1. Infrastructure Partnerships Australia Convenes Partnerships 2018 in Melbourne 2

IN THIS EDITION

1. Infrastructure Partnerships Australia convenes Partnerships 2018 in Melbourne 2. Victorian Treasurer Tim Pallas opens Partnerships 2018 with address on infrastructure delivery and population growth 3. Respected leaders panel discusses populism and microeconomic reform 4. Deputy Prime Minister Michael McCormack addresses Partnerships 2018 5. Panel discusses the role of waste to energy in solving Australia’s waste crisis 6. Panel explores the evolution and relevance of social license in infrastructure 7. Panel discusses the impacts of Electric Vehicle uptake on consumers, government and industry 8. Panel discusses the Cape Town water crisis and how to prepare for future challenges 9. Shadow Minister for Infrastructure Anthony Albanese delivers closing keynote address

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1. Infrastructure Partnerships Australia convenes Partnerships 2018 in Melbourne

The annual Partnerships conference was held in Melbourne last Friday with a selection of senior political, public sector and business leaders. Delegates attended from across the infrastructure sector to explore a range of key market reform, procurement and delivery challenges in Australia and internationally.

This year’s speakers and panellists covered a wide range of topics and emerging infrastructure issues. These included discussions on the impact of declining trust and rising populism on micro economic reform and the growing relevance of social license in infrastructure delivery and operation. The audience heard from Australia’s foremost political leaders on their priorities for the infrastructure sector.

The conference covered the policy challenges of climate variability and population growth in water management. Delegates also heard about the opportunities emerging with waste to energy facilities and the rise of Electric Vehicles. Figure 1: Partnerships 2018 was convened in Melbourne

Source: Infrastructure Partnerships Australia

A full list of speakers and panellists in order of appearance is listed below:

Opening address:

Hon Tim Pallas MP, Treasurer of Victoria

Respected leaders (panel):

Rt Hon Sir Bill English, Former Prime Minister of New Zealand Dr Kerry Schott AO Patron, Infrastructure Partnerships Australia Tony Shepherd AO Patron, Infrastructure Partnerships Australia Hon Alan Stockdale AO, Former Victorian Treasurer, Consultant – Maddocks, and Adrian Dwyer, Chief Executive Officer, Infrastructure Partnerships Australia (moderator).

Keynote address:

Hon Michael McCormack MP, Deputy Prime Minister, Minister for Infrastructure, Transport and Regional Development

Waste to energy (panel):

John Bradley, Secretary, Victorian Department of Environment, Land, Water and Planning Preet Brar, Chief Financial Officer, Veolia Gayle Sloan, Chief Executive Officer, Waste Management Association of Australia, and Christopher Voyce, Executive Director, Macquarie Capital (Pre-panel address and moderator).

Social license (panel):

Henry Byrne, Group Executive, Corporate Affairs, Transurban Ashley Jarquin, General Manager, Corporate Affairs and Marketing, John Holland Group Natalie Malligan, Head of Cities, Australia and New Zealand, Uber, and Jodie Brough, Partner and Office Head (Sydney), Newgate Communications (moderator).

Electric Vehicles and road funding (panel):

Nick Hudson, Director, Economics and Policy, Infrastructure Partnerships Australia (Pre-panel address) Peter Colacino, Executive Director Policy and Research, Infrastructure Australia Fiona Orton, Future Grid Manager, TransGrid Dr Allison Stewart, Project Director, Infrastructure Victoria, and Adrian Dwyer, Chief Executive Officer, Infrastructure Partnerships Australia (moderator).

How to avoid a water crisis (panel):

Karen Shippey, Chief Director, Environmental Sustainability, Department of Environmental Affairs and Development Planning, Western Cape Government, South Africa (Pre-panel address) Terri Benson, Managing Director, South East Water Sue Murphy, Chief Executive Officer, Water Corporation of Western Australia Michael Wandmaker, Managing Director, Melbourne Water, and Dr Jim Bentley, Managing Director, Hunter Water Corporation (moderator).

Closing keynote address:

Hon Anthony Albanese MP, Shadow Minister for Infrastructure, Transport, Cities and Regional Development Shadow Minister for Tourism.

Infrastructure Partnerships Australia thanks our generous sponsors for their support and investment in Partnerships 2018, the nation’s premier infrastructure conference.

2. Victorian Treasurer Tim Pallas opens Partnerships 2018 with address on infrastructure delivery and population growth

Victorian Treasurer and Minister for Resources, Tim Pallas MP, opened Partnerships 2018 by providing an overview of Victoria’s population growth challenges and the pipeline of infrastructure projects currently in procurement and under delivery in the state.

