Victoria has firmed up some of the details on how it will run Australia’s first offshore wind auction, including the length of the contracts that are on offer, as one of the leading contenders for the first round of projects secures a key environmental nod.
The Victorian Labor government in August officially opened the auction process seeking the state’s first 2 gigawatts (GW) of offshore wind from projects vying for a spot in the federally declared Gippsland zone.
A new guide published by Offshore Wind Energy Victoria (OWEV) confirms that the auction – currently in a year-long Request for Proposal (RFP) phase – will award a support package to winning bidders made up of a contract for difference (CfD) mechanism and an “availability payment.”
CfDs are a common model used to support renewable energy projects, and were a feature of the ACT government’s push to its target of 100 per cent net renewables.
It’s where a subsidy kicks in if market conditions result in revenue lower than a set per-megawatt-hour “strike price.” The strike price for the Victorian auction is yet to be revealed.
What the OWEV guide does reveal is that the CfDs for the Victorian auction will cover a term of 20 years – which is longer than the global industry average of 10-15 years – “to help mitigate market revenue variability risk.”
This mirrors the UK model, which last year extended its CfD term from 15 to 20 years as one of a series of reforms that helped to procure 8.4 gigawatts of new offshore wind capacity in January of this year, an outcome described as a “stonking result” that broke all previous UK and EU records as well as a years-long hoodoo.
As well as the CfD, winners of the first Australian offshore wind auction will also be awarded an “Availability Payment,” which OWEV describes as a “fixed-sum periodic payment, conditional upon the infrastructure being available to generate electricity and only payable following achievement of commercial operation.”
The guide says that at the end of the 12-month RFP phase, in August 2027, an extensive evaluation of the project bids will lead to the selection of successful projects, with contracts for the first 2 GW expected to be awarded in 2028.
Proposals will be evaluated based on value for money, deliverability and local content criteria. “Project deliverability includes the assessment of feasibility licence holders’ partnerships with Traditional Owners as well as their broader community engagement and benefit-sharing plans,” the guide says.
“The support package available through the auction provides investment certainty while maintaining strong expectations around local content, workforce development, community engagement and social value outcomes,” Victorian energy minister Jaclyn Symes says in an introduction to the guide.
“Together, these measures will help establish the strong foundations needed for a thriving Victorian offshore wind sector.”
OWEV also confirms that the offshore wind auction process will be integrated into the Electricity Services Entry Mechanism (ESEM), the new national framework proposed by the federal government to support delivery of new renewable energy generation and storage.
“Integrating Victorian offshore wind auctions into the ESEM will provide a strong, enduring pathway for delivery of 9 GW of offshore wind,” the guide says.
“Subject to further work on detailed design and implementation, and Energy and Climate Change Ministerial Council decision, the ESEM scheme is expected to be in place by the end of 2027.”
OWEV also confirms that the state’s schedule for offshore wind capacity to join the energy mix is running roughly two years behind target.
“Subject to the tender process and favourable approval outcomes, construction for the first 2 GW of offshore wind is expected to commence from 2032, with energy to start flowing into our grid in 2034.”
High Sea Wind win
Meanwhile, one of the contenders for a spot in the Gippsland zone off the coast of Victoria, Ocean Winds’ 1.3 GW High Sea Wind project, has had part of its project waved through the federal EPBC queue as “not a controlled action if taken in a particular manner.”
The green light has been given to the Victorian component of the project, only, which is “to construct, operate and decommission … offshore export cables within Victorian coastal waters, a shore crossing at McGaurans Beach and onshore underground transmission cables connecting to the proposed VicGrid connection hub in Gippsland.”
Developer Ocean Winds appears to have taken the somewhat novel approach of splitting the project into state and Commonwealth components through the EPBC process, perhaps in the hope of speeding it up.
The Commonwealth component of High Sea Wind – construction, operation and decommissioning of up to 117 bottom-fixed wind turbines, offshore substations and associated infrastructure and the portion of the offshore transmission corridor located within Commonwealth – was last week determined to be a controlled action, requiring full assessment and approvals.
For the state part of the project, the EPBC determination sets out a range of conditions of approval, including that the shore crossing at McGaurans Beach must use a trenchless construction method and that drilling additives are non-toxic.
The approval also sets out a range of conditions preventing and limiting certain construction activities during the Southern Right Whale migration period.
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