5 September 2024 • 26 minute read

Offshore wind development and regulation in Australia

Overview

The Offshore Electricity Infrastructure Act 2021 (Cth) (the OEI Act) and associated regulations, including the Offshore Electricity Infrastructure Regulations 2022 (Cth) (the OEI Regulations) set out a licensing scheme which, depending on the licence, enables a licence holder to construct, install, commission, operate, maintain, decommission, and assess the feasibility of, offshore renewable energy infrastructure (including offshore wind infrastructure) in certain areas of Australian Commonwealth waters. Australian Commonwealth waters generally cover the area from three nautical miles to 200 nautical miles off the coastline of Australia, meeting the outer boundary of Australia’s exclusive economic zone.

Declared areas

The Department of Climate Change, Energy, the Environment and Water (the Department) advises the Minister for Climate Change and Energy of Australia (the Minister) on areas it considers suitable for the development of offshore renewable energy infrastructure.

Before the Minister declares an area as suitable, public consultation on the proposed area is open for at least 60 days for consideration of factors, for example, other marine users. The Minister must also consult with the Commonwealth Ministers responsible for defence and navigation laws. The Minister may then declare an area as suitable for offshore renewable energy infrastructure and invite applications for a feasibility licence from interested parties. The invitation will specify a closing date for submissions, which is approximately 60-90 days after the invitation is issued, depending on the declared area. The invitation may also specify other requirements to be addressed by a licence application.

As at the date of this article:

Location	Maximum area	Status
Off Gippsland, Eastern Victoria	15,000km2	Declared offshore wind area. Feasibility licences have been granted.
Off Burnie to Bridport, Northern Tasmania	10,136km2	Proposed offshore wind area. Public consultation completed. Ministerial consideration of final area.
Off the Bunbury region, Western Australia	3,995 km2	Declared offshore wind area. Open for feasibility licence applications from 3 September 2024 to 6 November 2024.
Off the Hunter Region, New South Wales	1,854km2	Declared offshore wind area. A preliminary decision has been made for feasibility licence applications received.
Off Warrnambool and Port Fairy, Western Victoria	1,030km2	Declared offshore wind area. Assessment of feasibility licence applications.
Off Illawarra, New South Wales	1,022km2	Declared offshore wind area. Assessment of feasibility licence applications.

The frequency with which areas are declared and licences are awarded varies – there is no set schedule. The process for assessing and declaring areas suitable for offshore wind is generally at the Department and the Minister’s discretion. Consideration of areas for declaration is informed by public consultation and has regard to the need to balance factors like industry interest and readiness, as well as the suitability of conditions for offshore renewable energy infrastructure. Interested parties can nominate sites they would like the Department and the Minister to consider.

In general, licences for offshore renewable energy infrastructure are only granted in declared areas. The exception to this is offshore transmission infrastructure, which does not need to be in a declared area.

Types of licences

Four types of licences may be granted under the OEI Act:

Feasibility licence (Chapter 3, Part 1, Div 2 of the OEI Act): a feasibility licence will remain in force for up to seven years and permits the licence holder to assess the feasibility of an offshore renewable energy infrastructure project that the licence holder proposes to carry out in the feasibility licence area under a potential future commercial licence.
Commercial licence (Chapter 3, Part 1, Div 3 of the OEI Act): a commercial licence permits the licence holder to carry out a commercial project for the purposes of utilising renewable energy resources for a period of up to 40 years. The full guidelines for administration of these licences are still under development.
Research and demonstration licence (Chapter 3, Part 1, Div 4 of the OEI Act): a research and demonstration licence (an R&D licence) permits the licence holder to conduct research relating to the feasibility or capabilities of a technology, system or process, to demonstrate the capabilities of a technology, system or process, and to conduct research relating to the exploitation of, or exploration for, renewable energy resources for a period of up to 10 years. The full guidelines for administration of these licences are still under development.
Transmission and infrastructure licence (Chapter 3, Part 1, Div 5 of the OEI Act): a transmission and infrastructure licence (a T&I licence) permits the licence holder to carry out an offshore transmission infrastructure project to store, transmit or convey electricity, or a renewable energy product, in or through the licence area (or assess the feasibility of such activities). The Minister determines the term of a T&I licence. and the full guidelines for administration of these licences are still under development. The Department consulted on draft guidelines in respect of T&I licences from 22 April 2024 to 7 Jun 2024.

