To: Chris Bowen, Minister for Climate Change and Energy of Australia  

Problem to Solve: Net-Zero Emissions by 2050  

Australia’s commitment to net-zero emissions by 2050, with an intermediate step targeting a 43% emissions reduction by 2030, necessitates the rapid expansion of renewable energy sources. The technical capacity of Australia’s wind resources is estimated at over 4,000 GW, which far exceeds Australia’s current energy needs (IEA, 2019). Approximately 50% of wind resources are located in areas with deep water such as the Bass Strait. 

Offshore wind development in Australia is expected to take 8-10 years, comprising 3-5 years in early-stage feasibility assessment followed by a 3–5-year construction process (Arup, 2022). Additionally, the high upfront capital cost of offshore wind projects combined with limited bespoke offshore wind infrastructure in the regions adjacent to the Bass Strait may deter private investors and developers without government support.    

To unlock this potential, the Australian Government must implement regulatory reforms, invest in grid infrastructure, and offer financial incentives to attract private investment. With the right policy mix, outlined in the next section, offshore wind in the Bass Strait can not only help Australia meet its climate goals but also drive economic growth, job creation, and position the country as a leader in offshore wind.  

Recommendations & Strategy  

1. Streamlined Regulatory Processes: Government should establish a “one-stop shop” centralized agency to fast-track permitting process for offshore wind to reduce the average approval times from 3 years to 1 year and allow concurrent rather than sequential processes and assessments. Clear interim goals for reducing approval times should be set with regular reporting and remediation.  

2. Subsidies and Grants: Introduce a Production Tax Credit offering AUD27.50 per megawatt hour (MWh) generated for the first ten years of operation, which would potentially expand developer earnings by over 50% for a given 2 GW project. Additionally, implement an Investment Tax Credit of 30% on capital costs. Lastly, the Government should establish a dedicated fund of approximately AUD500m for grants aimed at covering initial development costs such as feasibility studies and environmental assessments which would lower financial barriers for developers and encourage more companies, both local and foreign, to invest in offshore wind projects in Australia.  

3. Grid Connection Support: Investment in transmission infrastructure is crucial. The Government should allocate up to AUD1bn for grid upgrades to connect offshore wind farms to the national grid, such as the proposed Marinus Link consisting of approximately 250km of undersea High Voltage Direct Current cables to connect Tasmania and Victoria.  

4. Port and Logistics Support: Enhancing port facilities to accommodate construction and maintenance operations is required. A proposed investment of AUD200m for larger turbine berths and improved logistical efficiency will reduce construction costs and timelines for developers.  

5. Research and Development: Allocating AUD100m annually for research into advanced turbine technologies and energy storage solutions can drive innovation and reduce costs over time. Partnering with Victorian institutions like the University of Melbourne or Monash University can help foster research initiatives that focus on optimizing offshore wind energy generation techniques.  

6. Market Mechanisms: The Government could establish a framework to encourage corporations, especially those aiming for sustainability goals, to enter into Purchase Power Agreements (PPAs) with offshore wind projects. Additionally, the Government should expand the Capacity Investment Scheme (CIS), which underwrites projects contributing to Australia’s renewable energy targets, to complement ITCs and PTCs as a financial support framework to attract investment and reduce costs.    

By implementing these mechanisms, the Australian government can significantly enhance the attractiveness of offshore wind projects in the Bass Strait. The Government should also set ambitious targets, such as at least 5 GW new capacity by 2035, and optimize the mix of support over time to ensure this target is met.  

This policy proposal could generate 21.9 million MWh per year and yield abatement of 8-9 million metric tons of CO2 annually for every 5 GW of added offshore wind capacity assuming a capacity factor of 50%. The average emissions intensity of Australia's grid is 0.8 tons of CO2 per MWh (based on the Australian Government’s National Greenhouse Accounts Factors) therefore offshore replacing fossil fuels would abate 8.75 tons of CO2 per year, which imputes a 50% haircut to account for grid integration and transmission constraints.    