In opening his keynote address, Mr Pallas said that with “the distance between the comparative populations of Melbourne and Sydney [reducing] by about 25,000 people a year…the challenges for the state are multifaceted”. The Treasurer outlined that the Victorian Government was responding to these challenges with a credible and long- term strategy for the state’s infrastructure. Adding to his comments, Mr Pallas made clear that industry should consider the infrastructure investment surge underway in Victoria the new normal and not simply a boom and bust cycle of investment. Mr Pallas also outlined the importance of sequencing this infrastructure investment across the state. He remarked that sequencing investment would ensure there is enough industry capacity and resources to build the state’s pipeline of projects. For example, staging the delivery of Melbourne Metro, West Gate Tunnel, North East Link and the Regional Rail Revival program will be critical in ensuring these projects can be delivered on time and on budget.

The Treasurer went on to discuss the Government’s priorities for improving the supply of skilled labour into the infrastructure market through the vocational training and education system. In the recent State Budget, the Victorian Government allocated funding for 30 free TAFE courses across construction and engineering to meet the growing skills gap in the infrastructure supply chain. In addition, funding was allocated for a further 30,000 TAFE places to ensure Victorians are well-equipped to partake in the infrastructure needs of their State.

Figure 2: Victorian Treasurer Tim Pallas MP providing opening address

Source: Infrastructure Partnerships Australia

In discussing the funding base for the infrastructure investment surge, Mr Pallas pointed to the Government’s Asset Recycling programme, including the $9.7 billion lease of the Port of Melbourne. Mr Pallas also explained that the recent $2.85 billion leasing of Land Use Victoria, has boosted the Government's capacity to fund additional infrastructure projects.

On the Westgate Tunnel Project, Mr Pallas highlighted that the current Westgate Bridge was initially built to carry 40,000 vehicles per day, but now carries about 200,000 per day. Once completed, the project will deliver a new tunnel under Yarraville, widening of the West Gate Freeway and a bridge over the Maribyrnong River. An alternative route to the West Gate Bridge and direct access to the Port of Melbourne will also be provided as part of the project.

On Level Crossing Removals, Treasurer Pallas spoke about the benefits of the programme, outlining its value in addressing suburban road congestion, separating pedestrian, car, and train traffic and enabling more frequent train services. He added that the programme is on track to remove 50 level crossings by 2022. The programme has been delivered alongside power and signalling upgrades enabling the State to run new rolling stock across the network. Mr Pallas emphasised that infrastructure development is intergenerational. He remarked that we need to think “beyond ourselves and our aspirations…in order to ensure that the wealth, the capacity and the wellbeing of this community is assured”. When reflecting on this point, he acknowledged that projects, such as the Melbourne Airport Rail Link and the Suburban Rail Loop, are not intended to be completed within a single term of government. He said that they are long-term projects that require long-lasting commitment, regardless of who is in office.

In concluding his remarks, the Treasurer made the point that Australia would be “better served” if politics was removed from infrastructure project selection. Mr Pallas added that partnerships between government and industry to enhance “creative thinking, skills and attitudes” and will be critical in meeting the challenges and opportunities presented by population growth.

Relevant links

View projects mentioned above on infrastructurepipeline.org

3. Respected leaders panel discusses populism and microeconomic reform

A panel of respected leaders convened to discuss populism and micro economic reform in Australia. The panel explored the role of trust in community acceptance of reform and the lessons learnt from Asset Recycling.

The panel comprised:

Rt Hon Sir Bill English, Former Prime Minister of New Zealand Dr Kerry Schott AO, Patron, Infrastructure Partnerships Australia Tony Shepherd AO, Patron, Infrastructure Partnerships Australia Alan Stockdale AO, Former Treasurer of Victoria Adrian Dwyer, Chief Executive Officer, Infrastructure Partnerships Australia (moderator).

Infrastructure Partnerships Australia Chief Executive, Adrian Dwyer, opened the discussion by asking the panellists if trust in institutions mattered to making infrastructure reform possible. Tony Shepherd responded by remarking trust in institutions does matter and that there are several causes for its decline. Mr Shepherd outlined that frequent leadership changes have not helped to build public confidence in the political system, and that social media has worked to oversimplify the policy debate in Australia. However, the principal reason cited by Mr Shepherd is the lack of real leadership and political courage to sell complex reforms.

Adding to Tony Shepherd’s observations, Alan Stockdale remarked that Australia is becoming virtually ungovernable. Mr Stockdale made the point that the fragmentation within the Australian Senate coupled with the election of knife edge majorities in the lower house has made good policy close to impossible to legislate. He outlined that Australia should change its electoral rules to ensure minority parties cannot be represented in the Parliament unless they get five per cent of the vote.

Turning to Sir Bill English for an outside perspective, Mr Dwyer asked whether Australia was simply obsessing over its problems. Sir Bill encouraged the audience to be more optimistic about the state of infrastructure in Australia and the economy more broadly. He remarked that while the nation may have experienced political setbacks and reform inertia, the size and scale of the infrastructure investment currently underway should be celebrated. Adding to the panel’s comments on populism, he said it was important to not let minority views dominate the political debate. He advised caution when using the label “populism” as “it has now become a word for democratic results I did not like”. Instead, Sir Bill suggested that politicians need to “treat the voters with respect - that is, the respect of believing that their opinion matters”.

