Australia's offshore wind industry: 2024 year in review

What you need to know

• In this article we provide an update on the offshore wind industry in Australia. We cover progress made in 2024 and consider what is ahead in 2025, a federal election year.
• In summary, significant milestones were achieved for Australia's offshore wind industry in 2024, including:
  • the award of 12 feasibility licenses in Victoria and preliminary award of feasibility licences in two other offshore wind (OFW) declared areas.
  • enactment of further federal and Victorian legislative and regulatory support.
  • launch of VicGrid's PPP tender for the onshore transmission and substation to support the first 2GW of OFW capacity in Victoria.

• Other points to note:
  • the year commenced with the news that the Victorian Port of Hastings initial EPBC referral had been refused leading to a redesign of the proposed upgrade of this facility and causing stakeholders to look to other solutions to support OFW development and operational phases.
  • a decision of the Minister to not award a feasibility licence to one project proponent was successfully challenged in the Federal Court.
  • the awaited EOI for the Victorian OFW CfD tender was delayed.

Status of Declared Areas at the beginning of 2025

The industry has taken significant steps in the past 12 months with regulatory and ministerial declarations across the OFW priority areas as set out in the table below:

Challenge to unsuccessful feasibility licence application

Seadragon Offshore Wind Pty Ltd applied for a feasibility licence in the Gippsland declared zone. The application area overlapped with the area of more meritorious feasibility licence applications. At the time, the Offshore Electricity Infrastructure Regulations 2022 were silent on the issue of overlapping claims of unequal merit. The Minister refused to grant the licence because he believed he did not have the power to grant a feasibility licence for an area smaller than the area described in the relevant feasibility licence application. Seadragon brought judicial review proceedings.

As explained in our 23 December 2024 alert "Minister's refusal to grant an Offshore Wind Feasibility Licence overturned", in November 2024 the Federal Court set aside the Minister's decision refusing to grant the feasibility licence to Seadragon. It held that the Minister erred in believing he did not have the power to grant a feasibility licence for an area smaller than the area described in the relevant feasibility licence application. The Minister was ordered to redetermine the application according to law.

In response to the Seadragon decision, in December 2024 the Government inserted a new section 11A into the OEI Regulations (Offshore Electricity Infrastructure Amendment (Overlapping Applications) Regulations 2024 (Cth)) clarifying that, where a feasibility licence application overlaps another application with unequal merit, the Minister must not grant a licence in respect of the application of lower merit. This new section effectively confirms the approach the Minister took in the Seadragon matter.

For more information about this decision, see our 23 December 2024 alert "Minister's refusal to grant an Offshore Wind Feasibility Licence overturned".

Federal legislative updates

Offshore Electricity Infrastructure Amendment Regulations 2024 ('OEI Amendment Regulations')

The much-awaited Offshore Electricity Infrastructure Amendment Regulations 2024 (Cth) (OEI Amendment Regulations) came into force on 12 December 2024. As a result, the Offshore Electricity Infrastructure Regulations 2021 (Cth) (OEI Regulations) now provide the detail which offshore wind developers need to progress the design of their projects, prepare and consult on management plans, and carry out feasibility activities.

Together with the Offshore Electricity Infrastructure Amendment (Overlapping Applications) Regulations 2024 (Cth), these amendments represent the largest update to the OEI Regulations since their commencement in 2021.

The OEI Amendment Regulations cover:

• management plans, which must be approved before a licence holder may construct, install, commission, operate, maintain or decommission offshore electricity infrastructure in accordance with a feasibility licence or other licence under the OEI Act;
• design notifications, which provide an opportunity for licence holders to seek feedback from the Offshore Infrastructure Regulator (OIR) on layout and other project design matters, and will be a mandatory step before applying for approval of a management plan for a commercial licence or certain transmission and infrastructure licences;
• financial security for decommissioning and seabed remediation costs;
• offences (mostly strict liability) for non-compliance with the OEI Regulations;
• safety and protection zones, in particular the process to apply for safety and protection zones, how the OIR will decide applications, and the publication of safety zone and protection zone determinations;
• work health and safety, in particular amendments to the Work Health and Safety Regulations 2011 (Cth) to tailor those regulations, particularly in relation to diving work, to the offshore wind context;
• record keeping; and
• fees.

Watch out for our alert series about these reforms, the first of which will be published shortly.

Future Made in Australia Bill 2024

The Future Made in Australia Bill 2024 was passed on 28 November 2024. The Bill seeks to establish the National Interest Framework to secure Australia's place in the changing global environment, including through supporting private sector investment in Australia's move towards net zero.