Licence applications

Interested parties can only apply for a feasibility licence or an R&D licence in an area after the Minister has declared the area as suitable, in accordance with the process outlined above, and after the Minister has invited applicants to apply for a feasibility licence or R&D licence (as relevant) in respect of all or part of the declared area. A person can only apply for a commercial licence if they hold a feasibility licence in respect of the area for which the commercial licence is sought (section 41(1) OEI Act) – though granting a feasibility licence does not guarantee a commercial licence will be granted.

As noted above, T&I licences are not required to be in a declared area, nor is there a requirement for a T&I licence holder to be a feasibility licence holder or a commercial licence holder. The timing of the application and approval process for the T&I licence is deliberately intended to be flexible to fit in with broader project development timing, given that the T&I licence will in most instances be used by proponents for the export cable from the offshore generation site to the onshore grid connection.

The Offshore Infrastructure Registrar (the Registrar) administers the licensing framework, including managing the licence application process and providing advice and recommendations to the Minister on licence applications, monitoring licence compliance and maintaining a register of licences.

Upon receipt of a feasibility licence application, the Registrar will review the application against the minimum application submission requirements under the OEI Act and the OEI Regulations. The Registrar will check that, amongst other things:

the applicant is an eligible person (as defined in section 8 of the OEI Act);
the application is made in the approved manner and form (as well as by the day specified in the invitation);
the application fee has been paid (section 46 of the OEI Regulations) – as at the date of this article, the application fee for a feasibility licence is AUD300,000;
there is a description of the proposed offshore renewable energy infrastructure project and licence area; and
the application is accompanied by any other information or documents required by the approved form or any other information or documents otherwise specified in the invitation to apply.

As at the date of this article, the Australian Government has granted 12 feasibility licences for offshore renewable energy infrastructure projects in the declared area off Gippsland, Eastern Victoria:

High Sea Wind Pty Ltd;
Gippsland Skies Pty Ltd;
Blue Mackerel North Pty Ltd;
Kut-Wut Brataualung Pty Ltd;
Ørsted Offshore Australia 1 Pty Ltd (Gippsland 01);
Star of the South Wind Farm Pty Ltd (SOTS);
Iberdrola Australia OW 2 Pty Limited (Aurora Green);
Gippsland Dawn OWP Project Pty Ltd (Gippsland Dawn);
Navigator North Project Pty Ltd;
Ørsted Offshore Australia 1 Pty Ltd (Gippsland 02);
Kent Offshore Wind Pty. Ltd.; and
Great Eastern Offshore Wind Farm Project Co Pty Ltd

As at the date of this article, out of the eight applications that were received for feasibility licences in the declared area off the Hunter Region, New South Wales, only Novocastrian Wind Pty Ltd has advanced to the next stage of the feasibility licensing process.

Merit criteria

As at the date of this article, the Department has published a guideline that provides information to help feasibility licence applicants understand the requirements and processes for the feasibility licensing process under the OEI Act and OEI Regulations (the Feasibility Licence Guideline). The Feasibility Licence Guideline has been updated several times since December 2022 when it was first published.

A person must be an eligible person to apply for a feasibility licence. Section 8 of the OEI Act provides that an eligible person is a body corporate that has a registered office in Australia, or a body corporate established for a public purpose by or under a law of the Commonwealth or a State or Territory.