Figure 3: [L to R] Adrian Dwyer, Alan Stockdale AO, Tony Shepherd AO, Sir Bill English and Dr Kerry Schott AO

Source: Infrastructure Partnerships Australia

Reflecting on Sir Bill’s comments, Dr Kerry Schott said that the influence of small groups on the political system, rather than trust, has made many reforms difficult to prosecute and legislate. However, she remarked that trust was essential to the operation of businesses, highlighting NBN Co’s work to rebuild trust with its customer base following the company’s setbacks in the rollout of the broadband network.

Building on this theme, Adrian Dwyer asked Tony Shepherd whether the Financial Services Royal Commission had accelerated the decline in trust in business. Mr Shepherd responded by remarking that unethical and illegal behaviour by some banks and financial institutions has had a detrimental impact on the public standing of those institutions. However, he outlined that we should not lose sight of the value of the banking sector to the Australian economy, highlighting the sector’s resilience in weathering financial crises and structural headwinds. Mr Shepherd made the point that greater enforcement of existing regulation would help to address issues of misconduct in the financial and other sectors and go some way to rebuilding public trust in those institutions.

Discussing reform, Alan Stockdale remarked that the 1980s and 1990s provide some instructive lessons for a new reform agenda today. Mr Stockdale made clear that the Federal Government needed to adopt an incentive-based approach, like the National Competition Policy Payments, to encourage the states to introduce a programme of microeconomic reform. According to Mr Stockdale, the agenda for reform should be sourced from the collective expertise of the public sector and business community. Furthermore, the Australian Government needed to provide leadership through the Council of Australian Governments (COAG) and other multi-jurisdictional channels to encourage broad-based support from the states. However, Mr Stockdale remarked that incentive programmes of this nature require not just a carrot, but also a stick. He outlined that the Federal Government should use an institution like the Commonwealth Grants Commission to review the progress of each state and territory in implementing the reform agenda and penalise jurisdictions who lag behind with reductions in their grants, while rewarding jurisdictions who accelerate the reform programme. In concluding his point, Mr Stockdale said that our national government and national business leaders needed to put a premium on the development and implementation of policy.

In discussing the preconditions for reform, Mr Dwyer asked Dr Schott about whether the National Energy Guarantee (NEG) could be salvaged. In response, Dr Schott explained that the reliability obligation component of the NEG will likely be carried forward. However, Dr Schott made the point that the reduction in prices that would have occurred in the wholesale market will be less without the full implementation of the NEG. She also said that, in the absence of a policy mechanism like the NEG, there would likely be a growing appetite within the Australian Government for greater market intervention in the energy sector, and that this presented the biggest risk to industry.

Turning to Asset Recycling, Mr Dwyer asked the panellists whether the success of Asset Recycling proved that reform was possible if the right stories were told about the infrastructure purchased rather than the asset sold. Mr Shepherd agreed with this proposition, remarking that one of the great policy initiatives of the last ten years was Asset Recycling. He made the point that “NSW pioneered the programme” under Mike Baird and won an election based on his Government’s commitment to and the observable results of reform.

Mr Shepherd added the point that the Baird and Andrews Governments both “relentlessly sold” the Asset Recycling concept to the public by using simple language. Furthermore, “complex economic terms or equations” were not employed in explaining the reasons or benefits. A simple link was drawn between the long-term lease of one asset for investment in public transport. Adding to Mr Shepherd’s point, Sir Bill English remarked that the power and effectiveness of that reform programme came down to the willingness of the political class to spend time explaining the policy to the public.

In closing, Mr Dwyer asked the panellists what policy area or reform they would most like to see prioritised and receive bi-partisan support for. In response, Tony Shepherd and Alan Stockdale both remarked that competition reform and energy policy were the two areas that needed the most attention.

Sir Bill English highlighted the importance of addressing the public accounting rules behind infrastructure investment and improving public asset management for the huge pool of public transport assets coming online across the east coast of Australia. He made the point that the operating cost of these assets would place a major burden on state treasuries in the future. Dr Schott said that she would like to see Commonwealth state relations addressed again, as the Federal Government has been getting into policy areas which it does not have either the responsibility or the capability to manage.

4. Deputy Prime Minister Michael McCormack addresses Partnerships 2018

Deputy Prime Minister and Minster for Infrastructure, Transport, and Regional Development, Michael McCormack, addressed Partnerships 2018. He spoke of the importance of engagement between government, industry and the community in the development of infrastructure. He also announced that the Government will undertake a review of Government procurement practices for infrastructure investment over the next month. Pointing to the importance of infrastructure to Australia’s continued economic success, the Deputy Prime Minister reflected that infrastructure is the “connector between people and markets” on both a local and global scale. He said that this was critical to ensuring Australia’s global competitiveness when considered against the backdrop of “rapid developments in our Asian region”.

