RWE scraps Gippsland offshore wind project due to costs and auction uncertainty

Germany energy giant RWE has become the latest developer to scrap its offshore wind plans in Australia, announcing this week the cancellation of the 2 gigawatt (GW) Kent project. 

After almost a year of feasibility studies, the project’s competitiveness in the current market conditions doesn’t stand up, RWE Renewables said in a statement published on its website.

Instead, the company will focus on batteries – and Australia’s first eight hour battery, specifically – and a 3GW pipeline of onshore wind projects.

“These projects reflect our long-term view of Australia as a key growth market for renewables,” RWE said.

“This decision [on the Kent project] follows a review of the project’s competitiveness in current market conditions, as well as ongoing uncertainties around supply chain costs and the future design of the auction framework.

“We want to be clear that this decision relates solely to the Kent offshore wind project.”

More heading for the door

This is the second project to formally pull out of the Gippsland zone, which will host up to 9 GW of capacity.

But it’s the first to specifically cite worries about Victoria’s delayed auction as a reason, after the state hit pause until the end of 2025 saying federal funding was still up in the air.

Spanish company Bluefloat Energy was the first in July when it dumped the 2.5 GW Gippsland Dawn proposal, and there is uncertainty around Origin Energy’s and RES Australia’s 1.5 GW Navigator North proposal after key staff being laid off in September.

There are now 10 feasibility licences still in play with a capacity of 21 GW.

But that also means more exits are expected.

Lautec Australia CEO Satya Tanner says some developers will be happy the competition is becoming more manageable.

“The supply of offshore wind projects outweighs the demand by the Victorian government,” she told Renew Economy.

“This means that developers are spending a lot of money at risk right now. It’s a bit like a game of last man standing. With more than 20 GW of projects and only 9 GW of demand in Victoria, it’s a normal part of the process that the competition will slim down.”

RWE’s reasons are worrying

But RWE’s exit in particular should be a wake up call for Australia’s offshore wind ambitions, says Climate Energy Finance director Tim Buckley. 

RWE currently operates 19 offshore wind farms and its exit from the nascent industry in Australia on cost grounds in particular raises questions about whether this technology will play a material role in a future electricity system, he says.

“I am a massive fan of offshore wind in the UK, the North Sea and in East China, close to massive populations and where onshore renewables are space limited,” he told Renew Economy. 

“Australian offshore wind is financially challenged by the high and rising cost of massive infrastructure projects and the key point that offshore wind is challenged by high quality onshore resources that are faster, cheaper and easier to build, with lower engineering, regulatory and financial risk.”

Buckley believes that while offshore wind might be able to drive the last 10 per cent of electricity decarbonisation in Australia, where reliability and system resilience is a priority over cost, that’s a question for five to 10 years away. 

It’s not a view shared by the Smart Energy Council’s Connor Price, who says offshore wind “can and will play an important role in Australia’s renewable energy mix.”

“The offshore wind industry is still establishing itself in Australia, these are significant projects and will take a reasonable amount of time to get the process right,” he told Renew Economy.

“As coal exits the system and additional loads come onto the grid like data centres and green metals, it will be large generation sources like offshore wind that step in.”

RWE’s pull back is a symptom of the global headwinds buffeting the renewable sector generally, says Ty Christopher, director of the Energy Futures Network at University of Wollongong.

He says Trump’s fossil fuel-favouring policies and rejection of clean technologies has caused a global contraction in renewable energy investment.

“The policy settings there are delivering the return on investment expected by the fossil fuel industry, and so it’s unsurprising that here in Australia we’re seeing investment pausing in renewables,” he says.

“That’s just the Australian impact of what’s happening globally. It’s a delay that we don’t need, it’s unfortunate, but it’s nevertheless a reality of what we’re seeing at the moment

RWE is currently testing the 50 megawatt (MW), 400 megawatt hour (MWh) Limondale BESS in New South Wales (NSW) and expects it to be commissioned by the end of this year. 

RWE now has 10 projects in Australia, of which six are batteries. 

The other four are wind projects but of these, two are very early stage in Queensland where there are concerns that doors are now closed to any renewable project not always approved or under construction.

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