Understanding the supply relationships of geothermal power generation projects in New Zealand

The increasing demand for renewable and clean energy has focused international attention on geothermal power generation. New Zealand, with a long and successful experience developing geothermal projects, is now enjoying an exciting resurgence of its industry. Geothermal development is a very complex process requiring a broad range of skills, specialized services and parties such as technical consultants, drilling companies, equipment suppliers and EPC contractors. Therefore, management of the supply relationships plays a strategic role in the delivery of geothermal projects. In contrast, supply relationships have been traditionally adversarial in construction causing detrimental effects on project performance. The current thinking suggests that the best practice in construction relationship management should always seek to develop highly collaborative relationships based on high levels of trust and transparency against opportunistic and adversarial approaches. This paper aims to shed some light on the factors influencing the procurement and relational strategies in the geothermal power generation projects. To achieve this, the researchers examined the relationship between key firms involved in the recent development of two successful geothermal projects in New Zealand. Through public reports and semistructured interviews to key professionals involved in these projects, the underlying reasons for selection of certain supply relationship strategies were identified, and their impact on performance at project and organizational levels were analyzed. The three critical factors for a collaborative environment that lead to the successful delivery of the projects (i.e., ahead of time and under budget) were: procurement strategy, contracts, and teamwork and cooperation.