The Deputy Prime Minister highlighted the importance of engagement between industry and government, given the value of infrastructure to the economy. In making his case, he pointed to the Federal Government’s $250 million Major Projects Business Case Fund. He outlined that this Fund would help to ensure industry has a degree of certainty over the next “tranche of major projects”.

Figure 4: The Hon Michael McCormack MP addressing Partnerships 2018

Source: Infrastructure Partnerships Australia

Continuing this theme, the Deputy Prime Minister then provided an overview of the Government’s 10-year Infrastructure Investment Program, adding that there is a focus on getting people to and from where they need to be "sooner and safer".

Projects such as Inland Rail and Western Sydney Airport were used as examples to highlight the Commonwealth’s focus on delivering infrastructure. Mr McCormack added that projects such as Melbourne Airport Rail Link, METRONET and the Roads of Strategic Importance Initiative highlight a continued, long-term, focus on delivering infrastructure across the 10-year investment programme.

The work of Infrastructure Australia, through the Infrastructure Priority List, was praised by the Deputy Prime Minister as helping to guide the right project selection. This ensures projects “maximise benefits to users” in addressing issues such as congestion and improving safety outcomes.

The Deputy Prime Minister then went on to re-state that the Commonwealth is no longer an ATM for the states and is seeking to become a “more informed investor” through the creation of commercial advisory capacity at the Federal level. Specifically, Mr McCormack noted the role of the Infrastructure and Project Financing Agency which advises on the structuring and procurement of projects, and how they are funded or financed.

This would involve the use of equity “where appropriate”, while recognising “financing should not drive investment decisions alone”. He said the Government’s investment decisions will be driven by analysing the best way to manage risk and delivering better value for money.

Mr McCormack also announced that a review of procurement policy and practices will be undertaken over the next few months. The review will consider the construction sector’s experience in procurement and how major procurements could be structured to present more opportunities to contractors at all tiers of the supply chain.

Several industry workshops will be conducted over the next month, before a final report is presented to the Council of Australia Governments Transport and Infrastructure Council later this year.

Relevant links

Read the Federal Government’s media release on the procurement review View projects mentioned above on infrastructurepipeline.org

5. Panel discusses the role of waste to energy in solving Australia’s waste crisis

Macquarie Capital’s Chris Voyce provided an overview of the waste and resource recovery sector and outlined how Australia’s environmental credentials in energy recovery compare to other countries. The panel then offered perspectives on policy and market drivers to create opportunities for waste to energy investment and emphasised the need for strong community engagement on project proposals.

In his pre-panel introduction, Macquarie Capital’s Chris Voyce noted how recent policy changes in China had “revealed our reliance on export markets for recycling”. This has raised awareness and interest in the waste and resource recovery sector and identified potential opportunities for investment, he argued.

Mr Voyce explained that Australia produces over 60 million tonnes of waste every year, of which 55 per cent is recycled and 40 per cent is sent to landfill. Only four per cent of waste generated is used for energy recovery. Mr Voyce pointed to the waste hierarchy (Figure 5) used for “ranking the relevant treatment options for waste”, which places energy recovery above disposal of waste into landfill. Figure 5: The waste and resource recovery hierarchy

Source: Victoria EPA

In terms of providing market incentives, Mr Voyce noted that a number of state governments have introduced waste levies for the disposal of waste in landfill. Offering an example, Mr Voyce pointed out that NSW’s high waste levies at around $140 per tonne, have resulted in high recycling rates. However, he explained that relative to our global peers, Australia lags significantly in terms of energy recovery from waste.

Mr Voyce was then joined by a panel of industry leaders to discuss the role of waste to energy in the resource recovery sector.

The panel comprised:

John Bradley, Secretary, Victorian Department of Environment, Land, Water and Planning (DELWP) Gayle Sloan, CEO, Waste Management Association of Australia (WMAA) Preet Brar, Chief Financial Officer, Veolia Chris Voyce, Executive Director, Infrastructure, Utilities & Renewables, ANZ, Macquarie Capital (moderator). Figure 6: [L-R] Chris Voyce, John Bradley , Gayle Sloan and Preet Brar

Source: Infrastructure Partnerships Australia

The panel began their discussion by outlining the make-up of the waste and resource recovery sector in Australia. Ms Sloan highlighted the importance of creating a circular economy, which involves the recovery of resources from waste wherever possible. Referring to the waste hierarchy, Ms Sloan noted that although avoidance and recycling are preferable, waste to energy sits above landfill in terms of waste management strategies. She added that there are different ways to obtain energy from waste and “we need to find the right balance”.

