On 19 December 2022, the Federal Minister for Climate and Energy officially declared the area in Bass Strait off the Victorian Gippsland Coast suitable for offshore wind. The declared area covers approximately 15,000 square kilometres, from Lakes Entrance in the east to south of Wilsons Promontory in the west. Based on AEMO’s latest draft 2023 Input, Assumptions, and Scenarios Report (IASR) and adjusting for the smaller REZ area, the area has a potential for 28 GW using a fixed foundation offshore wind and 47 GW using a floating foundation for a total of 75 GW of offshore wind capacity. With the significant amount of offshore wind capacity expected to be installed in this area, this Chart of the week evaluates the transmission infrastructure required to serve this new capacity in future.
This official declaration allows offshore wind developers to apply for feasibility licenses. They will help the Victorian government achieve their ambitious offshore wind targets of 2 GW offshore wind capacity by 2032, 4 GW offshore wind capacity by 2035, and 9 GW by 2040. In the Gippsland Coast area alone, there are around 10 GWs of proposed projects, three of which total 5.2 GW and have secured funding through Round 1 of the Victorian government’s energy innovation fund.
To achieve these targets, transmission infrastructure needs to be built to connect the offshore wind to the rest of the grid and deliver the energy generated from the offshore wind resources to the load centres. The first part of these infrastructure requirements is covered by the transmission schedule and plan contained in the Victorian government’s first offshore wind implementation statement. The statement shows that there should be enough time to build the required transmission infrastructure to connect the first stage of the offshore wind target by 2032.
Addressing the second infrastructure issue, the ability to actually deliver the generated energy from these offshore wind resources to the load centres is less clear when building up to the 4 GW and 9 GW targets in 2035 and 2040, respectively. In the latest Draft 2023 IASR, a 6,000 MW Gippsland transmission limit for South East Victoria is introduced to account for the generation impacts of Gippsland REZ (both onshore and offshore), Basslink, Marinus Link, and existing coal and gas plants. Figure 1 below tallies the existing generators’ installed capacity and the maximum transfer limits of the interconnectors to Tasmania. The chart uses the generator retirement schedule and interconnector build schedule from AEMO’s 2022 ISP. The optimal development path in the ISP recommends building onshore wind capacity in the Gippsland REZ up to its resource limit, which is up to 2 GW, combined with the 2 GW target by 2032 should lead to minimal curtailment based on the available transfer capacity of existing transmission infrastructure due to the expected coal plant retirements.
The transfer capacity limitation will arise when meeting the 2035 and 2040 offshore wind targets. The total installed capacity of the interconnectors (around 2 GW combined), installed onshore wind in Gippsland (2 GW), and the target offshore wind capacity (4 GW and 9 GW for 2035 and 2040, respectively) is at 8 GW and 13 GW for 2035 and 2040, respectively, will be greater than the 6 GW transmission limit of the existing transmission infrastructure. Although there is another proposed area to install the offshore wind capacity to meet its target, the South West Victoria area is already constrained due to expected onshore wind installations, based on AEMO’s 2022 ISP, as well as the energy coming from the Heywood Interconnector. Ideally, the optimal build path will change when considering the offshore wind target, and some of the onshore wind capacity required will be shifted to other REZs, but when considering Gippsland as the only option, an additional 2 GW and 7 GW of transfer capacity will be required in 2035 and 2040, respectively, to be built in order to meet the Victorian offshore wind capacity targets.
A more in-depth market analysis of the effect of the offshore wind targets can be performed using our Benchmark Power Curve, which has our 30-year energy price forecast when considering the different state renewable targets and policies. For more information on our price forecasts, please contact us at firstname.lastname@example.org.