For a feasibility licence to be granted to an eligible person, the Minister must be satisfied that the eligible person meets the merit criteria specified in the OEI Act and the OEI Regulations, including:

The eligible person is likely to have, or be able to arrange to have, the technical and financial capability to carry out the proposed offshore renewable energy infrastructure project, including an assessment of the technical advice available to the eligible person and the financial resources available.
The proposed offshore renewable energy infrastructure project is likely to be viable, including an assessment of the complexity of the project, its route-to-market and estimated commercial return.
The eligible person is suitable to hold the licence, including assessing their past project performance, past financial performance (which will include an assessment of experience in relation to prior and current offshore or large-scale infrastructure projects of a similar size) and corporate governance arrangements (notably, this may include inquiry as to suitability of entities having control of the applicant, contemplating the possibility of enquiries up the corporate structure).
Any criteria prescribed by the licensing scheme are satisfied, including that the proposed project is in the national interest which involves, amongst other things, an assessment of the project’s impact on the Australian economy (as well as local communities), impact to national security and whether the project is likely to be delivered within a reasonable time.

Overlapping applications

If the Minister (having regard to the advice of the Registrar) is satisfied that there are overlapping applications that are of equal merit and that, if not for the overlap, a feasibility licence could be offered for each of the applications, the Minister may determine that the applications form an “overlapping application group.”

The Registrar will notify applicants who fall within an “overlapping application group” and invite them to revise and resubmit their applications to remove the overlap.

The notice and invitation given to an applicant must set out:

the area(s) of overlap;
the name of the other applicant(s) whose application(s) overlaps with the applicant’s application; and
the kind of project(s) that such other applicant(s) propose to carry out.

Each individual applicant of an “overlapping application group” does not need to overlap each other applicant of the “overlapping application group”. For example, if Applicant A overlaps Applicant B, and Applicant B overlaps Applicant C, but Applicant A and C do not overlap each other, nevertheless Applicants A, B and C are all part of the same “overlapping application group”.

The notice and invitation from the Registrar may also include such other information as the Registrar considers reasonable about the overlapping applications, and other applications that cover areas adjacent to, or nearby, the area covered by the applicant’s application.

This latter point is important because an applicant in the “overlapping application group” will be entitled to revise its application so that the licence area to which the revised application relates is not limited by reference to that in the original application. In doing so, an applicant may create new overlaps with adjacent or nearby licence areas proposed in other applications, and those new overlaps will then also need to be reviewed and avoided.

Revised applications

A revised application must, to use the language in the OEI Regulations, “remove the overlap”. This means that, at the very least, the proposed licence area specified in the revised application must have changed to remove the spatial overlap with the proposed licence area of any other application.

Otherwise, the OEI Regulations provide that a revised application must, so far as is reasonably possible, remain “substantially similar” to the original application. In assessing what “substantially similar” means, the Registrar may take into account anything it considers relevant, including the location, shape and size of the original and revised proposed licence areas, and the details of the original and revised proposed projects.

The Feasibility Licence Guideline states, by way of example, that:

“A proposed 1 GW wind project with a licence area of 500 km² should remain substantially a 1 GW wind project with a licence area of 500 km² after any application revisions, and any proposed relocation should be for the minimum distance necessary to resolve any overlaps with other applications.”

Competition law risks

While not expressly contemplated by the OEI Act or the OEI Regulations, the need for revision of applications creates incentives for applicants in an “overlapping application group” to coordinate in preparing their revised applications and remove the overlap in their proposed licence areas. Such coordination will generally entail competition law risks under Part IV of the Competition and Consumer Act 2010 (Cth), including in particular a risk of breach of the criminal and civil prohibitions against cartel conduct.

The Registrar has released an FAQs document on the feasibility licence process, where it states that:

“Applicants must comply with all relevant legal obligations, including those set out in Part IV of the Competition and Consumer Act 2010 (the Competition and Consumer Act), whether for the purposes of collaboration to resolve a feasibility licence application area overlap or any other purpose.

If collaboration by applicants is limited to working out how to revise their applications in order to remove overlaps and avert the need for the Minister to follow the financial offer process, then such collaboration, in and of itself, will not cause applicants to contravene Part IV of the Competition and Consumer Act, which prohibits anti-competitive practices.