The panel then discussed the various types of waste to energy technologies. Ms Brar made the point that there are currently several biological facilities in Australia including Anaerobic Digestion (AD), with Refuse Derived Fuel (RDF) also experiencing some uptake. Ms Brar noted that large scale thermal facilities such as traditional incineration have not yet been successfully developed in Australia despite popularity in other parts of the world.

Providing a government perspective, Mr Bradley stated that there is an “opportunity for waste to energy to play its part in the waste hierarchy”, given that waste volumes will grow by 60 per cent over the next 30 years.

The panellists then turned to the appropriate pathways in which these projects come to market and the role of government and industry in planning and procurement. Mr Bradley highlighted the importance of developing an integrated resource recovery policy framework to avoid an environment where we have “confusion of economic signals in the market and an interruption of the economics of waste management”.

Ms Sloan explained that the industry is “highly regulated by government” and that “markets need to understand diversion targets, so we can develop the technology to achieve them”. The Commercial and Industrial (C&I) waste sector is predominantly market led and presents big opportunities but requires long-term certainty in the regulatory regime.

Agreeing with Ms Sloan, Ms Brar commented that while much of the industry is market led, regulations are unclear when dealing with residual waste. She noted that the “regulatory market points to the Waste Incineration Directive (WID) in Europe to comply with air pollution standards”. Mr Voyce then sought the panellists’ observations on the key regulatory and policy settings that are needed to support waste to energy. Mr Bradley emphasised the “need to continue to review standards for new technology being adopted”. He explained that the Victorian Environment Protection Authority (EPA) regulatory framework is robust with three waste to energy works approvals currently under consideration.

Ms Sloan explained that project proponents “need to spend a lot of time engaging with community” in building a social license. Ms Brar reiterated this point noting that social license is a significant barrier to uptake and there is misinformation around air pollution and emissions. Mr Bradley agreed stating that in order to “achieve strong social license at an early stage, there needs to be direct involvement with local government”.

Mr Voyce pointed out that in places “where waste to energy has been successfully adopted, there is a policy that waste generated within a municipal area needs to be dealt with in that area”. Ms Sloan called for a national proximity principle in dealing with waste where it is generated, as we “do not want waste moving around the country”.

The panellists then turned to the role of the Federal Government in providing national leadership. Mr Bradley noted the agreement between state and Federal ministers to review the national waste policy, which will provide an integrated approach to waste and resource recovery. Ms Sloan made the point that “states are the regulators” and the Federal Government needs to play a coordination and leadership role. Ms Brar added that the issue of extended producer responsibility needs to be led at the Federal level.

In closing, the panel was asked about the potential of waste to energy in Australia. Mr Bradley explained how Victoria has established waste and resource recovery groups that “aggregate municipal waste and put it to market to stimulate market opportunities”. Ms Sloan stated that “waste to energy is one of many opportunities to invest in this sector”.

6. Panel explores the evolution and relevance of social license in infrastructure

The panel explored the evolving nature of social license in the infrastructure sector from the perspective of contractors, operators and service providers. Panellists also discussed how businesses are responding to demands for greater regulatory oversight and the impact that construction fatigue is having on infrastructure delivery more broadly.

The panel comprised:

Ms Brough began the discussion by asking panellists to define social license in the context of their respective businesses. Mr Byrne commented that those who see social license as solely a communications challenge miss its core purpose. Mr Byrne argued that social license refers to how a business is accepted by its stakeholders, with the challenge of responding to public perceptions and undertaking necessary improvements.

Ms Malligan explained how Uber interprets social license as customer perception, with the need for Uber to be hyper-vigilant about the perceptions of both customers and driver partners. Ms Jarquin discussed the concept of social license from the perspective of construction contractors, remarking that community acceptance depends on how you manage projects at the coalface. She said that while social license is considered at the corporate level, it is generally “won or lost” at the project level. Given most projects are funded by government, if a contractor loses the community’s trust on a project, they also lose the trust of the client. She also noted the significant cost resulting from a loss of trust on a project.

Figure 7: [L-R] Newgate Communications’ Jodie Brough, John Holland’s Ashley Jarquin, Uber’s Natalie Malligan, and Transurban’s Henry Byrne

Source: Infrastructure Partnerships Australia

Ms Brough questioned whether social license is seen as a threat by some businesses. In response, Ms Jarquin explained that “the ship has sailed” if businesses still see social license as a threat. She noted that it is no longer enough to deliver a good physical product, as industry relationships with stakeholders are also essential to the success of a project. Ms Jarquin also commented that getting community engagement and the elements of social license right can be a true differentiator in winning work.

In the case of Transurban, Mr Byrne explained that they consider social license implicitly through the organisation’s Key Performance Indicators. Mr Byrne highlighted the need for businesses to filter issues into tangible actions the business can take, rather than simply talking about trust. He commented that while businesses such as Uber and Transurban are vastly different, the prism they filter through would generally be the same. Ms Malligan followed by elaborating on the customer-centric nature of the transportation industry. She explained how every decision Uber makes needs to consider what effect and perceived impact it has on the rider and driver.

