Winds of change: implementation of offshore wind, onshore connections and the social licence to operate

By Meg Lee

Energy and excitement are in the air, as well as some trepidation, over the development and facilitation of the new Victorian offshore wind sector. The release of ‘Offshore Wind Implementation Statement 1’ highlights some of the many moving parts that need to come together for the sector to take off, including the establishment of a new Offshore Wind Office, development of new land-side connection points and transmission infrastructure, as well as important port upgrades. The social licence to operate will be key to the success of the industry. We share our insights in this article.

What is the current energy market context?

When the ‘Offshore Wind Policy Directions Paper’ was released in March, the Victorian Government set ambitious targets to bring online two gigawatts (GW) of offshore wind capacity by 2032, 4GW of capacity by 2035 and 9GW of capacity by 2040. To put this in context globally, there is currently an installed offshore wind capacity of 35GW, which is expected to rise to over 100GW by 2025. In releasing the Implementation Statement, the Hon. Lily D’Ambrosio MP highlighted the potential for 6,000 jobs to be created in both construction and ongoing operations in developing the new sector.

The Implementation Statement follows a review of the feedback received when the Offshore Wind Policy Directions Paper was released for consultation. Much of the feedback related to the need for a coordinated and streamlined approach to approvals as between the State, the Commonwealth and local Councils, including the need to coordinate the onshore connection to the grid. Local communities gave feedback that they needed to be provided with opportunities to benefit and that they wanted to ensure the environmental and amenity impacts of associated onshore infrastructure are minimised.

The release of the Implementation Paper also comes at a time when the Western Victoria Transmission Network Project (recently rebranded Western Renewables Link) is facing significant community opposition from communities who consider they are bearing the burden of the transition to Net Zero through the installation of the transmission network on private land.

The Australian Energy Market Operator (AEMO) acknowledges the need for a social licence for the infrastructure required to reform the National Electricity Market to meet the challenge of transforming it from a fossil fuels to firmed renewables in its Integrated Systems Plan released in June this year. At the same time, a new community group known as Energy Grid Alliance has released a detailed paper on best practice and the social licence.

What is a social licence?

Energy Grid Alliance defines the social licence as follows:

The social licence to operate (SLO), or simply social licence, refers to the ongoing acceptance of a company or industry's standard business practices and operating procedures by its employees, stakeholders, and the general public. While a social licence is intangible, its practical, financial, and even legal implications are significant. The social licence to operate is not something that, once earned, is fixed and unchanging. It varies over time in response to changes in the community and developers' or industries behaviour.

What are the issues addressed in the Implementation Statement?

The Implementation Statement covers a range of issues including:

  • the transmission schedule and plan for coordinating its rollout;
  • the proposed upgrades to Port of Hastings to support construction, manufacturing and research firms to co-locate;
  • the proposed procurement process; and
  • policy and legislative changes.

How will transmission be coordinated?

The Statement confirms that a new body known as VicGrid – within the Department of Environment Land Water and Planning (DELWP) – will lead the development of the transmission infrastructure to coordinate offshore wind connection to the grid. The proposal is to facilitate connection of up to 2-2.5GW at each of Gippsland Coast and Portland regions where the licences are being proposed.

The proposal is for two coordinated transmission connection points near the Gippsland Coast (east of Wilsons Promontory) and Portland (at or near the existing Portland terminal station). Offshore wind farm operators will be required to connect underground to these connection points, as a condition of the Victorian Government’s procurement process. The Implementation Statement identifies the general area of investigation for each connection point. More significant transmission development is needed in Gippsland because the existing transmission network does not extend past the Latrobe Valley

VicGrid will be working closely with AEMO to design the network and to engage with local communities and Traditional Owners and to ‘ensure the local communities see benefits from these developments’[1].

Although not going as far as to foreshadow a similar scheme in Victoria, the reference to benefits is potentially a reference to the recently announced NSW Strategic Benefits Payments Scheme which legislates a payment of $200,000 per kilometre of new transmission infrastructure hosted on private land, regardless of the location or zoning of the land. The NSW payments will be made in annual instalments over 20 years. Payments under the NSW scheme are in addition to the one-off upfront compensation paid to landowners for the acquisition of transmission easements in accordance with the Land Acquisition (Just Terms Compensation) Act 1991 (NSW). The payments will only be made for certain projects including the Renewable Energy Zone network infrastructure projects, priority transmission projects and other transmission projects identified in the AEMO Integrated System Plan.

