensure that stormwater systems within the precincts: • efficiently meet the new environmental requirements set for the Parkland City waterways, • recognise Country in the Wianamatta-South Creek Catchment, and • harvest stormwater to provide a sustainable source of water for cooling and greening these precincts, where temperatures can be up to four degrees hotter than eastern Sydney.
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Our approach to the circular economy is key to achieving Sydney Water’s goal of net-zero environmental impact across our business by 2030 and delivering the best outcomes for our customers who have told us they want us to take a lead in combating climate change.
Importantly, by integrating stormwater with recycled wastewater, Sydney Water can provide a climate-independent supply of water to ensure the parkland remains green – even in a drought – drastically minimising water sourced from the nearby Warragamba Dam. This regional approach allows infrastructure to be placed most efficiently within the precincts to allow development to occur.
The Upper South Creek Advanced Water Recycling Centre is another of our projects in the Western Parkland City. It will be our largest investment in water resilience in a decade.
Our plan is for stormwater to flow into natural water channels and wetlands instead of relying on buried concrete pipes or drains. The stormwater will then be collected in constructed wetlands where it will be available to be treated and harvested as recycled Bywater.ensuring the creek lines in Western Sydney remain as natural as possible, our Mamre Road plan aligns with Aboriginal cultural values and is a vital part of Recognising Country in the OurAerotropolis.roleastrunk
The strategic position of Sydney Water’s Upper South Creek Advanced Water Recycling Centre at Kemps Creek presents a unique opportunity to activate a broader circular economy ecosystem for the management of water, energy and other resources in this new city.
The Mamre Road project provides an opportunity to engage with key stakeholders to promote the significance of the transformational approach and our capabilities in stormwater management as we continue to build our relationships in Western Sydney. For example, Sydney Water will work with Penrith and Liverpool Councils who will manage the stormwater system within the roads and streets across the Mamre Road precinct.
We will achieve this, in part, by delivering better outcomes through integrated water solutions that restore and regenerate natural systems, keeping resources in use at their highest value, and economically designing out waste and pollution.
Circular economy ecosystem Sydney Water is working hard to create a national and global benchmark for Australia’s circular economy ecosystem on one of the largest scales seen to date in Australia, right in the heart of Western Sydney.
The Centre will use industry-leading water and resource recycling technology and generate an estimated $10 billion in social and economic benefits in Western Sydney through jobs and investment. When it reaches maximum capacity in 2036, it will treat up to 100 million litres of wastewater daily and produce recycled water suitable for a range of uses.
So, what role can the infrastructure sector play?
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There are many answers to this question and the infrastructure sector has already played a significant role in the development and funding of many of Australia’s renewable energy projects. In our view, the areas where the infrastructure sector can have the most impact align with the traditional strengths of the sector:
3. Partnering with industry to develop solutions to difficult issues that need to be solved to ensure supply of energy is low-cost and available when required.
A critical component of Australia’s energy transition is the development of new transmission infrastructure to facilitate additional renewable energy projects. Without it, we will see a continuation of the issues that have impaired the development of renewable energy projects, such as unpredictable marginal loss factors and curtailments.
Transmission infrastructure
2. Delivering more renewable energy projects.
1. Funding, financing and delivering the necessary transmission infrastructure to support the efficient rollout of renewable energy projects.
The New South Wales and Victorian Government’s Renewable Energy Zone (REZ) policies are designed to encourage infrastructure operators and investors by providing opportunities to bid for assets with a tried-and-true appeal to infrastructure Lessinvestors.obvious is the role of behind-the-meter connection infrastructure. Australia’s large industrial consumers, including miners and smelters, are embarking on their own decarbonisation initiatives and are increasingly active through their demand response capabilities. There is a role for the infrastructure sector to play in helping to accelerate those projects and assist industrial consumers to manage their energy costs.
Meeting the challenges of transitioning Australia’s energy systems to lower carbon emissions will be an enormous task requiring coordination across governments, industry, banks, and investors.
Energy transition and the role of the infrastructure sector
Nick Baker | Partner and Head of Energy, Australia, Herbert Smith Freehills
David Ryan | Partner and Global Co-head of Infrastructure, Herbert Smith Freehills
• Manage construction risk and adapt to different contractual models. For a long time, fully wrapped Engineering, Procurement and Construction contracts dominated Australian renewable developments. While highly desirable, these contractual models are changing and split procurement is becoming more common.
• Develop innovative and bankable offtake structures and manage commodity risk on a portfolio basis. Once the domain of pure energy companies, we are seeing more and more infrastructure investors develop sophisticated offtake and trading strategies.
There are over 200 wind and solar generation assets currently operating in the National Electricity Market (NEM). Given capacity factors, these projects deliver less than a quarter of Australia’s electricity.