Ms Brough then moved the discussion to the influence of public perception on government intervention and regulation. Mr Byrne responded by noting that there is an excess of regulation and reviews, however the various jurisdictional tolling inquiries have allowed Transurban to engage in detailed conversations with the government and the public about its business and how it operates.

Ms Malligan cautioned that intervention can sometimes have unintended consequences. For example, driver registration varies from $100 to $1,000 across jurisdictions because each government rightfully intends to meet varying safety and social expectations of the community. However, this variance creates financial barriers for prospective Uber drivers.

Ms Jarquin explained that once a project is tendered, the contractor is the steward of the project’s social license. Therefore, she argued that governments need to get the project positioning right before awarding a tender, to provide a better long-term view of the project and implications for stakeholders. Given the nature of current projects underway, community fatigue is challenging a constructor’s social license to deliver projects. Mr Byrne added that social license imperatives have helped improve business practices, noting how stakeholder engagement and consultation processes are markedly different compared to five years ago.

In closing, the panellists reflected on the fluid relationship between government and industry, with social license being an acute lever in managing the relationship. Ms Jarquin commented that the onus is on industry to demonstrate social license practices, so government has greater confidence when the private sector becomes the steward of new complex projects.

7. Panel discusses the impacts of Electric Vehicle uptake on consumers, government and industry

Infrastructure Partnerships Australia’s Nick Hudson set the scene for the panel discussion, providing an analysis of the current trends in Electric Vehicle (EV) uptake and the implications for the energy and transport sectors. Following Mr Hudson’s address, the panel discussed which factors would be most influential in driving EV uptake, the role of incentives, and the opportunities for establishing a new road funding model off the back of this disruptive technology.

In his pre-panel address, Mr Hudson explained that EVs are set to become the dominant drivetrain in the new light vehicle market over the coming decade. Referencing work by Energeia (see Figure 8), he showed how EVs are forecast to account for 50 per cent of the total vehicle fleet by the late 2030s. Mr Hudson outlined that it is therefore not a question of “if”, but a question of “to what degree, and how quickly, EVs will be part of the transport mix”.

Figure 8: EV forecast uptake scenarios

Source: ARENA, CEFC, Energia, 2018 Mr Hudson then turned to the effect of EV uptake on transport funding and policy. Regardless of the forecast market penetration, the rise of EVs will substantially contribute to the decline in Fuel Excise revenue. The increasing efficiency of combustion engine vehicles has already seen revenue decline from 2.8 per cent of GDP in 2001 to 1.9 per cent in 2016, despite increasing kilometres travelled. Mr Hudson added that the energy sector will also be impacted, with the Australian Energy Market Operator (AEMO) predicting EVs will consume around 37.08 TWh of electricity by 2050.

In concluding his address, Mr Hudson explained that with effective coordination between governments, Australia could use the rise of this disruptive technology to achieve long-term road funding reform and help prepare the energy sector for the expected surge in electricity demand.

Following the address, a panel of industry leaders discussed the rise of EVs and the challenges and opportunities for actors in the transport and energy sectors.

The panel comprised:

Fiona Orton, Future Grid Manager, Transgrid Peter Colacino, Executive Director, Policy and Research, Infrastructure Australia Dr Allison Stewart, Project Director, Infrastructure Victoria Adrian Dwyer, Chief Executive Officer, Infrastructure Partnerships Australia (Moderator)

Adrian Dwyer opened the panel by asking what the future uptake scenarios for EVs could look like. Infrastructure Australia’s Peter Colacino was bullish on pace of adoption, and cited research which forecast EV uptake could reach up to 100 per cent by 2040. Infrastructure Victoria’s Dr Allison Stewart was also optimistic about the high uptake scenario for EVs. In terms of timing, she stated the turning point would be overall price parity with internal combustion engine (ICE) vehicles, which is expected sometime in the late 2020s. Once this happens, (Infrastruucture Victoria) IV forecasts a very rapid surge in uptake.

TransGrid’s Fiona Orton agreed, and cited global trends and policies which will drive this transition. She stated some countries have set future dates to ban ICE vehicle sales, as well as manufactures’ shifting development and production towards EVs. Because Australia is a technology taker with no domestic manufacturing market, Ms Orton stated Australia will follow global trends towards a very high EV uptake. Figure 9: [L-R] Adrian Dwyer, Fiona Orton, Dr Allison Stewart, and Peter Colacino

Source: Infrastructure Partnerships Australia

Mr Colacino added that improved model choice will also drive demand. He stated that out of the 10 new models of EVs set to arrive in Australia over the next year, five will be under $60,000. Mr Colacino also noted that once consumers understand the operating and maintenance cost efficiencies of EVs, this will also drive demand.

