With Australia facing the imminent shutdown of 60% of its coal-fired power stations over the next decade, the offshore wind sector is viewed as the only feasible replacement on a large scale.
Global competition for offshore wind developments is intensifying, and movements by state governments in this space now could chart the course for the industry in this country in the coming years.
Victoria, one of Australia’s most coal-dependent states, is laying the groundwork to become a major player in the offshore wind sector, a move aligned with the state's ambitious renewable energy targets.
Later this month, the government will release guidelines specifying the volume of local content that must be used in offshore wind projects.
Industry experts believe these rules could be instrumental in determining whether Australia sidesteps the high-profile setbacks experienced in other countries.
Strategic shift and targets
The state is striving to shift 20% of its electricity generation to renewable sources within the next decade.
The long-term vision includes generating 4 gigawatts (GW) from offshore wind by 2035 and ramping up to 9GW by 2040. The state foresees a potential for up to 13GW of offshore wind energy by 2050.
Global energy conglomerates like Orsted, Shell (LON:RDSa) and RWE, along with local giants Macquarie, Origin Energy and AGL Energy (ASX:AGL), are already in the queue for licences to develop offshore wind projects in the region.
Balancing local content requirements
The forthcoming local content mandate aims to ensure that a significant amount of Australian-produced materials are used in these projects. But industry experts caution that an excessively high mandate could stifle growth.
There is also much conjecture about how the state will structure its offshore wind market, given failures in other countries like the UK and Taiwan. The industry has voiced concerns that Victoria should take note of these global lessons to avoid similar pitfalls.
Later this year, the state is expected to provide additional guidelines on revenue models for developers.