The infrastructure sector has, and will continue to have, a critical role in meeting the challenges of Australia’s energy transition.
Delivering renewable energy projects
Partnering with industry to develop solutions to difficult issues
• Working with industry to accelerate decarbonisation strategies. We are already seeing this in lower carbon mid-stream Liquified Natural Gas. The benefits we see the infrastructure sector bringing to industry are two-fold.
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• Having a voice on market design. We know many of you already do this. The recent response from government to the Energy Security Board’s recommendations for 2025 continue to demonstrate political interest in an issue which, at its core, is a technical and engineering one. We encourage the infrastructure sector to continue to bring its perspectives.
The challenges and opportunities are vast and while some are familiar, such as onshore wind and solar, the most difficult issues require more than capital. They require alignment between a range of stakeholders, engineering and technology led solutions and creativity and coordination.
What is staggering is the number of additional projects required to meet emissions reduction targets. The infrastructure sector doesn’t need to be convinced to invest in conventional renewable energy projects like wind and solar, however, the most successful will: • Organise capital to deliver multiple projects. Over the past few years, we have seen a consistent trend of capital aligning with project pipelines. Given the significant shift in Federal Government policy on climate change and state-based policies, the question is no longer ‘if’ it is ‘when’ and ‘how fast’ renewable energy projects will become Australia’s main electricity source.
• Providing infrastructure solutions to decommissioning issues. One issue that stands out is water supply for coal mine decommissioning. This has been a critical issue in the Latrobe Valley and there is a potential role for the infrastructure sector to play in delivering alternative water supply options for a number of projects in the area.
While the steps taken to develop REZs and further roll out of wind and solar projects are all positive and necessary steps, the most difficult challenges centre on reliability and working out ways to replace high emission generation assets in a costefficient way. In our view, the infrastructure sector can play the following roles:
• Finding opportunities to support new technology. In the short term, we see this as supporting the development and roll out of battery and pumped hydro. Following that, offshore wind and hydrogen present new opportunities. The infrastructure sector has a long track record of identifying and developing assets which have infrastructure features, such as digital infrastructure and registries.
First, it allows capital to be unlocked to further develop assets. Second, the investment rigour and ESG mandate requirements of infrastructure investors assist in the validation of those projects.
Over the past few years, the Victorian Department of Transport has been transformed to ensure we can deliver on our commitments and services for Victorians. This transformation has allowed us to put integration at the heart of transport infrastructure decision-making.
Victoria’s integrated transport network
Early works commenced in June this year on the Suburban Rail Loop, the biggest infrastructure investment ever undertaken in Victoria.The early stages of the works will create 800 direct jobs. In addition, we are supporting the industry’s future, with 14 per cent of all hours worked on Suburban Rail Loop East early works to be done by trainees, cadets and apprentices.
We are also investing in maintenance and stabling to support our upgraded fleet.
This helps protect the transport system while land use changes, and allows for streamlined planning approvals, including a priority pathway to the Minister for Planning for other transport Theinfrastructure.planningreforms
The Victorian Government has invested a record $8 billion in rolling stock and supporting infrastructure since 2015 to meet growing demand across the state. Our minimum local content standards have meant we have continued to support Victoria’s local rolling stock supply chain. This work has ensured Victoria’s place at the forefront of the Australian rolling stock industry.
Our updated Rolling Stock Strategy – Made in Victoria, for Victoria – reaffirms our commitment to a strong pipeline of work for our local rolling stock supply chain.
Maintaining our fleet
With an ageing fleet and record investment in transport infrastructure projects, we need to continue to invest in new rolling stock to make sure our fleet meets the future needs of our state.
Building Victoria’s future transport network
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The Department has also considered feedback from its infrastructure partners and has redesigned its models to address various risks and challenges.
also allow us to do things faster with clearer decisions. We can provide greater clarity around the transport outcomes we want to achieve and have a network-wide view that encourages more local investment and economies of scale.
Since then, we have been steadily increasing quotas as part of new rolling stock contract negotiations, with our newest orders now above 60 per cent.
A new maintenance facility for the Next Generation Tram fleet will be built in Maidstone in Melbourne’s inner west, along with upgrades to maintenance and stabling facilities around the state.
A key benefit of integration has been the recent transport planning reforms. For example, there have previously been different rules for roads and rail in the planning system, however, we are now planning for the whole system and are not mode-specific.
For industry, this provides confidence to invest in facilities, new technology, processes, supply chains and enhanced skills. It also builds our workforce for the future, encouraging the TAFE sector to invest in training programs and means workers from industries in decline – such as auto manufacturing – have relevant new career options with minimal retraining required. We are supporting jobs through our major infrastructure projects.
Victoria is a hub for producing rolling stock. We are the only state manufacturing both trains and trams locally, and we were the first state to introduce a minimum 50 per cent local content for all new rolling stock orders in 2015.
