Utilities & Infrastructure
The utilities and infrastructure industry is a key part of Australia’s economy. Endless kilometres of pipes, poles, and wires extend across the country, distributing power, water, and drainage services to the houses and communities. Emerging technologies such as renewable energy systems and big data analytics are changing the nature of work, and employers need adaptable people with skills in science, technology, engineering, and mathematics.
Australia’s infrastructure needs will continue to grow over time because of population and economic growth. The rising demand for new infrastructure services has pushed our infrastructure to be bigger and more complex. While large-scale projects are becoming commonplace, they are also stretching the capacity of industry and government. At the same time, planning is siloed and poorly integrated, funding options are underdeveloped, projects face procurement issues and network maintenance is often an afterthought. Australia’s infrastructure sector include:
- Design industries.
- Service providers.
The market size, measured by revenue, of the Infrastructure Maintenance Services industry, is USD 16.06 bn in 2021.
The market size of the Infrastructure Maintenance Services industry is expected to increase 4.2% in 2021.
The market size of the Infrastructure Maintenance Services industry in Australia has grown 1.8% per year on average between 2016 and 2021.
The Australian energy and utilities construction category has observed some fluctuations in the review period with a value of AUD 47,168.01 million (US$36,204.02 million) in 2017 and increased at a rate of 3.77% over 2016. The market recorded a CARC of -9.70% from 2013 through 2017.
Facts and figures
Australia’s cities are the powerhouses of the national economy
The people in the country need smart, sustainable, and resilient cities to provide liveable, productive, and vibrant places for Australians to live and work. To thrive and grow, smart cities need strong, evidence-based planning and prioritisation of projects, the right ownership model, innovative funding and financing, and a strong infrastructure investment pipeline.
Australia placed among the leading 30 countries according to its quality of infrastructure in 2019
New South Wales, Victoria, and Queensland all have major infrastructure projects in the pipeline, covering transport, energy, water, and telecommunications sectors. For these projects, federal and state governments have had to increase infrastructure spending.
In 2020, the country’s construction industry was hit hard by the COVID-19 impact
Despite construction being classified as an essential service, so most businesses in this industry could still operate, many residential projects were put on hold. Homeowners had become more hesitant to start major projects, with architects similarly reporting widespread project cancellations. The major challenge for the construction industry now is securing new projects in the future. A robust pipeline of engineering and infrastructure projects may be enough to allow the industry to recover, reducing the risk of job losses for those directly and indirectly employed in this industry.
Residential building market, the value of construction in the non-residential segment has continued to grow. Investment has been focused on schools, hospitals, offices, warehouses, and hotels. The demand for warehouses can be attributed to an increasing number of data centres, and e-commerce growth. Commercial building activity was forecasted to peak in 2020, however, this might have been affected by the coronavirus pandemic.
Renewable energy is increasingly popular
Australia has made huge advances in the field of renewable energy, which promises sustainable sources of gas and electricity. In 2016, renewable energy (predominantly generated using solar, hydroelectric, and wind technology) provided 17.3 %of Australia’s electricity, the highest proportion of any year so far this century.
Customers are demanding more
Customers are demanding more and becoming more educated. They are price sensitive and understand the value of data.
- For Example, more than 2 million residential solar panel rooftops on over 20% of Australian households with 7.8 gigawatts of capacity.
- Integrated “behind the meter”, wind, solar, and battery industrial-scale set-ups.
- Greenfield, microgrid enabled developments where property developers are in partnership with utility providers.
- Energy efficiency firms moving from cottage industry to maturity at scale.
Rapid technological developments
Rapid technological developments are optimising existing business models, opening up new markets to traditional utilities, and accelerating the move from centralised to distributed energy generation. Developing the right technology strategy to navigate a transforming industry will be crucial for utility providers. For example:
- The use of drones in inspection regimes has drastically reduced safety risks & lowered costs associated with risk assessments, manual inspections & insurance premiums.
- OT/IT convergence, enabled in part itself by new technologies (such as IoT), will enable more direct control and complete monitoring of assets and grid ops.
- AI is being used in energy trading to help improve forecasts given its ability to systematically evaluate large volumes of data.
Digital transformation has the potential to deliver competitive cost structures, unlock the power of big data and provide new ways of engaging with customers. In a recent Cordence Worldwide study of utility and energy companies, almost 75% of participants agreed that digital transformation is their top strategic priority. Example:
- Customer interface solutions including chatbots, mobile apps & self-service portals are being implemented by over 65% of industry participants.
- Blockchain is being used to revolutionise energy trading and facilitate peer to peer data transfer and only increase with the introduction of 5-minute settlements.
- IoT devices can monitor grid activity and plant assets allowing predictive maintenance models to be introduced.
