WIND

All eyes on Albanese after Australia backs 25GW

The Australian government has backed 12 offshore wind projects totalling up to 25GW off the coast of Victoria, and is poised to announce further support for renewables in next week’s budget. But will this be enough to super-charge growth in the offshore wind and wider renewable energy supply chain?

RICHARD HEAP

May 7, 2024

  • Australia backs 12 offshore wind projects totalling up to 25GW
  • Federal government plans to unveil US-style policies next week
  • Prime Minister Albanese wants to fast-track green investment

 

It has been a long time coming, but the Australian government’s announcement of support for 12 offshore wind farms totalling 25GW is crucial for the industry.

Last Wednesday (1st May), it awarded licences for six projects to carry out further work to assess their feasibility and environmental impacts; and identified six more that are in line to receive these crucial licences subject to further consultation.

The government reportedly had 37 applications to consider, and ended up backing schemes by big-hitting developers including Copenhagen Infrastructure Partners, Ocean Winds and Ørsted. The six projects to receive licences are:

  • Blue Mackerel North (by JERA Nex / Parkwind and Beach Energy)
  • Gippsland Skies (2.5GW fixed-bottom project by AGL, Direct Infrastructure, Mainstream Renewable Power and Reventus Power )
  • High Sea Wind Project North (1.28GW project by EDP Renewables and Engie joint venture Ocean Winds)
  • Kut-Wut Brataualung (2GW project by CIP / Southerly Ten and Gunaikurnai Land and Waters Aboriginal Corporation)
  • Ørsted 1 (2.8GW project by Ørsted)
  • Star of the South (2.2GW project by new Copenhagen Infrastructure Partners vehicle Southerly Ten, Cbus Super Fund and original co-founders Andy Evans, Terry Kallis and Peter Sgardelis).

In addition, the six with the potential to receive licences after more consultation are:

  • Aurora Green (up-to-3GW project by Iberdrola)
  • Gippsland Dawn (by BlueFloat Energy)
  • Great Eastern Offshore Wind (2.5GW project by Macquarie’s Corio Generation)
  • Kent Offshore Wind (by RWE)
  • Navigator North (1.5GW project by Origin Energy and RES)
  • Ørsted 2 (2GW project by Ørsted)

It has taken more than a decade so far to turn offshore wind from an idea into reality in Australia, which is why industry reaction to this announcement has been gleeful. At present, Star of the South looks likely to be the first to be operational in Australian waters, with commissioning scheduled to take place in 2028.

But there is still plenty that needs to happen to unleash offshore wind at scale.

 

IRA-style incentives 

The government’s priority now is to support investment in the supply chain, and we hear more about this next week. On Tuesday (14th May), the government is set to unveil its 2024 federal budget, in which it is poised to more detail about the ‘Future Made in Australia Act’ that it announced last month.

Australian Prime Minister Anthony Albanese said his government plans to introduce policies modelled on the US Inflation Reduction Act that can incentivise investment by manufacturers in industries including wind, solar, energy storage and power-to-X.

The IRA was passed by US Congress in August 2022 and increased tax credits for wind and solar projects, while also introducing new tax credits for technologies such as standalone battery storage. Albanese has said he wants Australia’s own version to turn the country into a “renewable energy superpower”, and said that its priorities would include policies to fast-track the infrastructure needed to support the growth of renewables. That clearly aligns with the most pressing priority for offshore wind.

But it may not be that straightforward.

For instance, the Act could bring in strict policies on local content that make it harder and more expensive to build offshore wind farms to encourage local manufacturing. This type of policy has tripped up developers in markets like Taiwan, for example.

It could also introduce financial incentives that are too small to encourage the level of investment that the industry needs to build its manufacturing base, and in supporting infrastructure like port upgrades. Albanese said in his April speech that government “needs to be prepared to use its size and strength and strategic capacity to absorb some of that risk” in infrastructure investment, but has previously argued that it will not be able to go up against the US “dollar-for-dollar”. The level of funding is vital.

One thing Australia has in its favour is a development pipeline of offshore projects that should give confidence to supply chain investors, although we have a question about how much of that 25GW will be delivered. Victoria’s goals for installed offshore wind are below the capacity of the Gippsland projects that won support last week: it is aiming for 2GW installed offshore wind by 2032, 4GW by 2035 and 9GW by 2040.

There may need to be closer alignment between the state and federal targets.

But, if they can get that right, projects in other areas are on the way.

Gippsland is the largest offshore wind zone off the coast of the Australian mainland, but the government can also bolster its project pipeline in five more areas that it has already identified for offshore projects. In chronological order of when government designated them as priority areas, they are:

  • Hunter, New South Wales (up to 5.2GW offshore wind potential)
  • Southern Ocean, Victoria (up to 2.9GW)
  • Illawarra, New South Wales (up to 4.2GW)
  • Bass Strait, Tasmania (up to 28GW)
  • Indian Ocean off Bunbury, Western Australia (up to 20GW)

If the country can get the private and public sectors working together closely then it could create irresistible conditions for investment. Much rests on next week’s budget.