Riding the wave of renewable energy – when will Australia become a world leader in offshore wind?
Australia’s offshore wind farm journey so far
The Albanese Government’s Rewiring the Nation policy has promised an investment of $20 billion towards the modernisation of the electricity grid to unlock the commercial development of large-scale renewable energy projects. With an ambitious focus to increase overall renewable energy production to 82% of the National Electricity Market generation by 2030, part of this plan involves a $1.5 billion commitment to fast-track the development of offshore wind farms and renewable energy zones to lower electricity prices to Australian households.
At state level, 2022 saw the Victorian Government set a target of 2GW of offshore generation by 2032, with that to double by 2035 and reach 9GW by 2040.
The Federal Government has also committed $4.7 billion to renewable energy infrastructure in New South Wales, and following the state election in March this year, we now expect to see the New South Wales Government’s offshore wind targets follow in support of the state’s commitment to net-zero emissions by 2050.
All other state and territory governments are yet to specify any targets for offshore wind, but with approximately 40 projects in the offshore wind pipeline around Australia, currently in various early stages of development, it is clear that both international and Australian developers are eager to capitalise on Australia’s abundant offshore wind resources.
What is interesting to see, is that Tasmania remains an untapped market given its achievement in 2020 of 100% renewable energy generation – meeting all of Tasmania’s electricity needs – and a legislative promise to double its renewable energy production by 2040. The proposed Bass Strait Offshore Wind Energy project off the coast of northern Tasmania and the proclivity of strong winds within the locality make Tasmania an attractive area for offshore wind project developers.
What updates to the regulatory framework have been implemented in the past year?
In the past year, the Federal Government introduced the Offshore Electricity Infrastructure Act (Cth) with its supporting regulations to facilitate and manage offshore wind resources in Australia. This framework enables the Federal Minister to declare an area within the Commonwealth’s offshore areas suitable for development and to govern the activities of offshore wind developers from construction to decommissioning. As at the date of this publication, there is only one declared area off Gippsland, Victoria with five other priority areas identified across the country.
Despite these early stages, we have found that developers are eager to procure investment early in anticipation of these further regions being unlocked.
With the regulatory framework established and the race to be at the forefront of the Australian offshore wind market underway, what legal requirements should developers be aware of?
Renewable developers must hold one of several licences to accommodate a range of potential developments in Australian waters:
- a 40-year commercial licence,
- a 10-year research and demonstration licence, or
- a transmission and infrastructure licence (for a term to be determined on a case by case basis).
To allow developers to assess the feasibility of a proposed project, and before the Minister grants a commercial licence, a feasibility licence of seven years is needed. Applications for a feasibility licence must be in the national interest and are assessed under ‘merit criteria’, focusing on:
- the technical and financial capability of the proponent;
- the viability of the project; and
- the general suitability of the proponent, including having regard to the proponent’s past performance in the offshore wind space and large infrastructure projects either within Australia or internationally and the proponent’s corporate governance structure.
One of the more complicated aspects is the need for operators to prepare a management plan prior to a grant of licence. A management plan covers a range of issues on how the project will be conducted, including obligations on environmental management to preserve local marine fauna and flora, overall development and maintenance plans, and the provision of financial security to cover future decommissioning or remediation works.
What else should developers be aware of?
It is also up to the wind-farm proponent to consider whether the project will have a significant impact on Commonwealth waters (a protected matter under the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act)). If so, the operator must refer the project to the Federal Government for contemporaneous assessment and approval. Specific state and territory approvals for the project under respective planning legislation will also apply, particularly regarding infrastructure such as undersea transmission cables, which will inevitably pass through state and territory waters to reach the onshore electricity grid.
We anticipate that the timing and coordination of:
- licensing approvals under the Offshore Electricity Infrastructure regime;
- planning approval pathways under the EPBC Act; and
- planning approval via the state and territory statutory frameworks,
will present one of the more challenging hurdles prior to the construction and commissioning of an offshore wind farm, as approval under one Act does not guarantee approval under another.
In March 2023, the Victorian Government provided a new implementation statement to update and confirm the legislative approach to support offshore wind development in Victoria, expecting to reduce the regulatory burden on developers. However, we are yet to see if other states and territories will consolidate and streamline the complicated and fragmented federal and state legislative approach currently in place.
What is in store for the future?
Despite these welcome advances, investors are eager to see more action from government. Some critics question the lack of federal goals to harness offshore wind in its net zero targets and think that this implies a reluctance to provide significant government funding and support.
- As expected, there are calls for current onshore infrastructure to be urgently upgraded at the grid level to support the pending offshore projects.
- While Australia is taking steps to follow the likes of the United Kingdom, Germany and Denmark when it comes to offshore wind projects, further work is needed to overcome these key barriers to fruition.
For more information on this topic, or to explore other articles from our 2023 edition of Emerging Issues for the Australian Energy and Resources Industry, click here.
This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.