Labor defers NSW offshore wind decision, formally rejects Flotation Energy project

The decision to delay a decision on whether to award an offshore development licence in NSW until after an election frees Labor from an issue that has proved contentious.

The federal Labor government has deferred a decision over the controversial offshore wind region in NSW as it moves to sideline a politically unpopular proposal while preparing to return to the polls.

The decision to delay a decision of whether to award an offshore wind development licence in the Illawarra region frees Labor from the issue that has proved contentious, though it will dent the prospects for an industry that the government has spruiked as critical in delivering the nation’s ambition to achieve net zero emissions by 2050.

Energy Minister Chris Bowen sought to lay the blame at the ­Coalition and insisted the government remained fully supportive of offshore wind – though the decision comes just weeks after Anthony Albanese was heckled by opponents of wind farms in Wollongong, in the Illawarra.

“Offshore wind has huge potential for jobs, new industry, and clean, reliable renewable energy in the regions which have powered Australia for generations. But establishing an industry will take time,” Mr Bowen said.

The deferral decision comes as Mr Bowen announced his decision to reject an application backed by one of Japan’s largest companies.

The Australian revealed this year that Flotation Energy and its proposed Seadragon project in Gippsland had been informed it would not get a so-called feasibility licence. The Seadragon project had been widely seen as Australia’s second-most advanced offshore wind-powered electricity generation project given it held government grants and major project status.

Flotation launched legal action against Mr Bowen, arguing the minister had the capacity to alter Flotation’s proposal for a ­licence after finding a boundary overlap with Iberdrola, one of the world’s largest renewable energy developers.

Energy Minister Chris Bowen. Picture: NewsWire / Martin Ollman

The crossover was marginal, but Mr Bowen said Iberdrola had priority for the region, and a Federal Court agreed with Flotation that the government had the ­capacity to tweak the application.

The legal defeat was embarrassing for Mr Bowen, who was subsequently told by the court to reconsider the decision. Mr Bowen said he determined that Flotation would remain unsuccessful – a decision that prompted some bemusement from industry figures.

“Flotation should have had a licence last year. It had major project status and had secured plenty of grant money to accelerate development. I guess it was always unlikely that the minister would change his mind,” one senior industry source said.

While effectively killing Flotation’s Victorian plans, Mr Bowen confirmed a series of development licences to other projects in Victoria and NSW.

Morgan Rossiter, general manager of offshore wind at the Clean Energy Council – which advocates on behalf of Australia’s renewable energy sector – said the decision was critical in accelerating the transition away from coal.

“With a combined capacity of over 3GW, these projects will generate enough energy to power over two million homes or half of the Victoria and NSW industrial energy demand,” Ms Rossiter said.

Still, one of the developments awarded a licence by Mr Bowen – owned by Alinta Energy’s and JERA, Japan’s largest power generation company – faces an uncertain future, with the Coalition signalling its opposition to the ­development.

The 1.2GW Spinifex project in southwest Victoria had been earmarked as a possible clean energy source for the Portland aluminium smelter.

The smelter has capacity to produce about 358,000 tonnes of aluminium a year – more than 20 per cent of national aluminium production – but it draws about 10 per cent of Victoria’s total electrical demand.

And there is uncertainty about what will power the facility when the state’s coal power stations begin to close within the next 10 years. The possible Coalition action would be a blow to Victoria’s hopes for offshore wind.

Victoria has placed offshore wind at the heart of its plan to wean off coal. Victoria is Australia’s most fossil fuel-dependent state, relying on three major coal power stations for baseload electricity and gas to meet increased demand during winter.

Victoria is the most attractive to developers as strong winds and shallow coastlines make it ideal for offshore wind, and 12 developments are progressing early works.

The state government in 2022 set a target of generating 20 per cent of its energy needs from offshore wind within a decade.

The target then doubles to 4GW by 2035 and 9GW by 2040. In all, Victoria sees potential for 13GW of offshore wind capacity by 2050, five times the current renewable generation in Victoria.

The target has been widely heralded, but developers are concerned about the state’s capacity to financially support the industry as debt levels soar.

The state Labor government has pledged to hold the first offshore wind auction next year. Such auctions set the minimum and maximum return a developer would receive once generating electricity.

Projects typically are only viable once they have secured an agreement.

Victoria can ill-afford to sow seeds of doubt as a growing number of countries earmark offshore wind growth, which could persuade some developers that Australia is not comparative as attractive.

Originally published as Labor defers NSW offshore wind decision, formally rejects Flotation Energy project