Credit: RWE
Of all the things the offshore wind industry needs to make it in Australia, a sudden change of leadership and energy minister in the critical testbed state of Victoria, and a November election that could deliver a new state government are not high on the list.
Already, the task of building Australia’s first ever offshore wind farm has the odds stacked against it; high costs, the tyranny of distance from global supply chains, uncertain coal exit dates, and the distinct lack of bipartisan political support are all conspiring to make a tough job even tougher.
But the mantra from some of the key players tasked with delivering Australia’s first offshore wind zone – and its first project off the coast of Gippsland – is to keep calm and carry on through the crucial next six months, starting with the August launch of the first auction for 2 GW of capacity.
Or, to paraphrase Mark Wakeham – the Australian lead of Ocean Energy Pathway and a Churchill Fellow in successful energy transitions – ‘we’re not dead yet!’
“You hear a lot of news stories about … the challenges faced by the offshore wind industry, in the same way that only six or 12 months ago we were hearing that Australians had lost their appetite for electric vehicles,” Wakeham told the Australian Clean Energy Summit on Wednesday.
“[But] as Mark Twain talked about, you know the reports of his death were greatly exaggerated. We have a little bit of that situation happening in the offshore wind space.”
Wakeham’s keynote address to the Summit in Sydney had two key messages: The first is that, while there have been some global headwinds, offshore wind is now a core part of the global energy mix, particularly as countries strive for deep decarbonisation.
“Last year there were nine gigawatts (GW) of offshore wind Installed globally … [so] now have 20,000 turbines at at sea generating wind globally, nearly 20,000 turbines.
“Based on committed projects and projects that are under construction, we have another 328 GW of offshore wind that’s expected to be operational by the end of 2035. So, you know, by 2035, the industry will be a very large generator of clean energy globally.”
Wakeham’s second key message is that Australia needs offshore wind in its national mix if it wants to replace coal, meet its climate and renewables targets, and get serious about energy sovereignty.
“Ocean Energy Pathway has looked at the … deep decarbonisation pathways required to keep 1.5 and 2 degrees alive, and form the conclusion that we need all the technologies,” he said.
“We need the cheap solar and storage; we need the more expensive onshore wind and transmission projects, and we need the hydro projects.
“But we’re also going to need offshore wind to be playing a considerable role, particularly if we are interested in decarbonising and replacing our export industries.
“When you think about the fact that 75 per cent of our coal fleet will be retired in nine years, that … electricity demand will double by 2050, and that onshore renewable energy and transmission projects are are having their own cost … and delay challenges, we need to be thinking really big about the role that offshore wind could be playing in Australia.”
For its part, Ocean Energy Pathway is launching a new study to quantify the value of offshore wind on an integrated system basis, not just levelised cost – so, factoring in its effect on system costs – including avoided transmission costs – prices, and jobs.
But Wakeham says that getting offshore wind over the line remains a massive challenge.
“We’ve still got to make the case for this industry, and it’s a heavy lift. It’s no sure thing that this industry will exist in Australia in 2040.
“So we think that the more pieces of research that … can quantify the benefits of offshore wind to the energy system, but also to communities, to nature, and other benefits in the system, the more likely we will to be to be able to get government and industry to make that heavy lift.”
For governments, the heavy lifting started back in September 2021, when the then federal Coalition government announced the successful passage through parliament of the Offshore Energy Infrastructure Bill.
“An offshore electricity industry in Australia will further strengthen our economy,” said the then federal energy minister and current leader of the opposition, Angus Taylor.
“Offshore generation and transmission can deliver significant benefits to all Australians through a more secure and reliable electricity system, and create thousands of new jobs and business opportunities in regional Australia.”
The federal Coalition has changed its tune on offshore wind, significantly, since that time, preferring, along with numerous state Liberal and National Party governments to back nuclear, instead, despite it being more expensive and much further from realisation than offshore wind.
Federal Labor, which took government around six months after Taylor put offshore wind on the agenda, has made serious efforts to make it a reality, declaring development zones around the country and awarding feasibility licences for the first batch of proposed projects.
At the state level, at least in Victoria, the support from that state’s long-standing Labor government has been strong, too. But there have been some delays to the auction process and efforts to establish an offshore-wind dedicated port have also hit a wall.
And then on Thursday, Victorian energy minister Lily D’Ambrosio – a champion of offshore wind and the longest-serving energy minister Australia has ever had – resigned unexpectedly, announcing that she will not re-contest her seat at the November election and will quit Cabinet.
It’s not yet known who will take her place, but in a statement D’Ambrosio said she felt she was leaving the state well placed to continue on its decarbonisation journey, including in offshore wind.
“With our first offshore wind auction set to launch in August and Victoria now well placed to manage any further disruption to global fuel markets, I have decided that it is time to step back,” D’Ambrosio said.
“Offshore wind is crucial to Victoria’s energy reliability and affordability. It’s also crucial investment for people in Gippsland – growing the local economy and creating thousands of new jobs each year out to 2040.”
