Analysis, interviews, roundtables, reports and more on the topics that matter to you.

26 August 2022

Proximo Weekly: Australia gets serious about offshore wind

Australia has been toying with offshore wind for some time. But in the wake of the Offshore Electricity Infrastructure 2021 Act (OEIA), which came into effect on June 2, New South Wales will likely follow Victoria's lead with an ambitious offshore wind programme, as will other states once the federal government gets more development zone consultations underway.

EnergyCo NSW, the state government-controlled entity pushing development of renewable energy hubs in New South Wales (NSW), has mandated Arup to advise on the design and development of an offshore renewable energy industry in the state, following a competitive procurement process. Arup will produce a report, expected to be published in early 2023, on the state’s offshore wind capacity. If the report’s conclusions are positive it will be used as the evidence base for development of both offshore wind projects and supply chains.

The Australian offshore wind market is fledgling. Star of the South – located offshore Gippsland and sponsored by Copenhagen Infrastructure Partners and the Australian superannuation fund Cbus – is the most advanced offshore wind project in the country. The project will likely be the first to be licensed given the federal government’s recent announcement that the Bass Strait off Gippsland will be the first area to be formally assessed under its new Offshore Electricity Infrastructure 2021 Act (OEIA) which came into effect on June 2.

The Victorian government – which commissioned a similar report to the one just mandated by NSW, which resulted in Victoria now seeking to generate 2GW from offshore wind within a decade, climbing to 4GW by 2035 and 9GW by 2040 – has also made Gippsland its initial priority area for offshore wind development. Consequently, other proposed offshore schemes are largely focusing on Gippsland: DP Energy is looking at developing 1-2GW in the region (although it is also conducting feasibility studies on sites off the coast of Warrnambool in Western Victoria, and the Wollongong and Newcastle areas in New South Wales), and Shell, Flotation Energy and Corio Generation – a portfolio company of Macquarie’s Green Investment Group – are also vying for a Gippsland licence.

Besides first mover advantage, Victoria’s coastline is also much shallower than NSW’s, so whereas Victoria can accommodate fixed turbines, NSW may require developers to install floating wind turbines, the technology for which is nowhere near as tried and tested as fixed.

The implementation of the OEIA on June 2 and the opening of consultation (submissions for which can be made until 7 October 2022) on Gippsland as a declared offshore wind area is a significant step in making Australian offshore wind a reality. The federal government also intends to begin consultation on a further five offshore wind areas – Pacific Ocean region off the Hunter Valley in NSW; Pacific Ocean region off the Illawarra in NSW; Pacific Ocean region off Portland in Victoria; Bass Strait region off northern Tasmania; and Indian Ocean region off Perth and Bunbury in WA – although a timeline has yet to be announced.

Despite the progress, Australia still has some way to go on streamlining offshore wind legislation, with a multitude of different regulatory entities still involved in the process. Additionally, some argue the economics do not stack up, the country is hardly short on space to develop onshore wind and solar which have lower project costs than offshore.

But the arguments for Australian offshore wind are broader than the confines of the higher up front development cost of the projects themselves. All of Australia’s major cities are on the coast, so much of the transmission infrastructure is already in place, which is a significant overall cost saving. Similarly, offshore wind is less intermittent than onshore wind and solar (BESS technology is overcoming that drawback, but at an additional cost). And in areas like Gippsland, which contains the coal-based economy of the Latrobe Valley, an offshore wind industry (projects plus supply chain) has the potential to replace those fossil-fuels based economies. Finally, offshore wind has political backing from both state and federal governments – a rare consensus that should given potential investors and project lenders a high degree of comfort.

The Star of the South project now looks very likely to be the first Australian offshore wind project to be licensed and hence, financed. The bank line-up and debt tenor for the scheme should prove interesting. The bank market in Australia is still peddling relatively short-term miniperms for projects (five to eight years), with the consequent refinancing risk for the borrower, a significant angst given rising interest rates globally. Consequently, unless the Australian banks prove willing to go longer on tenors, logic suggests international lenders with a long history of financing European offshore projects are likely to be the first port of call for borrowers.

Selected news articles from Proximo last week



Miami-Dade issues RfP for $10bn redevelopment PPP

Miami-Dade County has issued a request for proposals for the redevelopment of 17 acres in downtown Miami in a $10 billion public-private partnership (PPP).


Meridiam partners with Magenta Telekom for FTTH roll-out

Meridiam and Magenta Telekom, a subsidiary of Deutsche Telekom, have formed a partnership to invest €1 billion to roll out a fibre-to-the-home (FTTH) network to over 650,000 homes in Austria.


Shapoorji Pallonji submit EOI for Bangladeshi CCGT plant

Indian-based Shapoorji Pallonji Infrastructure Capital, through its special purpose vehicle Nutan Bidyut, has submitted an expression of interest to the to expand a 220MW gas-fired combined cycle power plant in Bangladesh and is in discussion with the Bangladesh Power Development Board (BPDB).


Hyphen adds advisors for Namibian hydrogen project

Hyphen Hydrogen Energy - a joint venture (JV) between UK investor Nicholas Holdings and Germany's Enertrag - is advancing discussions with the Namibian Government towards the signing of the Implementation Agreement for its planned Namibian green hydrogen project before the end of the year.


Brazil auctions 13 transmission lines

The results have been announced in Brazil's latest power transmission auction.


The Proximo Membership

Join a brand new community of project finance professionals getting unrivalled access to unique analysis, market data and a global portfolio of expert industry events in the energy and infrastructure space. Click here to find out more

Interested in finding out more?
Ask the analyst

You might also like

14 June 2024

ChemOne: Navigating a difficult path to financial close

ChemOne is approaching financial close for its flagship Malaysia petrochemicals facility after enduring years of pandemic-related strictures. Its journey has taken in a few...

20 June 2024

Brightline keeps on track

Brightline's recapitalisation has involved raising debt for refinancing at the opco, parentco and holdco levels. Complex? Yes. Does it work? Investors seem convinced. Is it...