The Situation: Australia has had no regulatory regime for offshore renewable energy projects, and therefore very little investment in this sector. In 2020, the Australian Government committed to developing a regulatory framework for offshore renewable energy projects.
The Result: On 2 September 2021, the Offshore Electricity Infrastructure Bill 2021 ("the Bill") was introduced into Australian Parliament. The Bill intends to regulate the construction, commissioning (and decommissioning), operation and maintenance of offshore electricity infrastructure projects in Commonwealth waters (beyond three nautical miles of the coast).
Looking Ahead: If passed, the Bill is expected to provide the regulatory certainty and the approvals pathways necessary to facilitate investment in Australia's offshore renewable energy sector. The Bill is expected to enable billions of dollars of investment in Australia's offshore renewable energy sector, with most of the investment expected to occur in offshore wind projects.
Despite plentiful natural resources and a healthy domestic demand for energy, Australia's offshore renewable energy sector has lagged behind comparable jurisdictions. While the offshore wind sector is mature in Europe and growing rapidly in Asia, there is currently no offshore wind or solar generation in Australia. This is in large part due to an absence of a regulatory regime for offshore renewable energy projects in Australian waters.
In early 2020, the Australian Government prepared a framework for the regulation of offshore clean energy infrastructure projects. Following consultation with industry, the Australian Government has now introduced the Bill into Australian Parliament.
The Bill seeks to establish a regulatory regime covering the full lifecycle of offshore renewable energy projects in Commonwealth waters, from initial exploration and feasibility studies, to construction, operation and transmission of power, and finally, the decommissioning of facilities. While the Bill is expected to advance the development of wind projects in particular, it is technologically agnostic, and supports emerging renewable technologies including offshore wave and solar power.
The Bill has been introduced at a critical time in which Australia is faced with the challenge of transitioning its energy mix and establishing a decentralised energy grid while delivering reliable, secure and affordable energy to consumers. Offshore wind power looks certain to play a significant role in Australia's energy mix going forward. The Australian Government has already noted that it is aware of 12 offshore renewable projects currently under consideration.
The Bill is drafted in similar terms to Australia's offshore petroleum legislation, the Offshore Petroleum and Greenhouse Gas Storage Act 2006. Indeed, Australia's existing petroleum regulator and petroleum titles administrator, NOPSEMA and NOPTA, are set to expand their portfolios and assume the roles of Offshore Infrastructure Regulator and Offshore Infrastructure Registrar respectively.
The Bill will require proponents to apply for licences to develop offshore renewable energy projects within defined offshore energy sites which have been declared by the Commonwealth Minister (known as "declared areas"). We expect the identification of potential declared areas to be industry-led, at least initially as industry identifies favourable locations for offshore energy projects. Before declaring an offshore energy site, the Minister will consider maritime navigation and national security issues.
The Bill establishes four licences: feasibility licences; commercial licences; transmission and infrastructure licences; and research and development licences. Each of the licences will confer different rights, and will only be issued following approval of comprehensive management plans and the satisfaction of eligibility requirements.
- Feasibility licences will provide proponents with an exclusive right (for an initial 7-year term) to assess the feasibility of an offshore renewable project by conducting exploration activities and feasibility studies. This licence provides a pathway to a commercial licence.
- Commercial licences will authorise proponents to construct and operate a commercial offshore renewable energy project in the licence area. Commercial licences will have an initial term of 40 years and will be available to holders of a feasibility licence.
- Transmission and infrastructure licences allow proponents to store, transmit or convey electricity (for example, from offshore facilities to land). These licences will not be confined to declared areas and are not limited to the transmission of electricity from renewable sources.
- Research and demonstration licences will authorise proponents to conduct research into, or demonstrate, emerging offshore renewable energy or electricity transmission technologies. These licences do not permit the commercialisation of renewable energy.
The stewardship and financial assurance mechanisms from Australia's offshore petroleum legislation, including the requirement to submit environmental and safety management plans, and satisfy financial and technical eligibility tests, are carried over in the Bill. Licence holders will need to provide financial security for the costs of decommissioning their projects, and transfers of licences will require approval.
The Australian Government has stated that it is aware of twelve significant offshore renewable projects that are expected to proceed if the Bill is passed. These projects have an estimated combined capacity of 25 GW and include the Star of the South, a 2.2 GW offshore wind project proposed off the Victorian coast, the Australia-ASEAN PowerLink, a $16 billion transmission infrastructure project for the export of renewable energy from Australia to Singapore, and Marinus Link, a $3.5 billion transmission project between Tasmania and Victoria.
The development and construction of these projects will present unique risks and challenges, including with respect to offshore engineering and construction, transport and logistics, and supply chain risks. Jones Day has advised on landmark offshore renewables transactions and assists clients with the management of these issues on complex projects in Australia and around the world. We will be closely monitoring the passage of the Bill through the Australian Parliament.
Three Key Takeaways
- Australia lags behind other jurisdictions in Europe and Asia in the development of offshore renewable energy projects. Developing these projects will assist with the transition of Australia's energy mix.
- The Bill seeks to provide Australian and international investors with regulatory certainty and clear approvals pathways that are necessary for long term investment in renewables projects.
- The development of offshore renewables projects in Australia will present unique challenges for proponents, including with respect to design issues, supply chain management and offshore construction.