BlueFloat pulls plug on Victorian offshore wind project after failing to find buyer

The demise of one of Victoria’s most advanced offshore wind projects will raise concerns about the viability of the state’s plan to replace coal power.

Victoria has placed offshore wind at the heart of its plan to replace the likes of the Loy Yang Power Station on the outskirts of Traralgon in southeastern Victoria. Picture: Ian Currie

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Offshore wind developer BlueFloat Energy has abandoned plans for one of Victoria’s most advanced offshore wind projects after failing to secure a buyer, dealing a fresh blow to the state’s ambitious clean-energy transition.

The Spanish-headquartered group had been quietly shopping the project, known as Gippsland Dawn, to potential buyers as its US backers cooled on the industry, but has now formally decided not to proceed after failing to attract a bidder, industry sources told The Australian.

It marks one of the first significant casualties in Australia’s nascent offshore wind sector, which has struggled to overcome investment hurdles despite being central to Victoria’s plan to phase out coal and replace it with renewable energy.

Gippsland Dawn is the first project with a granted feasibility licence to fall by the wayside. The licences were awarded only after a rigorous vetting process, with exclusive access granted to projects deemed the most commercially and technically viable.

BlueFloat confirmed its exit after The Australian publicised the demise of the Victorian project.

“Following a strategic review of current and anticipated global offshore wind market conditions, BlueFloat Energy’s ultimate shareholder Quantum Capital Group has determined that continuing to fund offshore wind developments is no longer commercially viable in the short and medium term,” the company said in a statement.

“[Quantum Capital Group] has taken the difficult decision to cease BlueFloat Energy’s global operations, including Australian based developments and the Gippsland Dawn project in particular.”

Sources familiar with the BlueFloat situation said the company remains hopeful of securing interest in its less advanced NSW offshore wind project. However, the prospects are seen as challenging as it will require floating turbines – comparatively expensive – while the development also has sizeable local opposition.

Victorian Premier Jacinta Allan. Picture: NewsWire/Ian Currie

The decision to pull the Victorian project comes just weeks after The Australian first revealed that BlueFloat was seeking a buyer and underscores the growing difficulties for offshore wind proponents trying to navigate complex regulatory, environmental and financial barriers in Australia.

Victoria has made offshore wind a cornerstone of its energy transition strategy. The state has set ambitious targets to develop two gigawatts of offshore wind by 2032, scaling up to 9GW by 2040, in a bid to replace ageing coal-fired generators and meet emissions reduction goals.

But the collapse of the BlueFloat project raises fresh questions about the viability of those targets, particularly as other developers grapple with rising costs, supply chain constraints and the slow pace of federal environmental approvals.

While onshore wind and solar projects have become the dominant source of new electricity generation in Australia, offshore wind projects are far more capital-intensive and require substantial transmission upgrades, port infrastructure and longer lead times.

The Loy Yang power station on the outskirts of the city of Traralgon, in south-eastern Victoria. Picture: Ian Currie

The offshore wind sector globally has also faced headwinds in the past year. Major developers in the US and Europe have delayed or cancelled projects due to higher interest rates, inflationary pressures and supply chain bottlenecks.

BlueFloat’s retreat follows warnings from some industry players that the Australian market may not yet be mature enough to support large-scale offshore wind developments without significant policy and financial support.

Victorian Energy Minister Lily D’Ambrosio has previously said the state remains committed to offshore wind as a key pillar of its decarbonisation agenda. However, the collapse of one of the most advanced projects could intensify scrutiny over the government’s timelines and risk management.

Ms D’Ambrosio has insisted the state government will accelerate development of the sector and will soon begin the process of a market auction eyed by developers as critical in determining the viability of many projects.

Offshore wind is considered a critical pillar of Australia’s push to achieve net-zero emissions by 2050, offering generation capacity during the evening when solar and onshore wind output declines.

For Victoria, any suggestion that offshore wind may not develop as planned would be a significant setback. The state remains one of Australia’s most fossil fuel-dependent, yet it has set the nation’s most ambitious transition targets — aiming for 95 per cent of electricity to come from renewables by 2035.

Meeting that goal will require rapid deployment of a mix of new renewable projects, but Victoria is struggling to match other jurisdictions in bringing developments online.

The 2035 target has also been complicated by a two-year delay to a critical piece of infrastructure: the VNI West transmission line.

The $3.3bn project — 240 kilometres of high-voltage cables connecting Victoria and New South Wales — is essential for moving renewable energy between the states but has been pushed back amid land access negotiations with affected property owners.

Originally published as BlueFloat pulls plug on Victorian offshore wind project after failing to find buyer