Board Meeting: May 2015
Agenda Number: 12 (ii)
File Ref: EL0034
LORD HOWE ISLAND BOARD
Business Paper
ITEM
Renewable Energy Program
BACKGROUND
In December 2011 the Lord Howe Island Board approved the LHIB Energy Supply Road Map
(the Road Map) which outlined a plan to provide more than 80% of the Island’s electricity
needs through renewable energy, thus reducing the reliance on diesel fuel. The Road Map
identified the commercially proven technologies of wind and solar PV which can be safely
integrated into the existing generation and distribution system.
The Board CEO signed a Funding Agreement with ARENA on 17 July 2014 for a $4.5M
grant, which includes $0.5M of contingency.
Since submitting the Business Case to the NSW Government, the major change has been
the adoption of a loan arrangement with TCorp (NSW Government's bank) for the funding,
and repayment of the loan using savings in diesel consumption. The loan arrangement was
adopted to maximise the funding available from ARENA.
CURRENT POSITION
ARENA Funding
The 3rd and 4th milestone reports were submitted before 30 March 2015 as required, and all
milestone requirements were achieved by the Board. ARENA has yet to make payment of
$220,000 on the 2nd milestone from 31 December 2014.
State Government Activities
Negotiations between TCorp and the Board regarding the terms of the loan, have not
commenced yet.
Electric Vehicles
In late April, the Board’s Manager Infrastructure and Engineering Services (MIES) met in
Sydney with representatives of RMS and Transport for NSW regarding the statewide review
of conditional registration. It is clear that Lord Howe Island is a consideration in the review
and the Board will be invited to make a submission when a Discussion Paper is released
within the next month. The Board will ensure that the Discussion Paper is made available to
Island residents for individual comment directly to Transport. The MIES invited the RMS and
Transport representatives to visit the Island.
Owner's Engineer
Jacobs has continued to provide excellent service in carrying out the Owner’s Engineer role.
Recently, the major task was the finalisation of the Technical Feasibility Study for the project,
included as Attachment A. In addition, Risk Management and Contracting Strategy
workshops were held in Sydney in late April, in conjunction with ARENA.
Contracting Strategy
The procurement / contract options examined for this project fall into the following categories:

Design & Construct (D&C) – including Engineering Procurement Construction (EPC)

Project Management / Construction Management – including Engineering Procurement
Construction Management (EPCM)

Construct only

A combination of the above
The recommended procurement method is for an overarching Project Manager and Owner’s
Engineer (PMOE) to assist the Board with the management of packages of work delivered
either as D&C, supply only or construct only. Interestingly, this is similar to the
recommendation from ABB in their 2013 work. The following figure shows the recommended
arrangement.
For this recommended model, the advantages and disadvantages are listed below.
Advantages

Lower overall capital cost compared to D&C/EPC

Lower incidence of variations due to scope, performance or quality requirements

Changes and innovation can be introduced during the project’s delivery and managed

Can accommodate owner’s team undertaking some work

Warranties are direct with the owner

Owner’s team has greater control over equipment/vendor/subcontractor selection

Allows relationship to develop between vendor/contractor and the owner

Owner’s staff are involved and develop a sense of ownership

Focus tends to be on Life Cycle Cost rather than solely on minimum upfront cost
Disadvantages

Cost and time risk stays with the owner

Contingency is managed by the owner

Constructability risk remains with the owner eg. should ground conditions not be as
expected, the owner is responsible for cost and time variations

Larger owner’s team required or the owner needs to engage the required skills

Program and cost can escalate if owner’s team or OE ‘enhance’ too much

Final cost is not known till project completion. This applies to EPC also where variations
occur or delay costs are granted to the contractor.
The project would be divided into five or six packages as follows:
Package
Procurement by
Fee Type
Battery and control system
Solar PV plant
D&C
D&C
Lump sum
Lump sum
Wind turbine plant
Supply only
Lump sum
Infrastructure – for third party construction
Construct only
Lump sum
Infrastructure for owner’s team construction
Construct only
Owner’s cost
Environmental Assessment and Development Approvals
Jacobs are close to finalising the specific environmental assessment work for the solar PV,
battery and access road construction.
The noise assessment work was finalised in late April and made available to the public.
Attachment B is the Noise Fact Sheet distributed in late April 2015.
Attachment C is the photo-montage of the solar panels on the site.
Community Consultation
Jacobs are planning a 2nd visit to the Island 8-11 May to coincide with the release of the
Noise Assessment and the Community Markets on 10 May. During that visit, there will also
be a meeting with SEWG.
Jacobs have been engaged to carry out further community consultation work over the next 6
months to ensure that the valued work of the SEWG and the high level of community support
is not lost. The next phases of work will include:

Community stakeholder meetings in September

Information on a Community Owned Solar Scheme as part of the project
Wind and Avifauna Monitoring Mast
The wind and avifauna monitoring mast was installed and erected on 13th November 2014.
Data is collected on a fortnightly basis and sent to Jacobs for analysis. Highlights include:

Average wind speeds for the top of the mast are 7m/s, slightly less than the last
Board report

A maximum wind gust of 100km\hr was recorded in April.

Solar irradiation levels continue to be lower than expected. A 2nd instrument will be
installed in early May to rule out any instrumentation issues.
RECOMMENDATION
It is recommended that the Board:
1. Note the above information
2. Approve the contracting strategy
Prepared __________________ Andrew Logan
Manager, Infrastructure & Engineering
Services
Endorsed __________________ Penny Holloway
Chief Executive Officer