29 October 2025
7 min read
#Construction, Infrastructure & Projects
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Complex renewables and energy transition projects in Australia are facing uncertainty and heightened risks amid increasing scope and complexity, and narrowing development opportunities. Global economic headwinds, competition for investment and political instability have made investments more uncertain. Some high-profile projects have run into significant stress, many proposed projects have faced significant delays and others have an uncertain future. Nevertheless, there have been many successful projects and an underlying drive and need to continue to deliver such projects.
Renewables and the energy transition are not the first wave of complex projects and infrastructure to face stresses and challenges. In this article we consider parallels and trends in infrastructure delivery over the last 20 years, the current issues faced in complex renewables and energy transition projects in Australia and what lessons might be learned from the past for delivering successful projects in the future.
Major Australian infrastructure waves over the last 20 years include the mining boom of the late 2000s, the LNG mega-projects of the early 2010s, urban linear infrastructure projects of the late 2010s and early 2020s, along with the initial phases of the energy transition. While each of these has featured unique challenges, there are noticeable parallels in the issues that have tended to cause stress on projects and trends in the way those problems have been resolved.
The projects that have tended to suffer from the most challenges and stresses are often the first to be delivered or are projects where there has been a step up in the magnitude of complexity. Where there is a lack of delivery experience in an industry, the challenges of new projects can be underappreciated, leading to underestimates in the time or cost of projects. The solution for delivering new types of projects in infrastructure booms where there is a lack of existing capabilities is to scale up, transition resources from different types of projects or bring in resources from outside of the existing market – each of which carries risks. Along with underappreciated complexity, many new infrastructure booms have commercial or political pressures to be delivered fast, which causes further stresses and strains on delivery capability.
Where complex projects have become stressed, there is a significant risk of difficult and costly disputes. Many large infrastructure projects over the last 20 years have led to large disputes, some of which resulted in significant losses for one side or the other after lengthy and costly formal legal proceedings. In efforts to avoid these risks and focus on delivery, there has been a trend toward negotiated resolution, often involving a large settlement or project reset during the project delivery phase which recalibrates the legal and commercial terms. While this trend has seen parties avoid lengthy legal proceedings, it also calls into question the firmness of the original contractual risk allocation.
Procurement approaches to infrastructure have changed significantly over the last 20 years. In the 2000s and early 2010s, most energy and mining projects were being delivered under Engineering, Procurement and Construction (EPC) models with a single head contractor or joint venture, featuring significant risk transfer to contractors for large value contracts with limited scope to adjust the contract price. That also tended to be the model for significant renewables projects in the early 2010s. Although a different model, Private Public Partnerships (PPPs) for urban linear infrastructure projects featured similar themes of large risk transfers and limited scope to adjust the contract price.
This ‘turn-key hard-dollar’ procurement approach has become less common with changes in financing approaches, risk appetites and escalating costs. So-called collaborative contracting has become more popular, with disaggregated multi-package delivery models where the project proponent retains greater control and associated risk becoming more the norm in large project delivery. Most energy transition projects being delivered now feature this disaggregated approach to contracting with multiple contractors and multiple interfaces.
The onshore solar, wind and Battery Energy Storage System (BESS) industry is mature in Australia. However, new technologies and large-scale projects will face some of the issues encountered in previous complex infrastructure projects. Examples include offshore wind, pumped hydro, large transmission projects and projects delivered at unprecedent scale. If project participants have little experience in delivering particular kinds of projects, they will need to realistically consider the elevated risks demonstrated in previous infrastructure waves.
The trend toward disaggregated contracts raises interface risk as a key issue for project proponents. While interface deeds and linked project documents can assist with managing that risk, project proponents need to take more responsibility and provide more direction and leadership where there are competing interfaces. Project proponents need to consider managing appropriate contingency where interfaces lead to scope changes. Third party interfaces are also a key issue, with interactions with energy authorities and utilities being a well-known concern in these projects.
The availability of necessary workforce numbers and other resources is a key issue for delivery of complex renewables and energy transition projects. Similar issues have been experienced in previous infrastructure waves, particularly where multiple large projects squeezed the availability of resources. In those cases, labour and materials became a key constraint on project delivery that needed to be carefully managed.
Quality remains a key risk factor for renewables and energy transition projects. There are examples of large infrastructure projects in Australia and overseas that have been severely set back by quality problems requiring extensive resupply or rectification. Although warranties are available, enforcing warranties is not without difficulty and the totality of the disruption to projects is usually more severe than can ever truly be recovered. Preventing problems through robust quality control is certainly the preferable course.
Delay has historically been the principal driver of project overruns and difficult disputes. Renewables and energy transition projects can be particularly susceptible to the consequences of delay due to sensitive timing requirements around project commissioning, and the economics of project financing and revenues. In an environment of disaggregated contracts and interface risks, it falls on the project proponent to take an active role in the management of the project and to monitor and mitigate delay risks.
Global investment uncertainty has unfortunately challenged renewables projects to a greater extent than other recent infrastructure waves. Policy changes and geopolitical risks have naturally led proponents to be cautious and risk averse. It highlights that although the parties to a project often see themselves as opposed to one another, all participants in the industry need each other to foster the environment for projects to succeed and provide healthy returns on investments.
Complex renewables and energy transition projects are currently facing the kinds of risk that have historically led to difficult and stressed projects. This is being seen in uncertainty, delays in bringing projects online, and cost overruns. Infrastructure experience over the last 20 years shows that stressed projects also often lead to difficult disputes.
The risks faced by complex renewable and energy transition projects lead to problems that are not straightforward to resolve. Interface risks usually require coordinating multiple parties with different interests. Likewise, avoiding projects being impacted by resource constraints, quality problems or delays requires good planning, cooperation and leadership. If risks manifest, a solution usually requires a multi-disciplinary approach combining technical, commercial and legal inputs to problem solving.
While disputes are difficult to avoid entirely on complex projects, they do not necessarily need to lead to protracted and high-risk legal proceedings. Structuring a dispute management process that facilitates obtaining multi-disciplinary inputs and finding mutually acceptable solutions can help projects work through problems and focus on delivery. That requires leadership and multi-disciplinary expertise. Fortunately, renewables and energy transition projects can draw on the experiences, positive and negative, of complex infrastructure projects in Australia over the last 20 years.
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Disclaimer
The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.
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