What port upgrades are planned?

There are currently no existing ports in Victoria that meet the requirements to enable offshore wind construction due to the unique requirements for large areas of heavy-duty paved areas adjacent to the berths as well as channel capacity to manage specialist vessels. Unlike onshore wind turbines, offshore turbines are likely to be up to 300m in length. Significant road upgrades are also likely to be required in and around the ports.

The State-owned Port of Hastings has been identified as a suitable site following a multi-criteria assessment. This includes identification of the industrially zoned Old Tyabb Reclamation Area as a potential area for multiuser facilities with new berths alongside landside facilities. The Department of Transport and the Port of Hastings will commence the engagement process with local communities in late 2022 with a view to design and planning for an Environmental Effects Statement (EES).

In the East, Barry Beach (Gippsland) has been identified as a suitable location capable of being upgraded to support the operation and maintenances services to support the industry.

The Implementation Statement invites other Victorian ports to consider potential upgrades to assist with other support services for the offshore wind sector.

How will local industry benefit?

The Implementation Statement sets out the Victorian Government’s intention to develop a policy aimed at ensuring significant local content is required in the manufacturing of offshore wind infrastructure, including that the local content percentage will scale up as the supply chain matures. Further details about the procurement process will be released in Implementation Statement 2 in early 2023.

What legislative changes are foreshadowed?

Offshore wind development presents challenges to the existing patchwork of legislation that applies to the offshore waters, including both Victorian and Commonwealth waters. The current process for obtaining licences and approvals to carry out works in offshore waters is fragmented and de-centralised, making it a significant regulatory burden to a wind farm developer. Further, there is no current process to obtain tenure of the seabed areas for a sufficient duration for a wind farm to be viable.

To address the fragmented nature of the likely approvals required, a new office within DELWP is being established to be known as Offshore Wind Energy Victoria (OWEV).

The Commonwealth has already passed the Offshore Electricity Infrastructure Act 2021 (Cth) pursuant to which developers will need to obtain a feasibility licence, followed by a commercial licence and a transmission licence. However, seabed cabling will also pass through Victorian waters and require easements under the Electricity Industry Act 2000 (Vic). Approval under the environmental legislation at State and Commonwealth level will also obviously be required, together with Aboriginal heritage and Native Title consents and agreements as well as marine and coastal and Crown Land legislation.

The existing EES framework in Victoria has been accredited by the Commonwealth under the Environment Protection Biodiversity Conservation Act 1999 (Cth) (EPBC Act) and is an existing process that seeks to coordinate and ‘triage’ the variety of approvals required for large-scale projects. However, the resources required to prepare and assess EES documents, including the management of public engagement and extensive and complex public hearings that are coordinated by Planning Panels Victoria is likely to be a significant challenge for the sector and for the State administration, as well as the local Councils and communities that will be involved.

Proposed legislative changes that will hopefully assist with coordinating and streamlining all these approvals will be confirmed in early 2023.

What to expect next

There are expected to be a series of Implementation Statements released as the market develops and the legislative framework is drafted. Implementation Statement 2 is expected to be released in early 2023 and will address policy and legislative changes. It will also provide an update on transmission and ports infrastructure and an update on procurement. A further Implementation Statement 3 will be released later in 2023 and will address the procurement process plan and requirements for local content.

The race to Net Zero by 2050 presents the opportunity but also significant challenges for new industries to be fostered and to thrive in Australia. The offshore wind sector is certainly off to a flying start, but will need continued commitment and support from governments at all levels to ensure the industry establishes in an efficient and coordinated manner while also ensuring local communities and Traditional Owners are given adequate and meaningful opportunities for input and to share in the benefits so that the industry can operate with a genuine social licence.

[1] Implementation Statement, p.6


Meg Lee

Partner & ESG Co-Lead

Mark Dessi

Partner & Energy Co-Lead

Natalie Bannister

Partner & Commercial National Practice Leader

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