“Giant leap:” Australia’s first offshore wind auction goes live as state seeks first 2 GW of projects

Australia’s first ever auction for offshore wind generation capacity is finally underway, after the Victorian Labor government officially opened the Request for Proposal process for the state’s first two gigawatts (GW) of projects.

The launch of the long awaited auction process was announced with little fanfare late on Tuesday night, with just six days left to meet the August deadline set by a premier and energy minister both since departed – and just three months ahead of what promises to be a very tough state election for Labor.

New energy minister Jaclyn Symes says offshore wind projects can now bid for contracts and will be assessed on value for money, deliverability and benefits for local workers, businesses and communities.

Symes says contracts are “expected” to be integrated into the national Electricity Services Entry Mechanism (ESEM) – the successor to the Capacity Investment Scheme, the details of which are still being fleshed out by AusEnergy Services Limited (ASL) and a working group of developers and government agencies.

The already delayed auction is designed to provide financial support to up to 2 gigawatts (GW) of offshore wind capacity – an amount likely to be supplied by just one project – which the state government wants to be in place by 2032.

There are currently nine active project licences remaining in Victoria’s Gippsland offshore wind zone, with a combined proposed generation capacity of more than 20 GW. 

Symes says auction process will run for a year, closing in August 2027, with contracts expected to be awarded in 2028. The successful project or projects will then move towards investment, construction and operation.

The auction’s launch – despite recent political turmoil that has resulted in a new leader of the Labor government and the departure of its hugely successful and well respected energy minister, Lily D’Ambrosio – marks a critical milestone for a fledgling industry that now desperately needs investment signals.

“This auction is a giant leap towards getting Australia’s first offshore wind projects built – attracting billions in investment, creating thousands of jobs and delivering the reliable power we need as coal retires,” Symes said in a statement.

“Victoria has some of the best offshore wind resources in the world. This auction is about harnessing that advantage and building the next generation of energy right here in Victoria.

“Jess Wilson’s One Nation-Liberal Coalition want to rip up energy projects without a real plan to keep the lights on, while we’re getting on with building the energy Victoria needs for the future.”

As for the finer details of how Labor’s offshore wind auction will work, these appear to be a work in progress. There is little new information on the government website, which currently says only that “the auction design is commonly used in Australia and around the world to develop renewable energy.”

The biggest question mark is over the price, with the cost of offshore wind already significantly higher than solar or onshore wind, and likely to have an added premium in Australia due to the lack of an established industry.

But there have been some positive signs from some of the latest global auctions for offshore wind. A recent Danish tender, offering two-sided contracts for difference (CfD), led to two oversubscribed rounds and the winning projects made bids of €67.42/MWh ($A109.9/MWh) and €72.50/MWh ($A118.22/MWh) for 20 years.

“A pivotal moment”

The launch of Australia’s first auction has been welcomed by developers and industry groups, including the 2.2 gigawatt Star of the South project proposed for off the Gippsland coast that is widely expected to be the nation’s first offshore wind farm.

“We’ve spent years and invested significantly to prepare for this opportunity – working with communities and industry, completing detailed environmental assessments and building partnerships,” Star of the South said on LinkedIn on Wednesday.

“The tender outcome will provide the certainty needed to move projects into delivery, supporting investment, mobilising supply chains and creating hundreds of jobs and thousands of contracting opportunities.”

Clean Energy Council chief Jackie Trad described the action launch as a “pivotal moment” for Victoria’s future energy supply and for confidence of regional workers and local businesses.

“Victoria’s growing energy needs mean building new  supplies of electricity to replace our unreliable coal stations as quickly  as possible,” Trad said.

“Offshore wind as part of a diverse energy mix provides protection against volatile global conditions by providing secure supply locally.”

The developers of the proposed 1 GW Blue Mackerel project also welcomed the news.

“Large-scale infrastructure projects require long-term certainty,” said Blue Mackerel project director David Ghaly in a statement on Wednesday.

“The auction process provides an important pathway for projects to demonstrate their value, attract investment and contribute to Victoria’s clean energy transition.

“For Gippsland in particular, this represents a once-in-a-generation opportunity to build on its proud energy legacy and establish itself as the centre for Australia’s offshore wind industry.”

Environment Victoria called on the Victorian government to implement the Western Port Framework, a whole of bay plan and fund to oversee environmental protections and stewarship, including for the Victorian Renewable Energy Terminal – the port facility proposed to support offshore wind construction. 

“Implementing the Western Port Framework would provide certainty for both communities and businesses by establishing a community-led marine spatial plan, and ongoing funding for the care of Western Port’s precious, internationally significant wetlands,” said Kat Lucas-Healey, EV’s senior climate and energy advisor.

“The Victorian government should implement a whole-of-bay plan for Western Port to demonstrate to the community that this ecosystem is being properly cared for and to increase certainty for the Port of Hastings and offshore wind developers.”

If you would like to join more than 29,000 others and get the latest clean energy news delivered straight to your inbox, for free, please click here to subscribe to our free daily newsletter.

If you wish to support independent media, and accurate information, please consider making a one off donation or becoming a regular supporter of Renew Economy. Please click here. Your support is invaluable.