The Deep Green Sea

This article is part of our New Energy Insights series from our Energy, Infrastructure and Resources team. Stay tuned for regular updates and commentary on topical issues across the sector.



An offshore green-hydrogen plant, as envisaged by Engie’s Tracetebel unit. Photo: Tractebel

On 2 September 2021, the Offshore Electricity Infrastructure Bill (the Bill) was introduced to the Australian Parliament. The Bill establishes a regulatory framework for the offshore wind industry.

Specifically, it provides a framework to licence the exploration, construction and operation of renewable energy and transmission projects in Australia’s offshore exclusive marine economic zone.

The unlocking of Australia’s offshore wind capacity not only paves the way for existing proposed offshore wind farm projects but also provides a new pathway for the development of a large-scale Australian green hydrogen industry.

For years, Australia’s vast high-quality offshore wind energy has gone to waste as there has not been the regulatory framework needed to develop the industry. While not a silver bullet, the proposed law is the first step to unlocking the enormous potential of Australia’s abundant offshore wind resources.

The framework

  • In July AEMO included in its 2021 Inputs, Assumptions and Scenarios Report (IASR) Offshore Wind Zones, triggering the tabling of the Bill.
  • The Bill provided a framework for the regulation of “offshore renewable energy infrastructure” which includes “fixed or tethered infrastructure”.
  • “Fixed or tethered infrastructure” is defined as any infrastructure, structure or installation that:
    • rests on the seabed; or
    • is fixed or connected to the seabed (whether or not the infrastructure, structure or installation is floating);
    • is attached or tethered to any other fixed or tethered infrastructure,

but does not include a vessel that is temporarily moored or anchored to the seabed.

  • The Bill provides for the following categories of licences:
    • feasibility: a competitive process is proposed whereby the Minister will select applicants based on a suitability and merit criteria to undertake investigation activities for up to 7 years;
    • commercial activities: following successful feasibility studies large scale, generation-focused projects may apply for a commercial licence for up to 40 years, with an ability to extend the term for a further 40 years.
    • research and demonstration; designed to facilitate research, testing technologies and early stage technology assessment. With a term of 10 years (with a possibility of extension) these licences cannot be converted into a commercial licence. As such we anticipate size limitations will be applied to this licence category, All infrastructure installed under this licence must be removed at the end of the licence period;  and
    • transmission and infrastructure: a separate licence will be required to construct and operate infrastructure used for transmission. The term of this licence will not be fixed and will be linked to the life of the asset
  • The Bill is based upon the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (Cth). The framework will be regulated by The National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA), while the National Offshore Petroleum Titles Administrator (NOPTA) will administer the licencing scheme.
  • The licence fee structure and quantum has not been determined and will likely be part of NOPSEMA and NOPTA’s role.

Importantly, offshore proponents will need to navigate state and/or territory requirements for licensing infrastructure in coastal waters (ie within 3 miles of shore), in addition to the usual grid connection processes in order to participate in the National Electricity Market.

A such, we understand State and Territory legislation to support the development, construction, and operation of generation and infrastructure assets in state and territory coastal waters are currently being drafted. Legislative structures vary however it appears key States will apply similar schemes to the Renewable Energy Zone frameworks and hence provide another dimension to the ongoing competition between States and Territories for renewable energy investment.

We are currently engaging with clients in relation to the mechanics of the Bill. In particular, we note international offshore wind farm developers are particularly focused on the potential gap and/or overlap between Federal and State regulation. This is a common concern from international IPPs however the regulation of coastal and Commonwealth waters adds yet another layer of complexity.

The Bill is a “framework” in the purest sense – it is a skeleton around which the specifics and detail are to be fleshed out. These specifics and details will be critical to the success of an Australian offshore wind industry. Australia has the benefit of precedent regulatory regimes in the US, UK, Europe and North Asia – learning of these jurisdictions will be critical to developing the detail and specifics required in an Australian context.

This framework has been referred to the Senate Environment and Communications Legislation Committee for inquiry who are due to report on 14 October 2021. The outcome from this review will likely set the medium term trajectory of the framework and the development of an Australian offshore wind industry.

