Essay by Eric Worrall
Green energy construction firm destroyed by the shift to green energy? $10 billion of energy transition projects at risk.
Clough collapse threatens $10b of energy transition projects
Angela Macdonald-Smith and Jenny WigginsDec 6, 2022 – 6.45pm
Federal Energy Minister Chris Bowen is seeking urgent briefings from his department as the government seeks to limit the fallout from the collapse of engineering contractor Clough, amid a threat to almost $10 billion of projects critical to Australia’s energy transition.
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Industry observers warned that Clough’s administration, which occurred after a $350 million sale deal with Italy’s Webuild fell through, would delay and could drive up costs of the Perth-based contractor’s projects.
These include some of Australia’s biggest projects, such as the $5.9 billion Snowy 2.0 storage venture and the $3.3 billion Project EnergyConnect electricity interconnector between South Australia and NSW, as well as one of the few gas power plants being built in the National Electricity Market.
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In the wake of the Clough administration, Credit Suisse analyst Saul Kavonic said cost increases appear inevitable for at least some of the projects, including Snowy 2.0 and Waitsia, “with risks of delays also rising”.
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Clough was bleeding cash due to unresolved financial claims on lump sum, fixed-priced contracts and delays getting so-called “milestone payments”, which it has blamed on supply chain disruptions.
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Why are Australia’s supply chains so unreliable?
Part of the reason is high energy prices caused by the multi-decade green energy push is hammering our manufacturing industry, which means a lot of stuff which Australia used to manufacture now has to be imported. From August 2022;
Research highlights impact of energy crisis
Aug 26, 2022
Topics: Economics Research, Advocacy
National employer association Ai Group has today released new research detailing the impact of rising energy prices on a group of Australian manufacturers.
“Many manufacturers are energy-intensive, and manufacturing businesses are on the front-line of soaring global energy prices”, Innes Willox, Chief Executive of the Ai Group said.
“To understand how energy price rises are impacting industry, Ai Group sought feedback from businesses in the manufacturing sector and the responses were sobering.
“More than half of the 78 manufacturers who were contacted reported that they have already suffered significant negative effects from rising energy prices, with expectations that greater difficulties are to come over the next year.
“Only one in six said they can substantively pass-on rising energy prices. For most, the cost must be borne elsewhere on the balance sheet. This is a significant drag that weakens the capacity of energy intensive industries to invest in R&D or job creation.
“Worryingly, approximately one in five say they expect to either cut production and/or employment in the next twelve months due to high energy prices,” Mr Willox said.
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WUWT recently reported Australian Reserve Bank Governor Philip Lowe’s comment “… One way of tackling inflation induced by supply-side shocks is to address the supply…”. While Lowe stopped short of advocating a specific policy response, an obvious way to tackle the supply problem would be to roll back punitive regulatory political attacks on affordable energy, such as Victoria’s “permanent” ban on fracking, which was passed in 2021.
The death of a renewable energy construction company by renewable energy has a certain narrative symmetry. But I don’t feel like laughing. Thousands of people could be about to lose their jobs, just before Christmas.
None of this is likely to convince our net zero obsessed politicians to change course – they are probably trying to figure out how to pump in freshly printed subsidy money to rescue the situation. Because subsidies and price caps seem to be our current government’s go to answer to addressing the problems caused by their economically illiterate policies.
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