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On 27 April 2023, applications closed for the first round of feasibility licences to be issued under the Commonwealth’s new offshore electricity infrastructure (OEI) regime. While we await the Minister’s decisions on those applications, there is much more happening in the Australian offshore wind industry. We discuss key updates, considerations for getting projects off the ground, and future law reforms which will impact on decision making.

Snapshot

  • Gippsland declared area – It is likely that some feasibility licence applicants will progress through the ‘overlapping applications’ process and may need to make financial offers, before offers of feasibility licences are made.
  • Hunter proposed declared area – Public consultation on the proposed Hunter declared area has closed. Next steps will likely be declaration of a Hunter OEI area and invitation for feasibility licence applications. We understand that a declared area will be declared within the month.
  • It is expected that some updates may be made to the regulatory guidance documents to assist applicants in the Hunter area, addressing issues identified through the Gippsland process.
  • Further regulations under the Commonwealth Offshore Electricity Infrastructure Act 2021 (OEI Act) licensing regime are expected in the coming months, including to inform preparation of management plans which are required prior to any work under a feasibility licence, and to enable applications for transmission and infrastructure licences.
  • The Victorian Government is continuing consultation on consolidated grid connections for the Gippsland and proposed Portland offshore areas.
  • A suite of environmental and cultural heritage law reform is anticipated in the next 18 months, which will impact on decision making on offshore wind projects.

Current issues for Gippsland feasibility licence applications

Multiple proponents submitted applications for feasibility licences within the Gippsland declared area in the first round. The Minister, supported by the Offshore Infrastructure Registrar (Registrar), is now assessing applications submitted against the statutory requirements and merit criteria. The Registrar has foreshadowed licences will be granted around Q4 2023.

Overlapping applications process

Resolution of overlapping claims is expected to be necessary, given the number of applications made. Where applications are made for overlapping, continuous areas, the Minister may simply determine to issue a licence to an applicant considered of ‘greater’ merit. However, if the Minister is satisfied that the applications 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’.

Applicants within an overlapping application group will be invited to revise and resubmit their applications to remove the overlap, and will be given the contact details of other applicants within the group.

If the overlaps are not resolved and the re-submitted applications are still determined to be of equal merit, the Minister may determine that the applications form a ‘financial offer group’. Applicants within that group will be invited to submit financial offers, commencing a competitive and ‘silent’ bidding process for a licence offer, with applicants able to submit only one offer. If applicants happen to submit equal highest offers, they will be invited to submit increased offers.

With no Australian precedents for successful financial offers, applicants will face the challenge of gauging each other’s financial will and capabilities, as well as government expectations.

Ongoing satisfaction of merit criteria and consolidation of proposals

Applicants must continue to satisfy the merit criteria throughout the application and approval process. Where an applicant is considering altering its ownership and/or governance structures, it should consider whether an update should be provided on the application materials, including whether any additional suitability disclosure forms are required.

Once issued a feasibility licence, licensees should also be aware of the ‘change of control’ regime under the OEI Act, which sets a relatively low trigger for a change in control to require approval for any change where a person begins or ceases to hold or control 20% or more of the voting rights or an interest in 20% or more of the issued securities. The trigger applies to shares or rights held alone or jointly. This will be relevant to structuring and investment decisions during development of a project to commercial operation.

Proposed declared area for Hunter, NSW

Consultation on the proposed declared area closed 28 April 2023. For more information on the proposed area, please see our February blog post here. The Minister will now decide whether the proposed area is suitable for OEI developments, which is a precursor to the Minister declaring an area and inviting feasibility license applications in respect of that declared area.

We saw in the Gippsland declaration process that the area declared was smaller than the area proposed, informed partly through consultation with the public, Commonwealth and Victorian Governments.

Potential applicants for the Hunter region can leverage lessons learned from the Gippsland feasibility licence application process. Future proponents should carefully consider their corporate and governance structure and prepare early for the amount of detail and supporting documentation required to be provided with an application, including Project Development Plan and funding plan.

Other priority areas

Other priority areas identified for assessment by DCCEEW are:

  • The Pacific Ocean region off Illawarra in NSW
  • The Southern Ocean region off Portland in Victoria
  • The Bass Strait region off Northern Tasmania
  • The Indian Ocean region off Perth/Bunbury, WA.

Upcoming OEI Regulations and guidance, Transmission and infrastructure licences

The OEI regime is still under development, with DCCEEW and the Registrar having prioritised the guidance on feasibility licence applications to date to align with the Gippsland feasibility licence application process.