The 2024-2025 Federal Budget identifies five priority industries are under the National Interest Framework:

1. critical minerals processing
2. renewable hydrogen
3. green metals
4. low carbon liquid fuels
5. clean energy manufacturing, including battery and solar panel supply chains

We wrote about these developments in our 17 May 2024 alert "Supporting a future 'Made in Australia' – Energy policy announcements in the 2024-25 Federal Budget".

Victoria on the move

Victoria is an attractive proposition for the development of OFW and has comparative advantages to other Australian states. These include the shallower waters of the Bass Strait enabling the development of fixed bottom OFW projects (a more mature technology and significantly cheaper than floating OFW) and it is the location of Australia's first proposed OFW project, the Star of the South. With stakeholder engagement on OFW in Gippsland since 2016, versus the minimum 60 day public consultation period undertaken elsewhere under the OEI Framework, the region has not experienced the same level of stakeholder backlash seen elsewhere. Victorian Government is seeking to capitalise on the opportunity OFW presents with a range of legislative and policy supports.

Developments in Victoria are outlined below.

VicGrid PPP

VicGrid released a tender document on 10 December 2024 for a Public private partnership (PPP) model for the delivery of a Gippsland onshore connection hub to support Victoria's OFW projects, with capacity to receive and transmit 2 GW of electricity. The cost is expected to range between A$700m and A$1.5bn.

Legislative targets

Victoria is the only state so far to legislate specific OFW targets. The Climate Change and Energy Legislation Amendment (Renewable Energy and Storage Targets) Act 2024 sets out the following OFW targets:

Other state legislation

The Energy and Public Land Legislation Amendment (Enabling Offshore Wind Energy) Act 2024 (Vic) facilitates the grant of licences over public land not covered by the OEI Act for up to 21 years, including for the purpose of assessing the feasibility of constructing OFW energy generation.

The National Electricity (Victoria) Amendment (VicGrid) Bill 2024 ensures the Victorian government has powers to modernise the way new energy infrastructure is planned and developed in Victoria. It prioritises community consultation, gives communities, farmers and Traditional Owners a voice in the planning process. It confirms the central role of VicGrid in delivering transmission and connection infrastructure for OFW in Victoria.

Contract for difference ('CfD')

The Victorian Government is the only state that has proposed a CfD tender. Further details below.

Contract for difference ('CfD') - Government support

Beyond policy certainty (with the accompanying legislative framework), a study of established OFW markets abroad demonstrates that government revenue support will be critical to a successful OFW industry in Australia.

Victoria

The Victorian Government is the only state, at this stage, that has proposed a CfD tender.

Offshore Wind Energy Victoria's Implementation Statement 3 provides some detail on the proposed CfD scheme in Victoria including a commitment to support 2GW of capacity in the first auction. Implementation Statement 3 sets out the timeline for the first CfD auction as follows:

• EOI phase to commence in late 2024 (not achieved);
• formal Request for Proposal (RFP) phase to commence in Q3 2025; and
• proposals due in Q1 2026.

There is industry speculation that the EOI may not be released pending the outcome of this year's federal election (that must occur prior to 17 May 2025). For some proponents, the delay is welcome given the early stage of their feasibility work, which would have put them at a disadvantage to others.

Nonetheless, if the government provides certainty of regular/annual CfD auctions in a similar manner to the Capacity Investment Scheme, there could be advantages to proceeding early. This includes facilitating the advanced projects to proceed and propel the sector forward and underwriting an industry at scale to attract the supply chain. For more information about the Capacity Investment Scheme, see our August 2023 alerts "Australia's CIS – new support for clean dispatchable projects (Part 1)" and "Australia's CIS – new support for clean dispatchable projects (Part 2)".

Lessons learnt from recent international processes

In the UK, CfD auction rounds have generally been conducted following extensive survey work, project proponents having progressed engineering works and securing grid connection agreements. This has improved the reliability of data CfD bids are based upon.

UK CfD auction rounds encompass offshore and onshore wind but historically offshore has dominated the bids. There have been six competitive auction rounds completed for CfDs in the UK between 2015 and 2024. Importantly, developers did not submit bids in the fifth round as the CfD strike price did not keep up with rising development costs (due to high inflation, high cost of capital and supply chain issues), such that the CfD did not support project viability.

Even in the most established OFW markets globally, appropriate government support remains critical to project viability.

Challenges looking ahead

Supply chain

While globally OFW developers face macroeconomic challenges such as supply chain capacity and rising costs, Australia has its own unique set of challenges.

Port infrastructure

OFW projects require ports that can accommodate large vessels, heavy equipment, and specialised services for installation, operations, and maintenance of OFW turbines and infrastructure. However, most ports in Australia are not yet equipped or designed for these purposes and require substantial investment and upgrades.

