Offshore wind: Turning on renewable energy’s next generation
A global market is booming, and developers and investors are eyeing the huge potential of Australia’s world class offshore wind resources as the nascent industry starts to move ahead.
Australia doesn’t yet have any offshore wind electricity generators, but that is set to change in coming years as the Federal Government earmarks six zones for development.
Foreign and local renewable energy developers are gearing up to build offshore wind generation to tap its huge potential in Australia.
Offshore wind electricity generation is a proven technology overseas, but the sector is only just getting underway in Australia. It has several advantages over onshore wind.
Winds generally blow harder and more constantly off the coast than they do on land, and it’s possible to install much larger turbines out at sea. In combination, this makes offshore wind a more efficient resource than onshore wind and creates a more consistent supply of energy.
It can also be built close to end-users, such as in the ocean-near cities, without the need for thousands of kilometers of transmission lines.
And offshore wind projects can be built on a scale that far outstrips onshore wind. Turbines can be hundreds of metres tall and have a generation capacity of up to 15,000 kilowatts – enough electricity to power approximately 20,000 households and save around 38,000 tonnes of carbon dioxide emissions a year, according to The National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA).
Realising offshore wind potential
NOPSEMA says Australia has “world class offshore wind resources”, mostly in the southern half of the mainland and around Tasmania. It cites estimates from the Global Wind Energy Council that Australia has the potential to generate up to 5,000 gigawatts of electricity from offshore wind, which represents 100 times the installed capacity of Australia’s two largest electricity networks.
Offshore wind is a well-established and proven power source in countries including China, the UK and Germany, but has so far been hampered in Australia by a lack of enabling legislation.
This is changing with the Federal Government creating two offshore wind zones – in the Bass Strait off Gippsland in Victoria late last year, and the Pacific Ocean off the Hunter region in NSW in July – and it’s planning to create four more.
Local players, including Origin Energy, AGL and Macquarie Group, have applied for feasibility licences, the first step in building an offshore wind farm. None have been awarded yet.
“We're really excited about the opportunity for offshore wind both here and abroad,” says Jason Tranter, Global Head of Project Finance, Debt Products at Westpac Institutional Bank.
“The offshore wind market is booming globally. It's in its infancy in the Australian context; it's like solar 15 years ago.”
With the growing momentum for offshore wind development, Tranter says he is having regular conversations with new developers wanting to win feasibility licences and invest.
Making plans to build
Star of the South offshore wind project is planning to install up to 2.2 GW of new capacity in the Bass Strait off Gippsland, enough to power more than 1.2 million homes across Victoria.
Star of the South Chief Executive Charles Rattray says the project has been underway for five years and is Australia’s most advanced offshore wind project, with much of the data required for approvals already collected.
But even so, Rattray says there’s more to be done before Victorians see steel in the water. The project first needs to be granted a feasibility licence, then environmental and planning approvals, and a commercial licence before construction can start. Generation could begin later this decade dependent on approvals and licences, and so on.
Rattray says there are many reasons to build off Gippsland: it has high and constant wind speeds, which also correlate with hot weather; the water isn’t too deep to fix turbines to the seabed; and it is close to existing transmission. “Once you've got your transmission and port set up, you can deliver enormous scale into the grid when you compare it with onshore,” he says.
The project is estimated to cost AUD 8 billion to AUD 10 billion depending on its final size and already has investment from fund manager Copenhagen Infrastructure Partners and Australia’s Cbus Super, which has taken a 10 per cent stake.
Star of the South will need to carefully manage the potential environmental impacts of the project, particularly during construction and, while turbines must be at least 10km from the shore, Rattray says they will be visible.
The project is proposing to install fixed foundation turbines, which will be around 300 metres tall, into the seabed.
Depending on sea depths, other developers’ projects might rely on floating turbines, an emerging technology that will allow turbines to be installed in deeper waters. They can be set up further out to sea and can have a lower environmental impact, but they are an emerging and unproven technology.
Investors and developers lining up
Australia’s state, territory and federal governments’ energy targets, political stability and the huge need to electrify the economy make the country an attractive destination for capital for renewable energy projects. Victoria, for instance, is aiming for at least 2 gigawatts of offshore generation by 2032.
“We’re very confident that investors are there, and in the need to do it,” says Westpac’s Tranter of the potential of offshore wind in Australia. “There’s a long list of investors chasing the offshore wind sector and looking to invest in offshore wind in Australia.” These include Orsted, RWE, DP Energy, Oceanex and Macquarie Group.
The scale of offshore wind projects makes them more efficient than collecting together a lot of smaller renewable projects.
And with no existing offshore wind developments, the field is wide open for developers. The Gippsland zone alone covers 15,000 square kilometres and capacity for several developments.
Offshore wind energy development would get a boost from the declaration of more renewable energy zones and more efficient approvals processes, Tranter says. One complication for the sector is that projects may also require contracts from governments and/or customers to buy the electricity at a set price – known as power purchase agreements (PPAs) – to provide enough certainty for the business case and to underwrite the billions of dollars of investment required for each project.
None of the projects have any requirement for local content of materials or equipment, but Tranter says governments could set content requirements in their own power purchase agreements.
Offshore expertise for renewables’ next stage
Regardless, the developments will create a whole new industry for construction, operation and maintenance of these mega projects.
“You can't operate and maintain these very large projects from a remote location,” Tranter says. “This is going to create a lot of local jobs in order to operate and maintain these projects safely. We will need an entire local supply chain and even a fleet of maintenance barges, requiring an entirely new industry to be established in the region.”
Following its decision to shut its Loy Yang a coal-fired power station in Victoria by 2035, generator and retailer AGL is looking for renewable energy sources, including offshore wind because it can operate for more hours than onshore wind.
Chief Operating Officer Markus Brokhof said typical wind farms onshore in Australia would produce power 28 per cent to 43 per cent of the time, compared to about 50 per cent for offshore wind.
AGL has formed a consortium with global renewables and offshore wind developers and investors Mainstream Renewable Power, Reventus Power and Australia’s DIRECT Infrastructure to apply for licensing for a 2.5 GW wind development offshore of Gippsland, which would on its own replace half of Loy Yang’s capacity.
“While we have extensive experience in onshore wind, we are a newcomer to this,” Brokhof says. “So we wanted to have a consortium of reputable companies which have already built offshore windfarms and have a portfolio.”
Australia will be sourcing far more than know-how from international markets. It’s not the only jurisdiction seeking to exploit offshore wind, so will have to compete for supplies from global equipment manufacturers, Brokhof points out.
A successful energy transition for Australia will need to include offshore wind and foreign investment, he says, adding the government could help this with financial support and by streamlining the approvals process.
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