Details of other aspects of the regime have not yet been prescribed by regulations or become the subject of guidance or approved forms. These include details relating to the management plans and financial security, both of which are prerequisites to commencing studies or works that involve fixed or tethered infrastructure under a feasibility licence. Further, approved forms for transmission and infrastructure licence (TI Licence) applications or change of control applications are not yet available.

The Registrar has foreshadowed that the next tranche of guidance documents will be released or updated in Q2 2023 to cover TI Licences. An offshore wind farm proponent will likely require a TI Licence to connect their project offshore or onshore to a substation for transmission of energy generated to the grid. A TI Licence is an additional licence requirement to a commercial licence, with a separate application process, licence conditions, obligations, fees and levies. TI Licences do not need to be within a declared area, nor require an invitation from the Minister to commence the application process. A TI Licence can overlap with another licensee’s feasibility or commercial licence, with applications required to address how the TI Licence will interact with other OEI Act licensees and other marine users.

Update on Victorian regulatory framework

In 2022, the Victorian Government set targets of at least 2 GW of offshore generation capacity by 2032, 4 GW by 2035 and 9 GW by 2040. It is currently the only state which has set formal targets for offshore wind generation.

The Government is releasing a series of implementation statements to provide policy guidance and certainty on development of the sector. The most recent Implementation Statement 2 (March 2023) (available on the OWEV website) sets out the Government’s intentions, including:

  • Procurement: to develop an optimal procurement and support package for the first tranche of offshore wind projects, floating the idea of a Contract for Difference
  • Port: develop the Port of Hastings as the primary assembly port for the first tranche of projects
  • Transmission: VicGrid (a body within the Victorian DEECA) will lead the development of transmission infrastructure, connecting offshore wind farms to the Victorian grid.

VicGrid transmission update

VicGrid has stated its immediate priority is to lead the development of transmission infrastructure that provides coordinated connection points for offshore wind developers in the Gippsland offshore declared area and the anticipated future Portland declared area in Victoria’s South West. Offshore proponents will be required to connect their project to a VicGrid connection point, although it is not yet determined whether collection will be preferred offshore or onshore.

Throughout 2023, VicGrid is consulting on development of its preferred options for connection points and transmission corridors. It undertook initial consultation in April and May 2023 seeking feedback on its engagement approach with the community throughout the consultation process (see Engage Victoria website). VicGrid is working towards publishing its preferred options in late 2023-early 2024.

Implementation Statement 3

The Victorian Government’s Implementation Statement 3 is expected late 2023, anticipated to provide further detail on procurement and workforce including guidance on local content targets.

Public land tenure

Reform to Victoria’s public land regime has also been foreshadowed for late 2023, and will potentially include provisions specifically directed to electricity cabling relevant to the offshore wind industry.

Upcoming Commonwealth law reform and guidance

Commonwealth environmental laws and policy are currently undergoing a significant review and reform process, with a number of announcements anticipated throughout 2023 and 2024, including as part of the reform of the EPBC Act and in the context of the Federal Government’s Nature Positive Plan.

Amongst the changes are proposed National Environmental Standards for Matters of National Environmental Significance (MNES). Draft Standards were released in May 2023 which were directed at ensuring that all decisions made in relation to MNES deliver net nature positive outcomes for impacted MNES. Applicants should consider these draft Standards in progressing their projects ahead of final publication, to ensure that their proposals can be assessed as meeting the Standards. It is anticipated that collection of baseline data and monitoring during feasibility and commercial licence terms are matters that may benefit from a coordinated approach between the holders of adjoining or proximate licence areas.

Standards are also proposed for environmental offsets, First Nations engagement and participation, and Community Engagement, which will impact on assessment of applications and inform associated conditions.

New legislation addressing Aboriginal and Torres Strait Islander cultural heritage is also expected in 2023, and will likely be relevant to the offshore Commonwealth marine area.

Consultation has closed on the draft guidelines proposed under the Underwater Cultural Heritage Act 2018 and final guidelines are expected in late 2023.

 

If you would like to discuss how we may assist you with your proposed project or the Australian offshore wind sector more generally, please contact your usual HSF contact or get in touch via our details below.

by Heidi Asten, Partner, Alison Dodd, Partner, Rachel Foo, Senior Associate & Paige Mortimer, Solicitor.

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Heidi Asten

Partner, Melbourne

Heidi Asten
Alison Dodd photo

Alison Dodd

Partner, Melbourne

Alison Dodd

Key contacts

Heidi Asten photo

Heidi Asten

Partner, Melbourne

Heidi Asten
Alison Dodd photo

Alison Dodd

Partner, Melbourne

Alison Dodd
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