Now that President Biden has set a goal of 30 gigawatts of offshore wind capacity off the U.S. East Coast, offshore wind developers are moving on to new frontiers. Australia is shaping up to be the next big market for offshore wind developers, attracting interest from Shell, Denmark’s Orsted and Norway’s Equinor. Australia’s new Labor government has committed to net zero emissions by 2050 – a goal that aligns with its states’ renewable energy goals. To meet that target, the country will need 96 gigawatts of renewable energy capacity by 2035, replacing coal-fired plants that are set to retire. Australia passed a law providing a framework for offshore wind development late last year. The offshore wind industry in Australia, however, faces a number of challenges.
New regulations and additional government departments to handle licensing and approvals will be needed. The offshore wind sector will need to develop supply chains for equipment and hire workers with skills for jobs in construction and operations and maintenance. The industry needs to obtain suppliers of vessels, turbines and other related technology, which are being deployed in Europe and Asia. There are currently only a limited number of vessels in the world that can be used for erecting turbines offshore.
Offshore wind projects take eight to 10 years to complete, and will need to overcome potential opposition from landowners concerned about transmission lines that tie into the electricity grid onshore. There are also concerns about the impact of wind turbines on bird and sea life. Fisherman in the United States delayed approvals for offshore wind farms due to concerns about sea life and the ability to continue with their livelihoods.
The Australian government has moved quickly to launch a process for identifying offshore zones to be opened up for licenses. The first area proposed is off Victoria State’s Gippsland coast, with a final decision expected before the end of the year. Victoria State plans to procure 2 gigawatts of offshore wind capacity by 2032, 4 gigawatts by 2035 and 9 gigawatts by 2040. The Star of the South—a 2.2 gigawatt project—has been on the drawing board for 10 years and expects to be operating in 2028.
New South Wales has also sought bids for renewable energy projects for the Illawarra region south of Sydney, attracting eight offshore wind proposals with 12.9 gigawatts of capacity worth $35 billion Australian ($23 billion U.S.). New South Wales has a larger electricity demand than Victoria and all of its coal plants are scheduled to close in the next 10 years. Oceanex, which is a partner of Equinor, plans to start producing power off New South Wales by 2030.
Many in the industry see Australia as becoming the next boom market for offshore wind. Equinor views Australia as one of its top three Asia-Pacific markets for offshore wind, behind Japan and South Korea and plans to use its South Korean projects as a template for Australia. Flotation Energy plans to use oil and gas assets that are coming to the end of their economic lives in waters off Victoria, including vessels that will be deployed for decommissioning oil and gas platforms that can speed up development and cut costs.
Offshore Wind Is Not a Panacea
Australians may not realize that offshore wind is no bargain. According to the Energy Information Administration, it is one of the most expensive generating technologies—its levelized cost is 3 to 4 times more than that of a natural gas combined cycle generating plant. And, because the wind does not blow 24/7, offshore wind farms will need back-up power, which only expensive batteries (on par with offshore wind turbines) can supply in a net zero carbon emission setting. But, that would only be if and when there is enough wind energy to power the batteries so they can have energy to discharge when called upon. But, don’t count on that happening. Germany has seen days where its windmills have been idle. In fact the idle windmills helped to increase natural gas prices as gas was needed to back-up low wind generation when demand accelerated due to removal of the COVID lockdowns. Europe is now in a pickle due to its energy policies that have skyrocketed energy prices. Russia’s invasion of Ukraine and its cutoff of gas supplies to Europe have exacerbated the problem. Biden’s energy policies are putting the United States in the same predicament. And, Australia’s new government may be following in those same footsteps.
Like the United States, Australia has built onshore wind farms and currently gets 10 percent of its power from them. But, its new Labor government wants to leap into the offshore wind business as it has a goal to reach net zero emissions by 2050. The government will now need to develop regulations for the industry and staff up to review and approve permits. The offshore wind industry will need to establish supply chains for equipment and obtain vessels for the installation, as well as hiring workers with the necessary skills. There are also issues with environmental and landowner concerns that may delay projects. Victoria and New South Wales seem to be the states where the most progress is expected to occur with Victoria expecting 9 gigawatts of offshore wind capacity by 2040. Despite evidence that their system is already being stressed, Australians should expect to see skyrocketing electricity prices as offshore wind is an expensive technology.