In this edition of New Energy Expert Insights, we sat down with industry experts, Mia Barnard and Mike Erskine of GHD to consider the opportunities and risks that asset owners are likely to face during the transition to electric vehicles (EVs).
GHD is a global professional services company that leads through engineering, construction and architectural expertise. Its forward-looking and innovative approaches connect and sustain communities around the world. Delivering extraordinary social and economic outcomes, GHD is focused on building lasting relationships with partners and clients.
GHD has been recognised for their global contributions through the Zero Emission Vehicles Climate Change Business Journal Award in 2022 which involved a Fleet Net Zero study to optimise logistic, financial, environmental and energy efficiencies.
What are some of the risks that the energy transition is presenting to owners of assets such as residential and commercial buildings, shopping centres, parking lots, and airports?
Safety
Many of the risks associated with the conventional fossil fuel system will move from petrol stations into high urban density places such as parking lots. When you consider that the energy consumption of vehicles is around 200% – 300% of the average energy consumption of a house per day, fire risks in these parking lots will change.
The concern is not the electricity risk in an EV, but the 1.2 tonne battery combustible material. When compared with the 60-litre petrol tank, it will catch fire in a different way, with a whole range of different chemicals and compounds. That’s a major safety issue.
Infrastructure compatibility
Asset owners will have to scale up the power of input by 300% compared to what they had previously. We need to address this challenge by building and renovating existing buildings with forward-thinking approaches.
Risk must be systematically embraced and turned into pragmatic solutions through design. Builders and developers must adhere to robust minimum standards now that look very clearly into the lens of the future.
“If builders and developers operate on the edge of the current law and not much more, there are problems that could manifest in 10-20 years’ time.”
If you look at the Grenfell disaster for example, where a devastating fire started by a refrigerator tragically killed 72 people, we learn that we really need a safety case approach for large buildings. If we have 300% more power around these high urban density buildings, we need to implement much more mature risk management processes.
Building standards and existing buildings must now embrace infrastructure compatibility for technology that has yet to mature (and may take 10 to 15 years to do so). These buildings will stand for the next 50 years during one of the biggest transitions that society has ever made (within the shortest time) and a failure to address electrical, fire and safety risks appropriately could be devastating.
Why would an asset owner be willing to take these risks?
Passenger and light vehicles (including light delivery vehicles used by logistics companies) make up 60% of Australia’s transport emissions and transport makes up about 19% of Australia’s emissions. EVs are a technology that people can uptake today. This makes them low hanging fruit for government to actively promote in Australia, even though the technology is ahead of current regulation.
Embracing a technology that is ahead of current regulation comes with risks. For example, if 200% more energy is going into the buildings, 200% more energy must come out – Einstein got it right! This means that 200% more ventilation is required, and we are not seeing this in the regulations.
But it’s not about asset owners taking on this risk. If you are an asset owner, you must embrace these risks unless you want to remove a competitive advantage for yourself. These vehicles are coming to your premises, it’s about how you embrace, prepare for, and protect yourself from this future with a formalised risk assessment process that goes beyond current regulations.
How can asset owners assess and manage these risks, and what strategies can mitigate these risks effectively?
Knowledge is the biggest factor. Asset owners can’t claim that they didn’t know that there is a change happening so there is a burden on asset owners to be informed and risk aware.
“Asset owners need to understand what the transition means to their assets and what the impact will be.”
An informed asset owner will understand when the threshold of action is and have a financial and business resilience plan to respond to those action points.
GHD applies a range of quantitative and semi quantitative risk scenarios and approaches that we utilise from oil and gas which have the leading edge because of the energy intensity. In addition, aviation and rail have techniques that we utilise to get the risks down to what we call ‘so far as is practicable’. With any process, it’s the quality of input, data and assumptions that drive the process to give the quality of output of thinking for these plans.
Do you consider government interventions (such as the National Construction Code mandate at least 10% EV charging car spaces in new developments) to be valuable in driving EV uptake, or do you think there will be appetite for voluntary uptake among asset owners?
The tug-of-war: Compliance and convenience
If an asset owner complies with the strict 10%, they must ask themselves whether they will comply with the 10% and no more, or will they try and provide a charge point for every single car in the car park? As consumers decide to use EVs as the government is incentivising them to, asset owners must accept that this is what tenants are going to expect. It is a choice between complying with the mandatory rules, or whether asset owners go beyond this to ensure that all tenants are provided with the convenience of being able to use the facilities.
The balancing act: Innovation and legal oversight
Government mandates such as this indicate to asset owners that there will be developments around the provision of EV chargers but right now, there is a lack of clarity on how exactly that will unfold. This requires asset owners to begin preparing for the future changes long before they have been realised.
This is also seen in the context of assets with long life spans such as rail infrastructure with rolling stock. Many owners are presented with difficult and expensive decisions as most of the stock will need to be replaced within the next seven years but many of the desirable technologies are not market ready. They are presented with two choices:
- extend the life of the asset a little bit longer and wait for the technology; or
- make decisions now that will be effective up until 2050-2060.
As the supply of EV chargers increases, might tighter regulation be needed to protect asset owners and users from low quality installations?
Capitalism versus safety
“When asset owners are faced with decisions to comply with mandatory targets, it is unfortunately reduced to capitalism versus safety.”
Naturally, we will see an ugly convergence as asset owners may decide to build things cheaply to avoid being penalised, which is far more prevalent in less stringently regulated countries. Asset owners need to ensure that they find safe ways to meet mandatory targets.
They also might find creative solutions to meet regulatory requirements without making large investments by converting the space into something completely different. For example, owners could look at their environmental, social and governance (ESG) reports and decide to provide charging for 50% of car parking spaces but achieve this by removing 50% of car parking spaces. In doing so, asset owners could meet ESG targets whilst avoiding making excessive investments.
The energy transition presents significant challenges for asset owners across sectors, particularly in navigating safety risks, infrastructure compatibility, and evolving regulations. The shift towards EVs demands greater attention to fire safety, ventilation, and power requirements, which exceed current regulatory frameworks.
Asset owners must proactively embrace these changes, not only to mitigate risks but also to maintain their competitive edge. As the demand for EV charging infrastructure grows, balancing compliance with legal mandates and ensuring the safety and integrity of installations becomes crucial. Government interventions, while helpful, must be supplemented by forward-thinking strategies from asset owners, who should adopt robust risk management processes and invest in resilient, future-proof infrastructure.
The Hamilton Locke team advises across the energy project life cycle – from project development, grid connection, financing, and construction, including the buying and selling of development and operating projects. For more information, please contact Matt Baumgurtel.