Mr Dwyer then inquired as to which factors would be most influential in driving uptake – sticker price, model variety, government policy intervention or whole of life cost savings. Dr Stewart stated that experience overseas has shown people do consider whole of life costs, but their decision ultimately rests on a lower sticker price. On interventions, she commented that governments around the world have introduced subsidies without taking a long-term view of how those subsidies will evolve. She went onto suggest that this can lead to some negative consequences, as once subsidies were taken away, it created significant change in the market place for EVs.

This led Mr Dwyer to question that if we assume the transition to EVs is inevitable, then is there a need for subsidies or other policy interventions in the first instance? Mr Colacino believed there was. He stated the uptake rate should be accelerated because of the high opportunity cost of inaction. He cited an example of the household savings from EVs, and broader benefits to health, environment and safety.

The discussion then turned to the energy market, where Mr Dwyer asked about the projected impacts on networks. Ms Orton noted across the range of uptake forecasts, we might have anywhere between one to three million EVs driving on the roads in 2030. But this could be up to 13 million by 2040. If everyone plugged in their EV at 6pm, this could have significant negative implications for networks because of the surge in peak demand. Ms Orton cited air conditioners as an example where this has occurred previously. She explained the system is built to meet peak demand – however this can only be for a few hours each year – meaning there is generally considerable underutilised capacity in the system.

Ms Orton further explained that while EVs could increase network demand by 10 per cent per year by 2040, EVs could actually facilitate the smart use of energy. From a network planning perspective there are possible benefits to the energy network, as EVs have the potential to increase utilisation of the existing asset base to drive down unit costs of energy for all users. Ms Orton explained EVs offer a controllable and flexible source of demand which can help with the integration of variable renewable energy into the network. Ms Orton also outlined how EVs have a huge amount of energy storage capacity. Ms Orton noted that under certain EV uptake scenarios, there could be 350 gigawatt hours of battery storage driving around the transport network, which is the equivalent capacity of Snowy Hydro 2.0. This could offer revenue to EV owners, but also provide additional supply sources to electricity network operators and ultimately, lower electricity prices for consumers.

Dr Stewart added an insight from IV’s perspective. She noted that assuming there was 100 per cent EVs in 2046, there could be up to a 50 per cent increase in base demand. Because of this, billions of dollars of potential investment in the energy network may be needed. For this reason, Dr Stewart stated industry and government needed to do more to educate consumers about demand management to minimise the necessary investment required.

Mr Dwyer then turned the discussion to reform opportunities. He outlined how the terminal decline in Fuel Excise will accelerate with the rise of EVs. Mr Colacino argued the infrastructure sector needs to think holistically about what a sustainable and equitable funding model looks like, beyond just Fuel Excise. Dr Stewart acknowledged the failing road funding system and added that EVs and other technologies such as automation will provide the opportunity to “reset the model that isn’t working efficiently”.

Mr Dwyer then inquired on the government’s role in promoting the efficient transition to EVs. Dr Stewart noted the need for an open and honest public discussion. She said the objective of government should be to ensure the benefits are widespread, beyond just EV users. She also stressed the need to consider decarbonisation, and how we can ensure we are not moving emissions from the city for example to the La Trobe Valley. She presented an open question to the audience, “what are we trying to incentivise, over what timeframe, and how do we do so equitably?”

Mr Colacino made the point that any strategy around EV incentives should consider the positive benefits that come from the avoided health impacts of removing noxious emissions from our cities. Ms Orton added that there are some regulatory reforms that can be made in the energy network to assist in the transition to EVs. These include introducing the right incentives to charge at off-peak times, and also allowing EV owners to sell power back into the grid, when needed.

8. Panel discusses the Cape Town water crisis and how to prepare for future challenges

Karen Shippey, Chief Director of Environmental Sustainability from the Western Cape Government in South Africa explained the factors which saw Cape Town almost become the first major city in the world to run out of water. A panel of Australian water sector leaders then offered their perspectives on how Australia can avoid similar crises in the future while also preparing for changing customer expectations and the introduction of new technologies.

Karen Shippey highlighted the importance of planning for drought and other water sector challenges in a pre-panel address, outlining the anatomy of the Western Cape Province’s recent water crisis. The crisis saw Cape Town narrowly avoid becoming the first major city in the world to run out of water.

Ms Shippey explained how several years of severe heat, wind and declining rainfalls saw dam levels drop to as low as 16 per cent capacity (Figure 10). The Government calculated that once below 13.5 per cent capacity it would be too difficult to draw water from the dams. This meant that the Western Cape was 2.5 per cent away from having to turn off the municipal water supply, a scenario which was dubbed ‘Day Zero’ by the media. Figure 10: Cape Town’s Theewaterskloof Dam - Winter 2017

Source: Bruce Sutherland (CCT)

Outlining the emergency response to the impending crisis, Ms Shippey pointed out that ‘Day Zero’ was so imminent that "there wasn’t enough time to throw money at the problem, there wasn't enough time to build infrastructure that would solve the crisis". Large scale water restrictions were imposed with behavioural change programmes, reducing water consumption from 1.2 billion litres per day to just under 500 million per day in nine months.