Offshore wind opportunities

Offshore wind turbines can be constructed taller and with much larger blades compared to their onshore relatives, which boosts efficiency and capitalises on the stronger, more consistent ocean winds. Currently, offshore wind turbine designs can produce up to 15MWs each. Research conducted by the Blue Economy Cooperative Research Centre found that in some parts of southern Australia, the capacity factors of offshore wind turbines could exceed 80 % which matches the output of many of Australia’s baseload generators. For the rest of Australia, the study found that capacity factors up to 50% could be achieved.

However, as the overseas experience indicates, offshore wind provides its own significant development and operational challenges. First, offshore wind does not necessarily solve the intermittency issues that its onshore siblings face. While the quality of offshore wind is more consistent than onshore wind, there are still times where the wind does not blow. Second, the capex and opex requirements of offshore wind farms are significant. In particular, the cost of constructing the infrastructure to connect to the electrical grid, and the cost to maintain that connection can be prohibitive. This deep-water electrical infrastructure is costly to maintain and difficult to fix when it breaks. One just has to look at the Basslink outage in 2015/16 which took 6 months and a team of 100 cable experts to fix with a cost to Hydro Tasmania estimated at AUD140 to AUD180 million.

An opportunity for H2

The capex and opex costs of connecting offshore wind to the grid provide a niche for the hydrogen industry. Why connect offshore wind to the grid at all?  With an abundant, chemically consistent water source co-located with the reliable (very high capacity factor) and low-cost green electricity produced by offshore wind turbines, green hydrogen could be produced offshore either on power islands or at each wind turbine.

The oil and gas industry has already developed much of the technology required to produce and export offshore hydrogen such as semi-floating production facilities and floating production storage offloading. Australia should leverage its existing offshore oil and gas expertise to further utilise its competitive advantage in the renewable energy industry to supercharge its development as a major exporter of green hydrogen.

On the demand side, the appetite for green hydrogen is increasing. Apart from electrification, the global shipping industry is increasingly looking to green ammonia produced using green energy to fuel the shipping fleet. Currently, the shipping industry accounts for 2.9% of global CO2 emissions as an end user of fossil fuels, and with the International Maritime Organization’s (a United Nations agency) energy efficiency measures due to come into force in 2023, the shipping industry’s demand for cleaner fuels will increase dramatically.

Global examples

Internationally, offshore wind has traditionally been connected to grid-connected utility markets.  However, developers are now looking at how offshore wind can be used to power decarbonisation in off-grid scenarios. Many high-profile companies are exploring the use of offshore wind to produce green hydrogen in the North Sea.

For example, Norway has identified two zones in the North Sea for the development of up to 4.5 GW of offshore wind capacity to assist the Norwegian oil and gas industry transition to a low-carbon business model. Other countries such as Denmark, Germany and the Netherlands have large-scale industrial projects underway, all of which are focusing on how green hydrogen can decarbonise their respective economies. Presently, however, offshore green hydrogen production is cost-prohibitive relative to grey hydrogen production, but GW scale offshore wind farms may provide the economies of scale required to reduce the cost of green hydrogen

Japan is another jurisdiction where there are plans to utilise offshore wind to produce green hydrogen.  The construction of a 110 MW offshore wind farm and hydrogen facility is planned in the coastal city of Ishikari. The plan is for commercial operation to begin in March 2024 with the production of up to approximately 550 tonnes of hydrogen a year. The project participants are Hokkaido Electric Power, Green Power Investment, Nippon Steel Engineering and Air Water.

These international examples show that rather than being connected to the grid, the larger opportunity for offshore wind energy is to service the mass electrification required by the future green hydrogen industry. Offshore wind energy has the potential to be a strategic resource for offshore hydrogen production or a source of electricity for hydrogen production at port-based export facilities and local heavy industry.

So why not in Australia

With the recent announcement of the Federal Government’s Clean Hydrogen Industrial Hub grant program which will award grants up to AUD$ 3 million for feasibility and design work, and a further AUD$ 70 million for the rollout of projects, Australia is in a perfect position to capitalise on the growing global consensus that green hydrogen is the fuel of the future. Offshore wind provides a unique opportunity for Australia to produce offshore hydrogen which can be exported both domestically and internationally to electrify households or used to fuel the global shipping fleet moving goods around the globe.


The Hamilton Locke team advises across the energy project life cycle – from project development, grid connection, financing, and construction, including the buying and selling of development and operating projects. For more information, please contact Matt Baumgurtel.

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