Local content rules are likely to be one of the next big issues for Australia’s emerging offshore wind energy industry, but it’s a question that some suggest could be solved just by looking at the experience of near neighbours in Asia.
Taiwan is a case study in what not to do, says Thailand-based Patrick Architta, the head of wind development for engineering firm Ramboll.Â
“You cannot have the cheapest energy and local content, and that’s a little bit the mistake that Taiwan did,” Architta, who is French, told Renew Economy.Â
“Taiwan, they started very well. They said, I want the cheapest energy as fast as possible. No local content. All the investors went there and it was fantastic growth.
“And then they said, ‘now that I have the cheapest energy, I want to create jobs’. And they ask too fast. And so now the investors put everything in pause and regroup to find out what will be the next local content.”
Architta says there should be minimum local content requirements for the good of the country, but governments need to be careful about how fast they want it built in and what that looks like.
Ramboll’s Australia offshore wind head Marie Hegot sees the country leaning into local manufacturing for some parts and assembly.
The only local content requirement so far is Victoria’s stipulation that 80 per cent of operations and maintenance is with local businesses and people once that phase starts in 2032.
“We were involved in a supply chain study recently, where we were bringing what we call a hybrid approach. We can manufacture most of our components overseas, bring them over, but we can do a bit of assembly in Australia, and then you bring more local content,” Hegot told Renew Economy.
“Slowly, people are more experienced. You learn as you go, and then your supply chain can evolve. In Australia, we are still at the stage where everything is kind of open.”
Hegot’s work to date in her 18 months in Australia located a number of heavy manufacturing companies keen to supply elements needed by the offshore wind industry such as foundations and cables, but they need a lot of investment to come up to speed.
It’s investment that Architta says will need to come from government in the form of money and policy, such as targets.
“Japan, for example, they want to push the floating part and so the government is sponsoring heavily the development of floating manufacturing capabilities. They have zones where it’s free tax, they are financing some demonstrations where profitability is not important. It’s the learning curve of doing it. And this takes years and years and years,” he says.
“If Australia wants to go into heavy manufacturing… it will be complicated but they need to support the market.”
Hype cycle
Much has also been made of Norwegian company Equinor ditching its Bass offshore wind proposal while getting cold feet on the 2 gigawatt (GW) Novocastrian project in the Hunter zone, and Bluefloat Energy’s collapse which is taking its local portfolio down with it.
But Architta thinks this is just part of a hype cycle.Â
Just before the COVID19 pandemic, developers around the world were desperate for projects and “opening offices everywhere” in an industry that traditionally would see projects launched by local companies and sold on to bigger managers.
“In Australia, you had a combination of the two phenomena. You had the offshore bubble where everybody was super ‘everybody loves Australia’,” he says.
“The second phenomenon [was] people realising that Australia is as difficult as Taiwan, as Japan…. We start seeing the difficulties. Where will the grid be? Where will my substation be?
“The people at the start were super enthusiastic, and now they start [raising issues]…. This double phenomenon makes people regroup but I think it’s a natural phenomenon that we see everywhere.”
Architta says all of the big oil and gas companies, such as Equinor, who shifted into offshore wind have cut their losses and are keeping small teams on standby around the world to watch what happens with the industry.Â
But as Hegot points out, offshore oil and gas projects are simply compared to installing tens or hundreds of turbines across different sections of seabed.
“They say it’s easy. We did oil and gas. We can do wind offshore now. It’s much more complex. You need to duplicate the offshore 100 times, 1000 times, on the same location. So profitability is not the same at all. We need to be much, much more optimized than in oil and gas, and they didn’t have all the regulation we have now,” Hegot says.
“It is good to have more regulation. So we cannot take shortcuts and we need to do it step by step. Just be patient, accept that it takes time.”
Lots of uncertainties
Developers are hoping Victoria’s upcoming auction for contracts-for-difference price guarantees will inject a little more vim into the sector after a lull.
But the Gippsland developers, the first to test the Australian waters, are entering a period when the tricky work of permitting and navigating multiple regulatory pathways, while trying to ensure their proposed projects remain commercially viable.
Five years ago Australia was all potential, whereas now developers are now flying their planes as the airport is being built.
One example is that environmental and other surveys are starting in Gippsland yet no one is sure which port they’ll will be using – Geelong, a revised Hastings, or both, Hegot says.
“We have uncertainties in terms of the ports, for example, we are still working on the strategy…. Hastings, that can change the strategy and the costs as well on projects. So there are a few things that needs to be sorted out,” she says.
“But there is still an interest from the developers. We know that this auction will take place and the developers are busy as we speak preparing this auction process. So it seems very positive to me. It’s giving options.”
