The state of Victoria will hold the first auctions in Australia for offshore wind projects in 2025 to ensure that the first tranche of at least two gigawatts of the new technology is built before the first of the state’s last two coal generators closes down.
The state government is proposing to use so-called “contracts for difference” as the major currency in the underwriting scheme. It is also flagging “complementary contributions for capital and financing”, although the details of these will not be released until further discussions with industry.
These CfDs, used extensively in Europe and in the ACT, mean that any “super profits” for surging electricity prices are returned by the project owners to the government and consumers.
The CfDs that have been used for the wind and solar farms contracted by the ACT to deliver “net” 100 per cent renewables, has shielded the ACT consumers from any electricity price rises despite the massive increases in fossil fuel generation costs that has impacted consumers in the rest of Australia and around the world.
However, the Victoria government says it accepts that the projects in the first tranche of its auction process will require a higher price than later projects, particularly as they will be the first of their kind in Australia, and it is likely a significant amount of the materials needed will have to be imported.
The financial support is part of a package of measures proposed in the state government’s latest implementation statement, which also includes a commitment to ensure enough transmission is made for two 2.5GW connection points, and ports are prepared to accept massive wind turbines of up to 18MW each.
The government says the state-owned Vicgrid will provide common connection points for offshore wind farms and shared transmission lines to connect to the current network where necessary.
It says there is a risk that renewable energy projects will develop their own individual transmission infrastructure and it wants to precent any double ups and overlapping transmission developments.
It says it will provide a coordinated connection point near the Gippsland Coast – where the first offshore wind zone in Australia has been declared – and in Portland, which is likely to be the second zone in Victoria, given the huge demand from the smelter in that area.
This will enable up to 2.5GW of offshore wind capacity in both areas. Victoria is aiming for at leat 2GW by 2032, 4GW by 2035, and 9GW by 2040. It has been flooded with interest from the world’s major players, and a host of smaller players.
The government also says the Victorian Renewable Energy Terminal will be established at the Port of Hastings, and this will be Australia’s first assembly port to support offshore wind.
This will support up to 1GW of capacity a year, and individual turbines of up to 18MW. It will require two berths with a total wharf length of at least 400m to accommodate these massive turbines, possible dredging to handle heavy lift vessels, and reclaimed land to create 35 hectares of heavy duty hardstand.
There is still uncertainty about which projects will be chosen to conduct detailed feasibility projects which are expected to cost up to $200 million each.
Feasibility licence applications for offshore wind projects in the Gippsland area opened on January 23 and will close on April 27. The 2.2GW Star of the South project is regarded as the leading contender, although there are a number of other major players also competing for those feasibility licences.