With the Request for Tender set to launch in August – after being delayed to align with the establishment of the federal Electricity Services Entry Mechanism (ESEM) – Anh Mai, executive director Offshore Wind Energy Victoria, says the next six months will be critical.
“We’re kicking off, in earnest, the tender process for the port to start the commencement of procuring a partner for the construction port,” Mai told the Summit on Wednesday.
“We’re doing the next stage of procurement for the transmission project, and we are progressing the ESEM, which will give us the pathway to the final seven years. All of these things are huge endeavours in their own right, but in the next six months they will be crucial.”
The trouble is, in amongst that critical six-month period is a state election, and no one is too sure who will win and how offshore wind’s fortunes will be affected if the Labor government – which as of this week is being led by new premier, Ben Carroll – is ousted and an LNP government formed.
Charles Rattray, the CEO of Southerly Ten, which is behind the Star of the South project that is broadly expected to be Australia’s first offshore wind project, says his team has worked very hard across all levels of government, and all parties, and has found “broad support” of offshore wind.
But others are not so sure. While shadow energy minister David Davis met with a range of local stakeholders and business leaders in Gippsland for a roundtable discussion on offshore wind, his and his party’s policy on the technology is far from clear.
Meanwhile, the Victorian LNP has promised to pause major transmission projects in the state and to introduce new planning rules including strict buffer zones that threaten to stall the progress of onshore renewables.
Kimberley Cram, the co-funder of KIMAenergy and a veteran of the offshore wind industry in Europe and Taiwan, says policy uncertainty is one of the biggest threats to the success of offshore wind in Australia – and to its credibility with international investors.
“It makes no sense, now, that we’re having discussions of, if there’s a change of leadership in the state elections in Victoria … offshore wind would be paused. Why?,” Cram said on Wednesday at the Summit.
“I think there’s a real risk that we just keep looking for that perfect solution. We don’t need it to be perfect; we just need it to be certain.
“I think we’re at a real tipping point, and I think what happens over the next six months … is going to be really crucial to know if this market is going to work or not for offshore wind.
“Changing policy, having a lack of certainty, makes such a difference,” Cram added. “It really does negatively impact projects, and I’m just kind of conscious of where that goes to here.
“We’ve obviously had a bit of a runway of enthusiasm, people coming to the market in their droves. A lot of people then leaving the market and going through that – 37 proponents or 37 projects in Victoria; a third of those awarded; and only a third of those developers are still around.
“I think we’re at a point now where, if there’s any further delay, I think that will kind of impact on the credibility of the market.”
For the meantime, and certainly while Labor remains in power in Victoria, the various government departments charged with delivering Australia’s first offshore wind project are forging ahead with the job.
“We have a framework and a really amazing regulator there for the actual plant itself, in the Commonwealth waters,” says Mai. “Victoria is designing up what we need from the Victorian side to enable licensing, development access, land access, and construction. That is all in train.
“I am unable, as a bureaucrat to directly answer [the question of what will happen if the LNP wins the Victorian election], but what I can say is that regardless of who is in government, our riding instructions are to continue work to kick off this auction, and that is what all 55 of us are currently focused on, along with Treasury.”
As for the new Labor premier, Ben Carroll, Mai says she is confident that he is on board, having – in a previous role – helped establish the local content settings for offshore wind development.
“A couple of years ago, when we were working with his department on that, he was incredibly engaged and invested in making sure offshore wind succeeded, and so we have very reasonable local content settings for our first auction.
“And so I take a lot of heart from that, that he has quite a bit of foundational knowledge already about offshore wind, and he does understand the imperative of the energy transition.”
For the prospective projects, like Star of the South, Rattray says his team has found “a degree of responsiveness” at all levels of government around the key remaining challenges of planning and regulation and and how to solve those.
“I think we need to be a little bit cautious, as developers, about kind of pointing the finger at government [and] saying … ‘the problem’s over there’ as opposed to … the problem is probably shared.
“And so, we’ve got 30 regulators, right? That’s a lot, and it’s taken us tens of millions of dollars and years and years and years to maybe have an approval [at the] end of this year or next year. So that that metric needs to improve.
“I think we just need to think through identifying what the problems are, providing that feedback to the appropriate people in government, and then you know working with government on how to improve that, rather than just sort of throwing shots across the bow. I don’t think that helps anyone.”
All of that said, the experience gleaned from offshore wind markets around the world clearly shows that having a stable policy platform to build from is a major advantage, if not a must.
“If you look at, now, what made success happen in Taiwan …So government, I think, very clearly, in the very … early days, set out the agenda. Why do we need it? How does it become a part of that energy mix? And really kind of mapped out the whole framework.
“And again, this was started by a right-of-centre government, then implemented by the equivalent of the Labor government. So you had bipartisan support saying, look, we need everything. We can’t be relying on imports.
“They set out targets. They did marine spatial planning … and gave everyone a … roadmap on how to get it right and how to develop projects.
“So you enter the market, you know exactly what the targets are, you know your route to market… [the] infrastructure’s there, everything really stacks up, and it was very clear. …And now Taiwan is at a point where it’s got 4.5 GW in operation already since 2017.”
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