As the energy transition continues to alter Australia’s electricity network, experts are also expecting changes to maintenance expenditure across the sector.
Industry analyst and economic forecaster, Oxford Economics Australia, has released the findings of its Maintenance in Australia report that outlines how the renewable energy transition is slowing spending growth in electricity maintenance.
The report also warned that maintenance spending on oil and gas infrastructure will continue to slow, and that maintenance spending on electricity generators will soon begin to fall.
Study author and Head of Global Construction Forecasting for Oxford Economics Australia, Dr Nicholas Fearnley, said that the utilities sector will see the slowest growth in maintenance spending as higher cost fossil fuel generators are replaced by renewable generators with lower maintenance requirements.
The report analysed maintenance activity across a range of industries, including the mining, road, non-residential building, utilities and manufacturing sectors, and forecasts expected activity for the next 15 years.
What is maintenance?
Oxford Economics describes maintenance as work that is undertaken to improve the performance of an asset, but not above the level of its original design.
“This is different to construction, which can be thought of as work which either creates a new asset or improves on the design standard of an existing asset,” Dr Fearnley said.
While maintenance and construction are distinct sectors, they experience a significant amount of overlap when it comes to materials and skillsets. This means that the industries tend to compete for materials and workers during shortages, putting further strain on projects. On the other hand, the maintenance industry serves as another revenue source for companies that supply construction materials and skills, particularly during periodic construction downturns.
In total, Oxford Economics has estimated the sector will contribute $57.4 billion to the Australian economy in FY24.
Transition impacting maintenance spending
The report warns that the renewable energy transition is slowing growth in the electrical maintenance sector, and that there may even be years when maintenance spending on energy generators falls.
“Renewable generators require much less maintenance than fossil fuel generators per megawatt hour, and so maintenance spending will naturally fall as coal power plants are replaced by wind and solar solutions,” Dr Fearnley said.
“This isn’t necessarily bad news for maintenance providers, as those who are positioned to provide maintenance to renewable generators will continue to face a growing market.”
Oxford Economics’ report anticipates that electricity generation maintenance expenditure will fall from $978 million in 2023–24 to $964 million in 20240–25 and continue falling to $644 million by 2033–34.
Oxford Economics expects, however, that this lower maintenance spending will be offset by growth in the transmission sector, as networks and infrastructure are expanded to enable new renewable energy zones (REZs).
Some energy regulators have increased the allowed capital expenditure for electricity and transmission companies.
“We think these decisions will be repeated by other state regulators in upcoming pricing reviews and so signals higher maintenance spending for network owners,” Dr Fearnley said.
Growth to slow
“The mining investment boom at the start of the last decade was followed by a mining production boom, and then a mining maintenance boom,” Dr Fearnley said.
“We think this boom is now approaching its peak and we are seeing signs that asset owners are looking to manage their maintenance costs. As a result, we expect slower growth in mining maintenance expenditure over the coming years.”
Oxford Economics said that the LNG sector has shown significant maintenance spending growth over the years, but that it expects this growth to stagnate as operators seek to manage their maintenance costs. For example, more owners and operators are looking to remote technologies like drones to reduce the costs of inspections.
Gas maintenance spending can be highly variable between projects, based on their location and their process. For example, Oxford Economics estimates that offshore gas operations attract as much as twice the maintenance expenditure as their onshore counterparts, due to the harsh environment resulting in increased corrosion.
“While most oil and gas maintenance is outsourced, there are significant barriers to entry for new companies attempting to win ‘mega-contracts’,” Dr Fearnley said.
Coal operations occupy a significant portion of the mining sector’s maintenance costs, with Oxford Economics estimating the total expenditure in both 2024-25 and 2025–26 to be $3.6 billion.
Oxford Economics has said that its long-term view of the coal sector remains bleak, but that in the near-term, relatively high commodity prices are supporting coal production and maintaining a stable amount of maintenance expenditure in the industry.
“Most Australian coal is mined in New South Wales and Queensland, and exported to Asia,” Dr Fearnley said.
“New South Wales producers are generally located within reasonable proximity to each other in the Hunter Valley and are known to collaborate by coordinating weekly shutdowns to ensure a steady workflow for contractors.
“Queensland producers, on the other hand, are dispersed further apart and located in more remote areas, reducing the potential cost savings experienced by New South Wales operations.”
Unlike many of sectors across the mining industry, copper operations are expected to see growth in maintenance spending, as the critical mineral remains vital for use in consumer electronics, electric vehicles and the extensive electricity infrastructure associated with the energy transition.
Copper maintenance activity makes up more than 25 per cent of expenditure in the metal ore mining sector. Oxford Economics estimates that copper maintenance spending will increase from $865 million in 2024–25 to $890 million in 2025–26.
ACCC authorises electricity industry coordination
The Australian Competition and Consumer Commission (ACCC) has authorised the Australian Energy Market Operator (AEMO) and other electricity industry participants in the National Electricity Market (NEM) to work together in the scheduling of maintenance, repairs, upgrades, new connections and other projects along with the authorisation to share associated information necessary to coordinate such works.
The ACCC said that it has made this decision having acknowledged the challenges in managing the NEM through the energy transition. The ACCC also said that it is in the process of implementing and considering reforms that will assist the AEMO in managing the scheduling of the expected outages to occur as renewable projects are incorporated into the network.
ACCC Deputy Chair, Mick Keogh, said that the proposed coordination will increase AEMO’s ability to manage the scheduling of outages, providing greater security for the supply of electricity over the next two summer periods, which are forecast to be challenging.
The ACCC has acknowledged concerns that there is a risk of reducing competition and creating information disparities when enabling coordination and information sharing of this level. In response, it has developed a series of conditions that are designed to ensure competition remains steady in the supply of electricity and the acquisition of maintenance services.
“With transparency and reporting conditions, we are satisfied that the proposed coordination is likely to result in public benefits that would outweigh the likely harm to competition,” Mr Keogh said.
Image: noomcpk/shutterstock.com.
