The FDI angle

• CIP launches Southerly Ten to develop 4.4GW offshore wind projects in Victoria.
• Star of the South, with early preparatory work, aims to start power production by 2032.

Why it matters: CIP’s commitment bolsters Australia's nascent offshore wind sector in the country with the highest offshore wind technical capacity in Asia Pacific.

Copenhagen Infrastructure Partners (CIP) is extending its leadership in Australia’s budding offshore wind sector, launching a new developer, Southerly Ten, to pursue two projects totalling 4.4 gigawatts (GW) off the coast of the state of Victoria. 

The 2.2GW projects — Star of the South and Kut-Wut Brataualung — received among the first 12 feasibility licences issued by the federal government between May and July, a process that officially fires the starting gun on developing an offshore wind industry in the country with the greatest technical potential in the Asia Pacific. 

Star of the South has a head start over other projects in Australia’s race to produce offshore wind by 2032. Under an earlier agreement with the government, its preparatory works — such as weather data collection, geotechnical surveys and even a transmission system — date back to 2019, earning its reputation as the country’s first offshore wind project. 

“CIP has invested a lot of time and money in delivering that work. And that is where Star of the South is a long way advanced,” says Charles Rattray, CEO of Southerly Ten, the vehicle CIP launched in May to develop its offshore portfolio across Australia and New Zealand. 

Depending on the final size of its two Australian projects and the auctioning system, among other variables, that money could be the tip of the iceberg of CIP’s investment. “We are talking in the order of magnitude of A$8bn ($5.2bn) to A$10bn a project,” adds Mr Rattray.

A huge shot of confidence

Star of the South was first pioneered by three Australians back in 2012, before CIP bought into the project in 2017 when it was already one of the industry’s biggest players. “That was a huge shot of confidence to the Victorian government and the federal government,” says Tim Buckley, founder of think tank Climate Energy Finance.

CIP’s establishment of Southerly Ten, which is eyeing 10GW of capacity across its two markets, takes that commitment a step further. “Setting up Southerly 10 is not an exercise undertaken lightly,” says Mr Rattray. “[We are] extremely confident that there’s support at each level of government for offshore wind … and believe strongly in the market. 

With its feasibility licences, Southerly Ten will pursue environmental assessments and approvals. Auctions are expected to start in 2025, leading to a final investment decision by 2028 and the goal of starting generation before 2030 for Star of the South and a few years later for Kut-Wut Brataualung. 

CIP’S OFFSHORE WIND PROJECTS IN AUSTRALIA

• Company: CIP via its new platform Southerly Ten
• Location: Gippsland region, Victoria, Australia
• Projects: Star of the South (2.2GW) and Kut-Wut Brataualung (2.2GW)
• Investment pledge: A$16bn–20bn
• Expected production start: 2030
• Expected job creation: Up to 12,000

Maintaining momentum

World Bank studies have found that Australia’s technical offshore wind capacity — based purely on wind speed and water depth — is 4963 GW. That is more than double Asia Pacific’s next biggest contender, China, with 2,429 GW, but which has powered ahead to install more than 30GW — more than any other country globally. 

Australia’s potential has not been lost on the industry heavyweights. Orsted, RWE, Iberdrola and BlueFloat Energy also won Australian feasibility licences. “We’ve got almost every non-Chinese and non-Indian major global [developer] vying to build offshore wind in Australia,” says Mr Buckley. 

Despite its leadership in renewables, Australia has been a latecomer to offshore wind — primarily because it sought to maximise its strong solar and onshore wind resources before turning to more expensive offshore projects. 

Mr Rattray says it is essential the government now maintains its offshore momentum by “hitting those auction timeframes … and continuing to progress critical pieces of infrastructure,” he says, namely transmission lines into the Latrobe Valley and improving the area’s ports.

“We need to attract capital, skills and suppliers to [locations] a long way from the supply chain,” Mr Rattray explains. “And if we don’t move with purpose, they will be attracted to other markets.”

Taiwan has already installed 2.25GW. South Korea, Vietnam and Japan are on track to outpace Australia’s installation by 2033, according to Wood Mackenzie. “There’s still a lot of work to do to make sure this industry is investible and competitive,” Mr Rattray adds. 

A recent study by consultancy Arup forecasts the country could reach 40GW of installed capacity by 2040, but faces “notable disparities” in its local supply chain, including ships for transport and installation work, heavy lift transport and workers with the skills to maintain the wind farms.

Australia’s distance from the biggest wind turbine manufacturers in Europe and north Asia adds to the rising costs hitting developers in other markets. Australia’s “offshore wind is going to be expensive”, says Mr Buckley.

And the government has not yet released public guidance on pricing or whether it will use feed-in-tariffs, contracts for difference or another mechanism to ensure these mega-projects are financially sustainable investments. “What worries me is if we see 12 consortiums spending millions of dollars on due diligence and feasibility [studies], wasting time, money and goodwill, only to find out the government’s not willing to actually wear the costs needed,” says Mr Buckley. 

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