For the industry, it means more sustainable supply opportunities for small, medium and large companies, with improved cost certainty, approach to risk allocation, and a more streamlined procurement Navigatingprocess.ourport futures
Our climate goals
We have focused on evolving the way we work with industry to: • get the best from the market • have a procurement process that supports well-developed solutions, and • have reasonable commercial settings that support a sustainable market. We have moved to specialist delivery authorities for the design, procurement and delivery of projects, and we are working with industry to tailor procurement approaches to risk profiles and alter procurement processes to foster greater private sector Theinvestment.NorthEast Link Program’s central package is a case study of this renewed approach. We have developed a procurement model based on market feedback, which has the best features of a Public Private Partnership, while strengthening collaboration. It includes a robust and targeted performance regime which encourages alignment of interests during delivery. The right procurement model is key to successful project delivery.
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changes provide certainty and allow successful contractors to invest in their people, diversify skill sets, reduce procurement time and costs, and improve project planning and delivery integration.
Innovating our procurement models
We are trialling 50 battery electric buses and two hydrogen fuel cell buses on Victoria’s bus network, with all ZEVs to be locally manufactured in Australia.
We are introducing non-price criteria in capital works tenders, which recognises other factors beyond tender price, such as prior performance; as well asimplementing the Victorian Roads Maintenance Contract across the state to have clear and consistent commercial and performance models across all Theseareas.
Industry and stakeholder feedback has shaped the final objectives and actions that will guide us in achieving the strategy’s vision. Transport is a major contributor to Victoria’s economy and its liveability. An integrated Department of Transport has facilitated the design and implementation of strategic and structural changes to improve network-wide outcomes. In turn, this will ensure the Department can deliver on its vision of simple, safe connected journeys for all Victorians.
For example, we are increasing our investment in the Roads Prequalification Scheme by introducing a new accreditation program to create a consistent approach to traffic management across Victoria. This is creating better turnaround times for applications and access for all levels of industry.
Victoria has a target of net-zero emissions by 2050, requiring a rapid transition to zero-emission technology. To achieve its net zero goals, the Department will ensure that from 2025, all new bus purchases will be Zero Emission Vehicles (ZEVs).
Victoria’s commercial ports are the conduit for approximately $26 billion worth of locally produced and manufactured exports and handle almost a quarter of Australia’s total food and fibre Withexports.freight
The recently released Navigating our Port Futures: The Victorian Commercial Ports Strategy is the Victorian Government’s 30-year strategy, vision and action plan to position our ports system to grow and thrive.
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volumes expected to more than double by 2050, the importance of our ports will only grow.
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Infrastructure Partnerships Australia Suite 3.03, Level 3 95 Pitt SydneyStreetNSW 2000 P: +61 2 9152 6000 E: contact@infrastructure.org.au W: infrastructure.org.au
Victorian Government Department of Treasury and Finance
Macquarie Capital 50 Martin Place Sydney NSW 2000 P: +61 2 8232 3333 W: macquarie.com ANZ 833 Collins Street, Docklands Victoria 3008, Australia P: 1300 883 798 W: www.anz.com/institutional Transurban Level 31, Tower 5, Collins Square 727 Collins Street Docklands VIC 3008 P: +61 3 8656 8900 E: corporate@transurban.com W: transurban.com Sydney Water PO Box Parramatta399NSW 2124 P: 132 092 E: stakeholderengagement@sydneywater.com.au W: sydneywater.com.au
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1 Treasury Place East Melbourne VIC 3002 Department of Transport 1 Spring MelbourneStreetVIC 3000 P: +61 3 9651 5111 E: information@dtf.vic.gov.au W: dtf.vic.gov.au P: + 61 3 9655 6666 E: DoTCorporate@transport.vic.gov.au W: transport.vic.gov.au
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futureaPoweringdigital
1. Inspiratia (CY21 by deal value) 2. Australia Tower Network (2022) https://www. atn.site/ None of the Macquarie Capital entities are authorised deposit-taking in stitutions for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 (MBL). Any investments are subject to investment risk including possible delays in repayment and loss of income and principal invested. MBL does not guarantee or otherwise provide assurance in re spect of the obligations of these entities.
The global #1 infrastructure financial adviser1 Increasing data consumption and reliance on remote connectivity has made investing in digital infrastructure more important than ever. At Macquarie Capital, our deep expertise and unique capital solutions are powering digital transformation for our clients and Bycommunities.advisingon the sale of Axicom to Australia Tower Network, we helped create the country’s leading independent digital infrastructure provider. The combined national network of over 4,000 tower and rooftop sites maximises critical coverage in all eight states and territories across the major wireless networks2. Learn more about how we’re keeping Australians connected at macquarie.com
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