Australia’s first offshore wind auction set for August after nearly one year delay

The Victoria state government has announced that it now plans to hold the delayed first auction for offshore wind farms in Australia in August this year, but is yet to finalise the details of its structure.

Victoria is the only state government to have a specific target for offshore wind – it wants 2 gigawatts in place by 2032 and 9 GW by 2040 – and was to kick off the auction process last September.

But that was delayed – amid uncertainty about port and transmission facilities – and was a crushing disappointment for some of the most advanced projects in Gippsland, particularly the Star of the South project which is generally regarded as the most likely first project.

On Tuesday, Victoria energy minister Lily D’Ambrosio said a request for tender, the initial part of the auction process, for 2 GW of capacity will open in August this year.

She said work continues on the design process, which will also depend on the final shape and details of the new Electricity Services Entry Mechanism that has been proposed by the Nelson review on market settings as the new mechanism to support renewable and storage projects in Australia.

“We want to give industry the certainty it needs to invest and help us keep building the renewable energy Victorianeeds to push down energy bills,” D’Ambrosio said in a statement.

“We’re working closely with developers on the progress of this exciting auction to ensure strong competition to secure the best projects and best value for Victorians.

“We’ve always said Victoria will host the country’s first offshore wind industry and that’s why Victoria pushed for the ESEM to accommodate technologies including offshore wind.”

The move comes amid mixed news for the offshore wind industry in Australia and around the world. In the US, the Trump administration is trying to destroy the industry, issuing stop work orders that are slowly being overturned by court appeals.

However, in Europe, 10 countries announced on Monday plans to build an interconnected offshore wind power grid in the North Sea that is expected to provide 100GW of renewable electricity.

In the UK earlier this month, the latest tender delivered a surprisingly high 8.4 GW of capacity and a lower than expected price low(ish) strike price of £90.91 ($A182.91/MWh), and at £89.50/MWh in Scotland. 

That price is still considerably higher than the prevailing wholesale market price in Australia, and particularly run Victoria where wholesale prices are generally low.

It is difficult to see how Australia can deliver offshore wind at a lower price than the UK, even though its proponents argue that its value lies in delivering power to the grid at times of high demand, particularly the evening peak, when wholesale prices are higher.

Gippsland represents Australia’s best chance of developing offshore wind, given the rejection of the technology by South Australia, and the failure of floating offshore wind projects to gain a foothold, or even generate any interest now, in NSW.

Last week, the federal government announced feasibility licences had been issued for three projects totalling 4 GW for Western Australia, but also announced none had been issued for the Bass Strait (out of Tasmania) because the proposals were not competitive.

Victoria says it has some of the best offshore wind resources in the world, and argues it is critical over the long term as it closes the last of its brown coal generators in the Latrobe Valley that have underpinned the state’s grid for the last half century.

Victoria has a state-based renewable energy target of reaching 95 per cent renewables by 2035, assuming that the last of the brown coal generators (likely Loy Yang B) is all but shut by that time.

It has recently created the state-owned SEC, which is supporting renewable and storage projects and has already taken control of two key onshore projects – one wind, and one solar and battery storage – that were struggling to get to market through their private owners.

“Thanks to our record investment in renewable energy, Victoria consistently has the lowest wholesale electricity prices in the country,” the government said in its statement.

“Building more new renewable energy sources adds more affordable energy to the grid an helps to lower power bills for everyone.

“The offshore industry is expected to create over 6,000 jobs and generate billions in investment. Gippsland has=always been critical to keeping the lights on and to continue to keep downward pressure on power bills. 

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