The “technologies, transactions, conduct and arrangements” that have and will continue to develop as businesses transition to net zero will inevitably involve consideration of climate change. This means that climate change will infiltrate and influence many areas of law.
Take for example offshore windfarms. One of the fastest growing sectors of the renewable energy sector. The Commonwealth government set (at least unofficially) a target that by 2030, 82% of all electricity will be generated from renewables. As of 2023, renewables only accounted for about 36% of all electricity generated. There is a way to go and quickly.
The Commonwealth Environment Minister rejected the development of a port facility at Port Hastings (Victoria) late last year. Whether this rejection will make reaching the 82% target a little more difficult remains to be seen. The port facility was to be used to assemble components for offshore wind facilities.
Offshore windfarm projects involve complex commercial and legal contracts between varied stakeholders (e.g. developers, contractors, and subcontractors, the offtaker, the network service provider and Australian Energy Market Operator). Climate change issues may impact these contracts. Precisely how has not yet unfolded completely, but it is inevitable.
The construction of an offshore windfarm will require feasibility and commercial licences. In addition, compliance with State and Commonwealth environmental management and impact assessments will be necessary. These requirements will introduce environmental and wider climate issues into the project.
Statutory appeals against licence and approvals are available. Environmental impacts of the project (such as seabed and, sea flora and fauna impacts) are likely to feature in these appeals.
Construction contracts will involve consideration of sustainable designs and construction practices and, the allocation of climate change risks such as extreme weather events on timelines.
Wind can be unpredictable and perhaps even more so as the impacts of climate change materialise. Understanding these issues will be relevant to managing this risk (e.g. delay, breach of contract, force majeure and frustration) under the Operation and Maintenance (O&M) Contracts, the Power Purchase Agreements/Offtake Agreements for the sale of the electricity produced and the Connection Agreements for the connection of the windfarm’s generation equipment into the grid/network.
Further, climate issues may effect broader aspects of the project.
Project financing will also be influenced by climate issues. Banks may only provide finance that is conditional on achieving sustainable outcomes. In addition, banks may require insurance to cover the project from construction to decommissioning. The increased frequency and severity of extreme weather events due to climate change could pose risk assessment challenges which are reflected in the increased cost of insurance. Understanding these risks to the project will be central to protecting clients’ interests.
The risks that typically cause disputes in construction projects from the initial concept phase, through the design and engineering, construction, and operational phases up to decommissioning will remain present in offshore wind farm projects. However, as businesses transition, climate issues could provide the factual matrix from which time delays in specified completion dates, breach of contract, force majeure and frustration are decided.