Any communication or collaboration which goes beyond the process outlined in the OEI Regulations to matters such as bid-fixing or price fixing could constitute a breach of the Competition and Consumer Act. For this reason, it is important for applicants to understand their obligations under both the OEI Regulations and the Competition and Consumer Act. If an applicant remains concerned, they should seek independent legal advice and/or contact the Australian Competition and Consumer Commission prior to commencing conversations with other applicants.”

On 15 March 2024, the Department applied to the Australian Competition and Consumer Commission (the ACCC) for authorisation on behalf of itself, the Registrar and renewable energy businesses applying for feasibility licences (together, the Parties), to communicate, propose, enter into, and give effect to, agreements until 15 March 2027 for the purpose of removing overlaps in feasibility licence applications (the Application).

Five days later, the ACCC granted interim authorisation to the Parties to communicate, propose, enter, and give effect to, agreements for the purpose of removing overlaps in their feasibility licence applications for the declared areas off Gippsland, Eastern Victoria, and the Hunter Region, New South Wales. On 4 July 2024, the ACCC issued a draft determination proposing to grant authorisation until 15 March 2027. On 28 August 2024, the ACCC issued a final determination granting authorisation until 15 March 2027. The conduct authorised is not limited to the declared areas off Gippsland, Eastern Victoria, and the Hunter Region, New South Wales. If no application for review is made to the Australian Competition Tribunal, then the determination will come into force on 19 September 2024.

The final determination states that communications will be limited to the exchange of geographical information concerning the licence areas and any agreements proposed, entered into, or given effect, will only be permitted to the extent that they do not involve the exchange or transfer of anything of monetary or commercial value (save for obligations of confidence, geographical information or agreements on geographic scope).

Financial offer

If overlapping applications are not resolved by revision within the allowed revision period, the process moves to a final ‘tie-break’ financial offer stage, whereby the Minister may determine that the applications form a “financial offer group.”

If the Minister determines that a “financial offer group” exists, the Minister may invite applicants to submit financial offers in relation to their respective applications.

The Minister may only then grant a feasibility licence to the highest financial offer. If, in the unlikely event that two financial offers are tied for the highest financial offer, those applications will be invited to submit a second offer.

The Minister may only grant the feasibility licence once the amount of the financial offer has been paid to the Commonwealth. The financial offer must be paid even if it subsequently becomes clear that there are no overlapping applications (because all other applicants withdrew their overlapping applications).

Before granting a licence to an applicant, the Minister must first provide a written offer specifying the area, term, and conditions. If the offer is accepted by the applicant in the manner and within the time period specified, the licence will be granted to the applicant.

Recourse for unsuccessful applicants

The Minister can refuse to offer to grant a feasibility licence if:

the application does not meet the OEI Act or the OEI Regulations, including the Minister is not satisfied the applicant meets the merit criteria; or
the application does not meet the application requirements.

Section 43 of the OEI Regulations provides that procedural fairness may apply to certain applications where a decision-maker proposes to decide to refuse an application, including a decision not to offer to grant a licence (other than a feasibility licence). A decision by the Minister under sections 42 (Grant of commercial licence), 52 (Grant of research and demonstration licence) and 61 (Grant of transmission and infrastructure licence) of the OEI Act may be subject to an application for review made to the Administrative Appeals Tribunal (see section 297 of the OEI Act).

There is no recourse under the OEI Act for a decision not to grant a feasibility licence. Unsuccessful applicants will need to consider what other recourse, outside the OEI Act, may exist at law.

Other OEI Act requirements

The Offshore Infrastructure Regulator (the Regulator) is responsible for work health and safety, infrastructure integrity, environmental management, financial security and regulation of day-to-day operations in respect of offshore renewable energy infrastructure.

To construct, install, commission or operate any offshore renewable energy infrastructure or offshore transmission infrastructure in a licence area, a licence holder must obtain approvals from the Regulator including, but not limited to, approval of a management plan. In addition, it must lodge the required financial securities (see sections 31, 117 and 118 of the OEI Act).