The Victorian Government had planned to redevelop the Port of Hastings for this purpose but its Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act) referral was rejected at the close of 2023, leading the Victorian Government to redesign its plans for the Port of Hastings and to consider a broader, multi-port, strategy in order to support the development of the OFW industry. As a result we have seen announcements such as the Bell Bay Renewable Energy Services Hub.

Environment and planning considerations in the new OEI regulatory scheme

OFW projects require environmental and other approvals (eg Aboriginal cultural heritage and vegetation removal permits) in addition to the licences required under the OEI Act.

At a Commonwealth level, OFW projects need to be referred under the EPBC Act. The newly amended OEI Regulations make clear that management plans must describe a project proponent's obligations under the EPBC Act and the measures it will take to comply. Guidance released in December 2024 confirms that management plans will need to describe compliance measures in a way that ensures compliance can be monitored and verified. If potential non-compliance with EPBC Act obligations is identified, the OIR and DCCEEW (regulator of the EPBC Act) will work together to enforce compliance.

Although it is clear a referral, and likely an EIS, will be required under the EPBC Act, industry proponents and communities are still waiting on clarity about the State and Territory environmental assessment pathways. This has implications for how both federal and State/Territory environmental matters are assessed. The usual practice is for federal matters to be assessed together with State/Territory matters as part of a "bilateral process" (ie an accredited process under a bilateral agreement between the Commonwealth and the relevant State or Territory). However, most offshore wind infrastructure will be located in Commonwealth waters, rather than in a State or Territory jurisdiction. As a result, there is a question of what "work" the State or Territory assessments will do, and whether the impact at the State or Territory level is sufficient to warrant comprehensive assessments.

Further guidance is expected on how Commonwealth and State/Territory environmental regulations will interact.

First Nations involvement in OFW projects

OFW projects present potential impacts on First Nations' rights and interests including through the installation of infrastructure within native title determined land or impacts on onshore and underwater cultural heritage and connection to Sea Country. The OEI Regulations provide a broad requirement for project proponents to make reasonable efforts to identify and consult with Aboriginal or Torres Strait Islander peoples or groups with interests in, or management functions related to, the relevant licence area or an area adjacent to the licence area (this includes native title interests, or land or water rights under federal or state-based agreements).

But protection of cultural heritage is only part of the story. There is a growing push from Government, banks and other financiers and the community for Traditional Owners to share in the benefits of Australia's energy transition and for agreements to be reached before projects proceed.

In February 2024, the Clean Energy Council (co-authored with KPMG) released Leading Practice Principles: First Nations and Renewable Energy Projects. This guide provides best practice principles for engagement, participation and benefit-sharing for renewable energy projects. In September 2024, the Gunaikurnai Land and Waters Aboriginal Corporation (GLaWAC) published its 'Pathway to Partnership: Gunaikurnai and Major Projects' which establishes an engagement framework for proponents to follow when developing projects on Gunaikurnai lands or waters, including OFW projects in the Gippsland region.

The free, prior and informed consent standard for agreement making (or FPIC) continues to be an influential concept in the development of legislation, guidelines and the expectations of Traditional Owners, including in relation to OFW projects. At the moment the law lags behind evolving community expectations, but the trend is clear. For more on FPIC, see our 4 June 2024 article "FPIC continues to dominate the discourse".

Looking ahead: 2025

The relative infancy of Australia's OFW industry enables Australia to learn from the experiences of OFW markets globally. It is an opportunity for federal and state governments to build on work to date and ensure Australia presents a competitive global opportunity that attracts the necessary investment, skills and supply chain to develop an OFW industry that delivers for the Australian people.

However, with the federal election this year there will be increased scrutiny of Australia's plans to achieve its energy transition. The Opposition has announced plans if elected to support nuclear energy and cancel the Hunter OFW feasibility license (currently a preliminary award). Without government support, the OFW industry will face a challenging path, as evidenced by the need for government support in even the most developed OFW markets globally.

Want to know more?

• Minister's refusal to grant an Offshore Wind Feasibility Licence overturned (23 December 2024) 
• Feasibility Licences for Offshore Wind Projects (9 November 2023) 
• Offshore Wind: What you need to know when applying for an offshore electricity infrastructure licence (18 November 2022) 
• Australian Parliament passes the Offshore Electricity Infrastructure Bill 2021 (3 December 2021) 
• Offshore wind New framework for offshore electricity infrastructure (10 September 2021)

Authors: Bree Miechel, Partner; Clare Lawrence, Partner; Jeff Lynn, Partner; Murray Wheater, Partner; Kimberley Garth, Senior Associate; Robert Gough, Senior Associate; Chris Primmer, Senior Associate; Anna Seddon, Senior Associate; Vanessa Asumugha, Lawyer; Fergus Calwell, Lawyer and Gerard McGookin, Lawyer.