The clean energy industry has a massive job ahead of it – designing and delivering a decarbonised grid – which is made all the more difficult by ideological reluctance at the peak government level. It’s a tough sector, but the people who seem to go through the wringer day after day are the ones who work for engineering, procurement and construction firms, or EPCs.
Investors take on plenty of risk backing the transition to clean energy, to be sure, but EPCs can find themselves pulled to straining point by project owners and developers on one side and contractors and equipment manufacturers on the other.
Indian-headquartered Sterling and Wilson have risen to the top of the Australian EPC league table as corporate collapse or grinding attrition has seen the exits of big names such as RCR Tomlinson, Downer and Decmil, among others.
It’s a tough sector, but all the same the generation needed to replace ageing coal plants must be built. As developers line up to satisfy the ambitions of state energy ministers, Sterling and Wilson Australia CEO Philip Sheridan says confident participation in such a highly competitive market “comes down to looking at an opportunity, critiquing it, and looking at the risk profile you’re prepared to take.”
In Australia, Sheridan says Sterling and Wilson is looking to extend beyond the EPC role and strengthen its O&M capabilities (around the world the company manages about 8GW in O&M). The company is working on three utility-scale solar projects in Queensland, one in NSW and one in South Australia. A project near Wellington, NSW, is in the final stages of testing. The others are in the construction phase and Sheridan says the company will provide O&M services at four of the five projects after completion.
Data from Rystad Energy shows close to 1GW of projects for the company in Australia, most of it under construction.
Negotiating the two-stage registration process of a power plant with the Australian Energy Market Operator involves “literally daily engagement”, Sheridan says. “It gets pretty intense during the R2 process. Ultimately the client is the generator, so what we do is support their position.”
Grid congestion is an issue in each of the three states where Sterling and Wilson is engaged, especially Queensland and South Australia. Owners of clean energy assets are seeing revenues clipped by economic curtailment, where generators bid to avoid dispatch (and negative prices), and system curtailment, where AEMO intervenes to disallow dispatch because the grid is congested.
Sheridan says it’s not a problem for his current portfolio of work because they are well-located or still being built. Nevertheless, it’s a challenging area, he says. “It’s one of the things we look at when weighing opportunities, to establish whether there may be potential for constraint or curtailment which may affect our project from a delivery perspective, especially during testing.”
Projects must clear Sheridan’s “bid/no-bid” criteria to be considered. “We’re well aware of the challenges; a lot of us [at Sterling and Wilson] have spent a fair amount of time in the power game and other sectors.”
Modeling for the five projects has shown no red flags so far, he says, although it may be a different story for developers who are further down in the queue at nearby locations.
States show the way
The enthusiasm shown by many states in pursuing the development of renewable energy zones makes for a vibrant market, he says. “There’s a genuine interest, and I think with that joined-up thinking associated with the combination of solar, wind and renewables technology – along with storage and grid upgrades – that’s really going to help those governments achieve their clean energy targets.”
The grid is crying out for new wind and solar generation to replace coal, along with plenty of storage, but finding the skilled workers to get the projects finished on time may be another matter. Sheridan says it sometimes is a case of competing for resources with other types of infrastructure work that’s going on. If that sounds tough, the restrictions on movement across borders in response to covid-19 have been an even bigger problem.
“Here in Australia we don’t claim to have all that available skill set,” he says. “If [projects] all seem to come at a similar time it brings challenges.” Patience is required among all parties, he says, including developers and regulators.
Looking ahead to storage
Storage is the missing piece if tomorrow’s grid is to rely on renewable energy and Sheridan says “two or three” of the EPC’s current projects include an allocation for batteries. “It’s a future provision,” he says. “We don’t have any storage on any of our current projects, apart from some land space.” He sees storage as an obvious way to lever better value out of midday solar energy by selling it into the evening peak. “We’re looking at those opportunities.”
Module prices are volatile and have become a “significant risk”, he says, especially considering the difficulty of adapting system design mid-project. “Changing supplier in an EPC contract, in all honesty, is the last thing you want to be doing. It has significant time and cost implications.”
The combination of bifacial modules with single-axis tracking is becoming a standard project design. “It comes down to what the client is looking for,” he says. “They will have locked away their thought processes, looked at their funding and their development set-up [to decide] whether a project is tracked, fixed or bifacial or not.”