MANAGEMENT PLAN

Management plans must detail how the offshore renewable energy infrastructure activities will be carried out. They need to be submitted by the feasibility licence holder and assessed and approved by the Regulator before a commercial licence can be granted and may also be required before activities are undertaken under a feasibility licence (depending on the nature of the activities).

Management plans must contain all measures to support compliance with the OEI Act requirements (including environmental management, work health and safety, infrastructure integrity, emergency management, and consultation arrangements), and must also demonstrate how activities will be undertaken in accordance with approvals required under other legislation.

As at the date of this article, the Department is developing more detailed regulations and guidance around management plan requirements, which will be finalised once the Offshore Electricity Infrastructure Amendment Regulations 2024 (Cth) receives Royal Assent.

FINANCIAL SECURITY

Section 117(1) of the OEI Act provides that a licence holder for which there is a management plan must, at all times while the licence is in force, provide the Commonwealth with financial security sufficient to pay any costs, expenses and liabilities that may arise in connection with, or as a result of:

decommissioning;
removal of equipment and other property; and
remediation of the licence area, vacated areas and any other affected areas.

As at the date of this article, the Department is developing more detailed regulations and guidance around financial security requirements, which will be finalised once the Offshore Electricity Infrastructure Amendment Regulations 2024 (Cth) receives Royal Assent.

Levies

As at the date of this article, and pursuant to section 5 of the Offshore Electricity Infrastructure (Regulatory Levies) Regulations 2022 (Cth) (the Regulatory Levies Regulations), the levies payable by a feasibility licence holder, for each period of 12 months for which the licence is held, are:

annual licence levy – AUD120,000 plus AUD1,000 per 10 km2 (or part thereof) of licence area over 100 km2;
annual compliance levy – AUD100,000 plus AUD5,000 per 10 km2 (or part thereof) of licence area over 100 km2; and
annual Commonwealth levy – AUD513,342.

The levies payable by a commercial, research and demonstration, and transmission and infrastructure licence holders differ in quantum but follow the three-pronged levy approach above. The amounts are specified in sections 6 to 8 of the Regulatory Levies Regulations.

Environmental and other approvals

In addition to the licensing requirements under the OEI Act and the OEI Regulations, proponents will need to consider obtaining the relevant environmental approvals in respect of any proposed offshore activities.

The Environment Protection and Biodiversity Conservation Act 1999 (Cth) (the EPBC Act) is administered by the Department and is the primary piece of legislation for the management and assessment of environmental protection in Australian Commonwealth waters. It provides for the protection of matters of national environmental significance (MNES) which include Australian Commonwealth waters and threatened and migratory species. Any offshore renewable energy infrastructure project that will have, or is likely to have, a significant impact on any MNES must be referred to the Department to determine if it is a “controlled action” (as defined in the EPBC Act) requiring Commonwealth approval.

Activities that require environmental approvals may not be limited to infrastructure developments, it may also include preliminary research and testing activities which assist the proponent in determining feasibility.

Obtaining approval under the OEI Act does not secure the proponent approval rights under the EPBC Act or any other environmental legislation.

Once an EPBC Act approval or other environmental approval has been secured, any conditions applied to the approval need to be satisfactorily addressed by the proponent in the management plan.

Depending on the location of the project, proponents will also need to obtain and incorporate other approvals and consents into their management plan, including, for example, cultural heritage, native title and Department of Defence consents.

Grid connection

An important part of any offshore renewable energy infrastructure project will be, for east coast projects, connection to the Australian national electricity market (the NEM) and, for west coast projects, the Wholesale Electricity Market (the WEM).

Onshore grid connection to the NEM is regulated under the National Electricity Rules, and onshore grid connection to the WEM is regulated under the Wholesale Electricity Market Rules, both of which are administered by a Commonwealth body, the Australian Energy Market Operator (AEMO). The grid connection process itself involves the proponent engaging with local network service providers, which (depending on the state or territory) are either state-owned or private-owned corporations. The rules include stringent processes and procedures for grid connection.

