Blow to offshore wind hopes as Origin puts $8b project on hold

The developer of a major proposed Victorian offshore wind farm has put the $8 billion project on ice as uncertainty over the economic and political viability of the industry forces key renewable energy investors to reconsider their near-term priorities.

As the Albanese government prepares to deliver a series of critical climate and energy announcements over the next fortnight, staff at the Origin Energy-backed Navigator North offshore wind farm in Gippsland have been let go after the company decided not to prioritise the project’s development, according to multiple industry sources speaking on condition of anonymity.

Other developers in Gippsland are also reconsidering their plans, the sources said, in the latest of a series of setbacks for the offshore wind sector, which is critical to Victoria’s plan to replace coal-fired power and meet its ambitious renewable energy targets.

Offshore wind does not feature in the federal government’s near-term climate or renewable energy plans, but is expected to play a role in the longer term, including in Labor’s 2035 emissions reduction target, which will be announced by the prime minister next week.

The government is set to announce a range target of at least 60 per cent or more emissions reductions on 2005 levels. The government will also publish Australia’s first national climate risk assessment next week, which is a highly detailed government study of the impacts of climate change on households and key industries.

Labor is also expected to come to an agreement with gas giant Woodside over its proposed 40-year extension to its North West Shelf gas facility in the coming days, and has been criticised by Pacific Island nations for its mixed messaging on climate issues during Albanese’s trip to the region this week.

Despite the recent collapse of several proposed offshore wind projects in other parts of the country, Climate Change and Energy Minister Chris Bowen continues to back the industry, which has the potential to generate vast amounts of power and create jobs in regional industrial hubs.

Victoria is banking on having two gigawatts of offshore wind power up and running by 2032, and four gigawatts by 2035, which underpins the Allan government’s broader goal to have 95 per cent of its electricity sourced from renewables by 2035.

However, it is locked in negotiations with the federal government over how to fund “offtake” arrangements, which provide developers with a guaranteed fixed price for electricity and are critical for locking in long-term private investment financing for the projects.

Victorian Energy Minister Lily D’Ambrosio has committed to holding an offshore wind auction this month, which would allow developers to bid for government underwriting support and potentially other funding, such as availability payments.

But the state is unlikely to reach a funding agreement with federal Labor by its declared deadline because the Albanese government wants to wait for the results of a major review of Australia’s electricity market being conducted by Tim Nelson.

The review is not expected to be finalised until the end of the year, leading many in the industry to privately express scepticism that the auction will be able to go ahead on D’Ambrosio’s schedule.

A Victorian government spokesperson said discussions with federal Labor were continuing.

“We continue to work with the Commonwealth government on support for Australia’s first offshore wind industry, which is critical to the nation’s energy security and pushing down energy bills for Victorian families,” the spokesperson said.

Project ‘not abandoned’

There are 11 proposed projects in the Gippsland zone, but only a select few are thought to be sufficiently advanced to be able to bid into an auction. Southerly Ten’s Star of the South project, the zone’s most advanced, is widely expected to bid if an auction is held.

An Origin spokeswoman said the company had not abandoned the Navigator North project, which is a joint venture with global renewables developer RES, but confirmed it did not intend to bid in the auction as it no longer planned to be operational by 2032.

“The Origin X RES Joint Venture intends to continue to progress development activities on the Navigator North project, and awaits details on future auctions for the 2035 and 2040 delivery timelines for offshore wind,” the spokeswoman said.

Only one company, BlueFloat Energy, has officially withdrawn from the Gippsland zone since the government handed out feasibility licences. Global wind juggernaut Ørsted, which has two proposed projects in the zone, has had its US projects targeted by the Trump administration and is tapping its investors for $9 billion in new capital.

Projects elsewhere in Australia have fallen over in recent years as major international backers have withdrawn their support. Norwegian oil and gas giant Equinor has abandoned four separate projects since it entered the Australian market in 2022.

However, the federal government continues to back the sector and recently issued three new preliminary licences for projects in Western Australia. Labor has also established new research licences to allow developers to keep projects going while they seek new investment backing.

Offshore wind executives and policy experts travelled to Canberra earlier this month to lobby MPs to support the industry’s progress, which included a large open-door information session attended by Bowen.

Southerly Ten chief executive Charles Rattray said that although Gippsland had ideal characteristics for offshore wind, unforeseen delays created nervousness among the financial backers of big renewable projects, and almost always resulted in upward cost revisions.

“In the case of an auction, what we are seeking to do is to line up investors, suppliers, vessel owners, skills, a whole range of inputs into that project that all need to be in place in order for that project to be delivered,” he said.

“The most important thing for getting an industry going in a new market like Australia is maintaining momentum. [It’s about] kick-starting the industry, and demonstrating to suppliers, investors, providers of skills that we’re committed and we’re heading in that direction and getting turbines into the water.”