“Challenging economics:” AGL pulls 2.5 GW project out of contention for Australia’s first offshore wind zone

AGL Energy has pulled its Gippsland Skies offshore wind project out of contention for development in waters off the coast of Victoria, citing challenging economics and a renewed focus on onshore wind and firming projects, including nearly 1 gigawatt of grid-scale batteries.

The 2.5 gigawatt (GW) Gippsland Skies project was proposed for development south-west of Wilson’s Promontory and among the first of its kind to join the federal government’s EPBC process, to get green clearance on the the early stages of work under its feasibility licence. 

But on Friday it was revealed that AGL and the consortium of partners behind Gippsland Skies had applied for consent to surrender their feasibility licence to the Offshore Infrastructure Registrar.

“Gippsland Skies has made the decision to discontinue feasibility studies for a potential offshore wind project off the coast of Gippsland,” AGL said in a statement.

“AGL will prioritise options in its development pipeline of onshore wind, batteries, pumped hydro and gas firming projects, including an expectation of taking final investment decision on 900 MW of grid-scale batteries in the next 12-18 months.”

October 2025 map of Gippsland offshore wind feasibility licences. Image: Victoria Department of Energy, Environment and Climate Change

The decision comes less than a month after Germany energy giant RWE scrapped its own offshore wind plans in Australia, announcing the cancellation of the 2 gigawatt (GW) Kent project, also in the Gippsland zone. 

After almost a year of feasibility studies, the project’s competitiveness in the current market conditions doesn’t stand up, RWE Renewables said in a statement published on its website, that also specifically cited worries about Victoria’s delayed auction.

“This decision [on the Kent project] follows a review of the project’s competitiveness in current market conditions, as well as ongoing uncertainties around supply chain costs and the future design of the auction framework,” the statement said.

Victoria in September hit pause on the auction for spots in what will be Australia’s first offshore wind development zone until the end of 2025 saying federal funding was still up in the air.

A few months earlier, in July, Spanish company Bluefloat Energy dumped the 2.5 GW Gippsland Dawn proposal, and there is uncertainty around Origin Energy’s and RES Australia’s 1.5 GW Navigator North proposal after key staff being laid off in September.

This leaves nine licence-holding projects still penciled in to take part in the auction process for Gippsland, for which an updated timeline is expected by the end of the year.

The Victorian Labor government came under attack in the media and from the state opposition this week after an auditor-general report flagged concerns about delays to key state transmission projects and a blown-out offshore wind timeline.

The state is targeting the installation of at least 2 GW of offshore wind generating capacity by 2032, followed by 4 GW by 2035 and 9 GW by 2040.

In a statement emailed to Renew Economy on Thursday, state energy minister Lily D’Ambrosio said Victoria was still on track to meet its target of 95 percent renewable energy generation by 2035.

“More than 42 per cent of the state’s electricity was produced by renewable energy last financial year and Victoria consistently has the lowest wholesale power prices in the country, helping to slash energy bills for families and businesses,” the minister said.

“We’re focused on lowering the cost of living for Victorians, that’s why we’re fast-tracking more renewable energy projects to help drive down power bills by bringing more new renewable energy online.”

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