Australia is primed to harness its offshore wind potential

Australia has been more of a pioneer in wind power than many people realise. The first onshore turbines were installed near Esperance in Western Australia as long ago as 1987.  At the end of 2023, there was some 11.5 GW of installed wind power capacity nationwide. 

In the move to offshore wind, however, the country has let others take the lead. That is about to change. In May and July 2024, the Federal government awarded 12 feasibility licences for projects in the country’s first designated offshore wind zone, in Gippsland, Victoria, with a total potential of 25 gigawatts (GW).  There was no shortage of interest: 25 other bids were rejected.

Another five zones have been identified, including a 4,000 square kilometre area off the Bunbury region in Western Australia, where the bidding is open for feasibility licences for a potential 11.4 GW of capacity by 30 January 2025, after being extended twice.  Offshore wind is still the subject of strong political debate in Australia ahead of parliamentary elections in 2025. But if all six zones are eventually developed to their assessed potential, Australia’s offshore wind sector could add as much as 75.4 GW of capacity – more than doubling the country’s current installed generation of 62.1 GW. 

These kinds of numbers illustrate the importance of offshore wind in Australia’s clean energy future. Harnessing that potential will take Australia a big step closer to become a renewable energy superpower. 

Favourable conditions

Being an island, Australia has a long coastline – and a lot of ocean – at its disposal. Its climate has also resulted in most of its population ending up near the coast, near demand centres for future offshore wind assets, which reduces the cost of transmission from offshore turbines.

Offshore locations also offer operational benefits. The wind out in the ocean tends to be more reliable, given the lack of geographical obstacles. And, by blowing unobstructed for miles, it tends to generate higher wind speeds and higher capacity factors too. That means that one offshore turbine is likely to be much more efficient than the same turbine onshore, so fewer are needed to produce the same amount of power.

Supporters of offshore wind would additionally argue that the impact of installing turbines at sea is significantly less than onshore assets. The feasibility licence process involves extensive public consultations in the areas identified as having exceptional offshore wind potential, in combination with an assessment of the sites’ suitability and environmental impact.

All of which helps to explain the economic rationale for operators to install wind turbines in the sea. 

Installing assets offshore is complex and entails high upfront investment compared to onshore. But if the site conditions – wind speed, geophysical and geotechnical conditions, weather risks and wave conditions, distance from shore – are favourable, and supported by adequate site surveys and soil investigations, obstacles can be identified and taken into account in the installation. 

Even the fact that Australia is moving later than some other markets may turn out to be useful now. Today’s turbines can produce about four times the power that was possible just 10 years ago. Foundation technology and the specifications of installation vessels have also evolved accordingly. 

More to do

One of the keys to convincing developers to invest in expensive offshore technology is scale, and within the renewable world this is a unique advantage of offshore wind compared to other asset classes. 

We’ve seen how other markets in Asia Pacific have managed to harness this potential. Taiwan has been the early leader, with its first project, Formosa 1, dating back to 2018.  The island now has over 5 GW of offshore capacity in operation or under construction. These include a 376 MW project completed by Japan’s JERA, Australia’s Macquarie Asset Management and Taiwan-based Synera Renewable Energy, where Societe Generale acted as financial advisor, and more recently a 600 MW project delivered by Denmark’s CIP.  

And as financial advisor or mandated lead arranger on projects that have achieved financial close in Japan and South Korea, we’re also helping clients get the first generation of projects off the drawing board in those countries. 

There is a fundamental increasing demand for renewable energy, and offshore wind is a critical component of this growth.

But this requires overcoming a number of hurdles that are particularly acute in the current market environment. Inflation hits everything, and offshore wind technology is no exception. While the rate of offshore wind projects globally is expected to continue to grow, there has also been a necessary period of adjustment across the industry, in particular on the supply chain side, as the world transitions into a more normalised environment for the cost of capital. 

Last but not least, as for any sizeable and complex infrastructure project, procedures for granting permits have traditionally resulted in long lead times for offshore wind projects, although this has been mitigated in Australia by the well thought-through and efficient approach applied by the various authorities, at both state and federal level.

In Australia, getting to this point has involved a lot of collaboration between the state and national governments and industry – and continued cooperation will be key to establishing the viability of the sector over the long term. The Federal government’s new AUD22.7 billion (€13.9 billion) Future Made in Australia package will bring much-needed support – and local jobs – to the sector through direct investments in renewable energy technologies.  

At this pivotal moment in Australia’s renewable energy journey, the response to the next round of feasibility studies will confirm whether developers are still on board. Potential investors will still need confidence that the size of the opportunity is sufficient to make investment economical, and government will play an important part in smoothing the path for the private sector. But that path goes much further now.