Electrification is a new technology and regulation is creating new electric ‘appliances’, many with significant grid loads. The most significant new appliance is the electric vehicle (EV) but there are others including the move from gas to electric boilers. Example:
- Major traditional car manufacturers are investing billions in new EV manufacturing platforms and vehicle designs.
- New players are entering the market at pace and are well funded.
- The regulatory environment is changing; at least 14 large jurisdictions have banned internal combustion engine vehicles as soon as 2040.
- The Netherlands aims to remove all gas boilers from residential properties by 2050.
Security for critical infrastructure is crucial for social and economic reasons. Digital and connected device growth and IT and OT convergence increase the level of cybersecurity risk. Regulators are now forcing utility companies to improve cybersecurity. The industry is responding however there remains a lot of work to be done. Implications:
- Cybersecurity impacts multiple domains and is an organisation-wide concern not just a problem for the CIO.
- Actors cover a wide spectrum from activists, criminals and nation-states meaning the threat can many different forms.
- The potential impacts of cybersecurity breaches are serious.
Technologies can help to overcome barriers to service access as a result of distance or location. Better access to services through improved technology can bring economic and social opportunities for users outside of fast-growing city centres.
Transport infrastructure projects are a key ingredient to the liveable cities status we all value so highly. It provides the answer to congestion and accessibility, to improvements in services, and a sense of future-proofing spaces.
With the scarcity of water comes great responsibility. A shower using a modern fixture will use approximately 9 litres of water per minute. If you shower once every day for 15 minutes, that’s almost 50,000 litres a year.
Surfing the green wave
Utilities must keep pace with Australia’s aggressive green energy agenda. “By 2050, it is estimated that customers or their agents – not Utilities – will determine how over USD 145.30 billion in system expenditure is spent and millions of customer-owned generators will supply 30-45% of Australia’s electricity needs,” according to the Electricity Network Transformation Roadmap.
Common challenges for organisations that develop and deliver infrastructure projects or maintain operations, typically revolve around fundamental constraints such as budgetary and/or timeline pressures, uncertain benefits, and risk exposure against target benefits. Some of the key challenges that our clients may face include:
- Optimism bias on reliable project cost and timing.
- Reactive project risk management rather than proactive.
- Qualitative Risk Assessment rather than Quantitative Risk Analysis (QRA).
- Misrepresentation of risks and uncertainties.
- Poor prioritisation leading to funding of wrong projects.
- Inefficient use of technology and data analytics.
- Not regularly measuring the likelihood of project success.
- Poor transparency of project decision making.
- Poor determination and management of project contingency.
- Contract strategies misalignment to contract risk profile.
Quality and Cost Risks
Governments and service providers do not always adequately measure and report on access, quality and costs for users. Insufficient user-focused data makes it difficult for users and policy makers to make decisions that improve user outcomes.
- Example, Lags in infrastructure quality and access to services in smaller cities and regional centres could lead to a growing gap in productivity and liveability, relative to larger cities.
- Infrastructure is more expensive to provide per unit of consumption in low population density areas, but communities and businesses in these areas are also more reliant on available infrastructure for their productivity and wellbeing.
- Unreliable and inconsistent population projections make planning for future needs difficult.
- Fluctuations in economic activity in regional industries make it difficult for infrastructure to efficiently and sustainably underpin long-term growth and development.
- A historical underspend on preventative maintenance, short budgetary and funding cycles, a lack of data and incentives, and inadequate reporting has contributed to a maintenance funding backlog across infrastructure sectors.
Decision-making processes across many jurisdictions and sectors are not meeting best practice standards, including the application of the Infrastructure Decision-making Principles.
- Many decisions are being made without meaningful engagement, and without the means for comment and stakeholder feedback to inform project planning and delivery.
- Across many infrastructure markets, regulatory principles are complex, inconsistent, do not sufficiently protect the long-term interests of users, and reporting does not always align with user outcomes.
- How infrastructure is provided and used will transform over the coming decades, meaning laws and regulations will need to be reviewed, removed, or updated.
- Many community service obligations lack transparency, are not frequently reviewed, and may be inefficient.
In 2019, Australia was ranked in the top 30 countries in terms of infrastructure quality. Major infrastructure projects in the transport, energy, water, and telecommunications sectors are all in the works in New South Wales, Victoria, and Queensland. The federal and state governments have had to raise infrastructure spending to fund these initiatives.
The Utilities and Infrastructure Industry is contributing to the country's growth.
The impact of Covid-19 was mirrored in the country's development, with large cities still under construction in Australia.
The government and business organisations are collaborating to improve the country's development by promoting solar energy, water conservation, and green initiatives for the future.
The utilities and infrastructure industry are performing well in terms of labour skill development and providing maximum benefits from country developments such as improved transportation facilities, underground pipes for drainage and distribution of power and water to homes, and construction of commercial and non-commercial buildings, among other things.
Local governments in Australia are mostly concerned with renewable energy and water conservation.