Victoria wants to tap CIS, and federal funds, to help pay for offshore wind

Victoria energy minister Lily D’Ambrosio says federal funding will be key to help kick-start the offshore wind industry in Australia, and is pushing to have the first projects that will be built off its Gippsland coast included in the new Capacity investment Scheme.

The federal and Victoria government this week revealed the names of the six consortia that have won the right to conduct the first feasibility studies for offshore wind projects in Australia, and another six that will be awarded similar licences once negotiations with First Nation and other stakeholders are complete.

All of the consortia are dominated by deep-pocketed international energy giants, such as Orsted, CIP, RWE, Engie and Iberdrola, with Australian utilities AGL and Origin having only minor roles in two of the consortia. But the big issue will be over cost, and the premium that will be paid over onshore wind and solar.

Victoria aims to have at least 2 GW of offshore wind capacity by 2032, and 4 GW by 2035, and state energy minister Lily D’Ambrosio says it is essential if the state is to meet its 95 per cent renewable target by 2035.

“It’s not an ‘I’d like’, it’s a must have,” D’Ambrosio told Renew Economy in the latest episode of the Energy Insiders podcast.

D’Ambrosio says Victoria is speaking to the Commonwealth about how the offshore wind projects will be funded, and indicated she is hopeful that they can be included in the CIS, which has been expanded to 32 GW, including 23 GW of new wind and solar generation capacity.

It remains to be seen if offshore wind meets the criteria, given that the deadline for completion of winning tenders might be too soon for the Gippsland offshore wind projects, but D’Ambrosio says federal support is essential.

“There’s still no commitment from the Commonwealth to work with the state … for the financing part of getting these projects actually built,” D’Ambrosio says.

“That’s …. critical for us. No other country globally that has built offshore wind energy has relied solely on a sub national government to get these projects built.”

The first stage of the CIS was focused on 600 MW (2,400 MWh) of battery storage in Victoria and South Australia, to help solve near term reliability needs, and ended up being 32 times oversubscribed, or more than 19,000 MW offered, a testimony to the huge pipeline of projects in Australia champing at the bit for contracts and financing.

A new auction of 6 GW of wind and solar capacity will be launched later this month, and will be the biggest ever renewable tender in Australia, with 2.2 GW reserved for NSW and another 300 MW for South Australia.

D’Ambrosio said she is keen for capacity in future auctions to be reserved for Victoria, and did not want to see the state disadvantaged for being an early mover in the uptake of renewable projects, and for having the lowest wholesale prices in the country.

“We continue to negotiate with the Commonwealth around the Capacity Investment Scheme, and what we would hope that it delivers for Victoria,” D’Ambrosio said.

“The Commonwealth did talk about the need for additionality, certainly, we’re very keen to ensure that the Capacity Investment Scheme does not disadvantage Victoria, by way of the fact that we’ve got very, very ambitious targets for 2030 and beyond.”

D’Ambrosio says expressions of interest for the first offshore wind project tenders will be sought later this year, with the tender per-se going ahead next year, as planned.

To listen to the full interview with Victoria energy minister Lily D’Ambrosio, please click on the latest episode of the Energy Insiders podcast. You will also find last week’s interview with federal climate and energy minister Chris Bowen.