Economic, Social and Environmental Benefits  

1. Cost Advantages: The Bass Strait has large areas with depths of less than 50 meters, making it suitable for fixed-bottom wind turbines which are cheaper than floating turbines. Consistently high wind speeds averaging 8-10 meters per second similarly enhance project economic viability. Larger turbines and more consistent wind levels compared to onshore wind, which are subject to diurnal and seasonal variability, enables more stable long-term energy generation.  

2. Job Creation and Economic Growth: Offshore wind development would generate significant employment opportunities. The construction and maintenance of wind farms could create up to 14,000 jobs over the next decade (AEMO, 204).  

3. Emissions Reduction: Offshore wind is one of the cleanest forms of energy. For every MWh of electricity generated by offshore wind, more than 500kg of CO2 emissions are avoided (AWEA, 2024).  

4. Economic Feasibility: The cost of offshore wind energy has decreased by more than 60% globally over the past decade, with some projects now producing electricity under AUD80 per MWh (NREL, 2023). The availability of mature technologies and economies of scale means that Bass Strait projects could be competitive with other energy sources by the late 2020s.  

5. Energy Security and Grid Stability: Wind speed and consistency provide a stable and predictable energy source, complementing onshore wind and solar, and is close to areas that are over-indexed on coal-fired gas plants including Victoria and Tasmania. This proximity will help reduce transmission costs, improve grid integration, and accelerate phase out of coal and gas plants.  

6. Support Green Hydrogen Production: Excess offshore wind energy can be used to produce green hydrogen via electrolysis, which provides clean energy for hard-to-decarbonize sectors such as heavy industry, shipping, and aviation.    

Conclusion  

Offshore wind in the Bass Strait represents a transformative opportunity, in terms of both opportunity scale and benefit, to accelerate Australia’s transition to a net-zero emissions economy. The Bass Strait, aided by some of the world’s best wind resources, can deliver reliable, large-scale renewable energy to anchor a stable and decarbonized electricity grid.  

By adopting these recommendations, Australia can expect to see significant job creation while also achieving its ambitious renewable energy targets. Targeting 5 GW of offshore wind capacity by 2035 will not only help meet domestic energy needs but also position Australia as a leader in the global renewable energy market.  

The successful implementation of offshore wind farms in the Bass Strait is not just an environmental imperative; it is an economic opportunity that can drive innovation, create jobs, and ensure a sustainable future for Australia. By committing to these strategies now, the Australian government can pave the way for a cleaner, greener energy landscape that benefits all Australians while contributing to global efforts to combat climate change.

References  

Teske, Sven. “Offshore wind could make Australia an energy superpower.” University of Technology, Sydney (UTS) Institute for Sustainable Futures, 17 August 2021. https://www.uts.edu.au/isf/news/offshore-wind-could-make-australia-energy-superpower  

Electricity Generation by Fuel Type 2021-22. Department of Climate Change, Energy, the Environment and Water, 15 June 2023. https://www.energy.gov.au/publications/australian-energy-statistics-table-o-electricity-generation-fuel-type-2021-22-and-2022  

Norton Rose Fulbright. “Global Offshore Wind: Australia,” 10 January 2024. https://www.nortonrosefulbright.com/en/knowledge/publications/ec2a685f/global-offshore-wind-australia  

International Energy Agency (IEA) Offshore Wind Outlook 2019. https://www.iea.org/reports/offshore-wind-outlook-2019  

Arup Report. “Australian Offshore Wind Market Study, Supply Chain Assessment and Gap Analysis,” United Kingdom Government, 6 July 2022. https://www.arup.com/globalassets/downloads/services-and-tools/ports-and-the-energy-transition/australian-offshore-wind-market-study.pdf    

Australian Energy Market Operator (AEMO). (2024). Future Energy Scenarios: Offshore Wind Integration. https://aemo.com.au/-/media/files/major-publications/isp/2024/2024-integrated-system-plan-isp.pdf?la=en  

American Wind Energy Association (AWEA). The Clean Air Benefits of Wind Energy, May 2014. https://cleanpower.org/wp-content/uploads/gateway/2021/01/AWEA_Clean_Air_Benefits_WhitePaper.pdf 

National Renewable Energy Laboratory (NREL). 2022 Cost of Wind Energy Review, December 2023. https://www.nrel.gov/docs/fy24osti/88335.pdf