As at the date of this article, there are no grid connections, or onshore transmission corridors specifically for offshore wind. Given jurisdictional responsibilities, state and territory governments will be coordinating development of grid connection points and transmission corridors. Victoria is leading the way:

Amendments to the National Electricity (Victoria) Act 2005 (Vic) were passed on 2 May 2024 to implement the first stage of the Victorian Transmission Investment Framework reforms, including requiring VicGrid to publish the first Victorian Transmission Plan by 31 July 2025.
Amendments to the Land Act 1958 (Vic), the Crown Law (Reserves) Act 1978 (Vic), the Forests Act 1958 (Vic), the National Parks Act 1975 (Vic) and the Electricity Industry Act 2000 (Vic) passed on 7 May 2025 by the enactment of the Energy and Public Land Legislation Amendment (Enabling Offshore Wind Energy) Act 2024 (Vic) (the Enabling Offshore Wind Energy Act). As noted earlier in this article, offshore renewable energy infrastructure projects will be positioned in Australian Commonwealth waters. However, offshore transmission infrastructure will need to cross public land. The Enabling Offshore Wind Energy Act will allow developers to obtain tenure over public land up to three nautical miles from the coast in order to investigate suitable locations for offshore transmission infrastructure.

The Victoria Government and New South Wales Government continue to work in this area and develop further legislation and policy that will complement the Commonwealth licensing framework outlined above and (hopefully) ensure timely but non-duplicative, lower-cost and lower-impact grid connection and onshore transmission.

Government funding

The Commonwealth Government’s AUD20 billion ‘Rewiring the Nation plan’ allocates AUD19 billion to priority transmission projects. This follows AEMO’s ‘Integrated System Plan’ which describes, amongst other things, where additional transmission, generation and storage infrastructure is needed in the NEM as coal-fired generation retires. The Commonwealth Government appears to be working closely with state and territory governments to accelerate Australia’s clean energy transition. The Commonwealth Government has committed:

AUD2.25 billion of concessional financing to Victoria projects, which will go towards renewable energy zones, renewable energy infrastructure projects and the Victoria-New South Wales Interconnector; and
AUD4.7 billion to New South Wales transmission projects, which will also go towards the Victoria-New South Wales Interconnector, as well as the HumeLink, the Sydney Ring and renewable energy zones (including in the Hunter Central Coast).

The Victorian Government has established the ‘Energy Innovation Fund’ to support innovative renewable energy technologies through, for example, feasibility studies, pilots or demonstrations. Round 1 of delivery of the fund was focused on offshore wind during which three proposed offshore renewable energy infrastructure projects were successful in securing funding totalling AUD37.9 million:

The Seadragon Offshore Wind Farm (Flotation Energy) was awarded AUD2.3 million.
The Great Southern Offshore Wind Farm (Macquarie Group) was awarded AUD16.1 million.
The Star of the South Offshore Wind Farm was awarded AUD19.5 million.

The Victorian Government is now developing its proposed offshore wind support package which includes a Contract for Difference plus availability-style payments, to ensure projects are bankable. The Victorian Government has flagged that this will involve running an auction process, with an Expression of Interest (EOI) phase targeted to commence in Q4 2024 and close in Q1 2025, Request for Proposal (RFP) phase targeted to commence in Q3 2025 and close in Q1 2026, and contract negotiation and award expected later in 2026.

Additionally, in the 2024-2025 Victorian budget, AUD18 million has been allocated to plan for offshore wind generation projects and AUD17 million has been allocated to design a renewable energy terminal at the Port of Hastings, where infrastructure for offshore wind farms can be assembled.

In the 2024-2025 New South Wales budget, AUD128.5 million has been allocated to upgrade roads from the Port of Newcastle to renewable energy zones. Moreover, a total of AUD3.1 billion has been allocated to deliver such renewable energy zones, including the Hunter Central Coast.

In due course, to support further industry investment and to help offshore renewable energy infrastructure projects reach financial close, it is likely that further Commonwealth, state and territory government subsidy schemes and funding will be required. The nature and extent of these subsidies and Government funding remain to be seen and will be dependent to some extent on how the industry develops during the feasibility phase, over the next five to ten years.