Ms Shippey concluded by summarising the importance of avoiding a complete shutdown of the municipal water supply, commenting that “it became clear to Government, business and our residents that we could not afford to get to Day Zero, Cape Town wouldn't be able to recover for years if we had actually got to that point”.

Ms Shippey was joined by a panel of leaders from the Australian water sector to discuss how to best prepare for drought and other challenges.

The panel comprised:

Terri Benson, Managing Director, South East Water Michael Wandmaker, Managing Director, Melbourne Water Sue Murphy, Chief Executive Officer, WA Water Corporation Karen Shippey, Chief Director, Environmental Sustainability Department of Environmental Affairs and Development Planning, Western Cape Government, South Africa, and Dr Jim Bentley, Managing Director, Hunter Water Corporation (moderator).

The panel began with Dr Bentley asking if Australia is at risk of a crisis similar to Cape Town’s, given our comparable climates and geographies. Ms Murphy pointed out that strong investment and planning procedures have helped Australia avoid extreme crises so far and will continue to play a role. She also highlighted that climate change and dry climate are ever present in Western Australia with nine of the driest years on record having occurred in the last twelve years. This has led Perth to rely on desalination for 50 per cent of its water supply.

Comparing the Cape Town experience to that of various Australian states during the Millennium Drought, Mr Wandmaker explained that Melbourne Water lost 17 per cent of total water storage in a calendar year, leaving water sources at 25 per cent of total capacity. He described many of the lessons learnt during the drought, such as the need for strong governance structures and robust decision-making frameworks. Ms Benson added that the sector must recognise the importance of whole of system planning and that water utilities should "not plan for the averages, but plan for the extreme".

Figure 11: [L-R] Dr Jim Bentley, Karen Shippey, Sue Murphy, Terri Benson and Michael Wandmaker

Source: Infrastructure Partnerships Australia

Turning to the community’s role in managing the Millennium Drought, Ms Benson described how behavioural change towards demand management techniques, such as using shower timers, has had a lasting effect on the people of Melbourne. As a result, "total demand is still lower than it was in the 1980s, with resilience and capacity being built into the water supply system just through community action", said Ms Benson.

Dr Bentley asked panellists to describe the social, economic and political consequences of water shortages. Mr Wandmaker highlighted the huge impact water plays on morale and productivity. “Simple things such as children not being able to play weekend sport because sporting fields have turned brown has lasting impacts on society”, said Mr Wandmaker.

Sharing her experience from South Africa, Ms Shippey explained that during the Cape Town crisis there were impacts on food security and the delivery of food, due to break downs in the cold chain, which resulted from a lack of water. Similarly, Ms Shippey described how many problems emerged that people had not yet thought of, such as the reliance on water for data centre cooling systems which are vital to the operation of the banking system and other businesses.

Drawing on an example from his time spent running water utilities overseas, Dr Bentley explained how crises can also occur in the distribution of water. Dr Bentley explained that after an earthquake in Turkey in 1999, although there was enough water supply, people were no longer living in their houses which created an immense challenge in delivering water. Dr Bentley turned the conversation to examine future disruptions or innovations likely to be seen in the water sector. Ms Murphy commented that “we don’t yet understand the extent of the disruption that the water sector will undergo”, and as such “water utilities and politicians must not take options off the table”.

Ms Benson highlighted the rapid improvements and cost reductions the water sector is seeing using sensors and communications technology. According to Ms Benson, these technologies are allowing water utilities to engage with customers and manage water networks more effectively. Ms Murphy agreed, commenting that “with better information, customers will be better able to understand their water use and change their behaviour”.

To conclude, panellists reflected on the significant role the private sector will need to play in managing future challenges and transforming the water sector. Ms Benson illustrated this point noting that “there is not an issue which the private sector is not already working on with us”.

9. Shadow Minister for Infrastructure Anthony Albanese delivers closing keynote address

Shadow Minister for Infrastructure, Transport, Cities and Regional Development, Anthony Albanese MP shared his observations on the state of national infrastructure policy and emphasised the importance of finding common ground in the national interest.

Mr Albanese used his address to the national infrastructure sector to emphasise the importance of achieving policy consensus in order to manage demographic, spatial and technological changes. He made the point that Australia required leadership and bipartisan support to ensure infrastructure can help to overcome challenges presented by our growing and ageing population, and rapid urbanisation.

In particular, Mr Albanese expressed concern over the long-term absence of national energy policy in Australia. He recounted the number of policy proposals that have been rejected, including the Emissions Intensity Scheme, the Clean Energy Target (CET) and the various versions of the National Energy Guarantee (NEG).

“That is five years without the regulatory certainty investors have rightly sought in order to make the investments that would have increased the supply of affordable, reliable electricity into the national grid”, said Mr Albanese.