Energy Insiders Podcast: Offshore Wind Discussion with Charles Rattray

Project Overview - Star of the South

Project Details:

  • Size: 2.2 gigawatt offshore wind project seeking environmental approval
  • Phased Development: Unlikely to be built all at once; Victorian government auction seeking up to 2 gigawatts through multiple tranches
  • Water Depth: Shallow waters around 20 meters, average just under 40 meters across site, some areas up to 50 meters
  • Location: Bass Strait, Gippsland region
  • Transmission: Project covers wind farm to shore crossing and up to Gifford; VicGrid responsible for transmission from Gifford to the valley

Company Structure

Southerly 10:

  • Development entity with offshore wind development capabilities
  • Develops projects in Gippsland and considers opportunities across Australia and New Zealand
  • Owned directly by CIP (Copenhagen Infrastructure Partners)

CIP (Copenhagen Infrastructure Partners):

  • Danish-based development company specializing in offshore wind
  • Large green-only, greenfields investor in energy transition
  • Project assets held in various funds (Star of the South in Fund 4)

Technical Specifications

Turbines:

  • Industry Standard: 15 megawatt turbines (European OEMs producing around this capacity)
  • Larger Options: Siemens has 19+ megawatt turbine installed in Denmark; Chinese manufacturers exploring bigger turbines
  • Capacity Factor: Better than AEMO’s 45% estimate for offshore Gippsland; project has two years of detailed LIDAR data from ocean
  • Performance Characteristics: Larger turbines have lower capacity factors due to infrequently reaching full capacity

Operational Performance:

  • Seasonal Advantages: Produces energy when onshore wind and solar produce less, particularly strong in winter
  • Peak Performance: 70% capacity factors during high heating days in winter and hot, still heat waves
  • Portfolio Benefits: Different production profile complements onshore renewables

Economic and Contractual Framework

Auction Process:

  • Contract Type: Contract for Differences (CFD) - guaranteed fixed price for output over specified years
  • Timeline: Auction launch in back half of 2024, award and contract signing within 12 months
  • Competitive Advantage: Extensive data collection and community engagement provide advantages, though detailed knowledge can lead to higher pricing due to better risk assessment

Cost Considerations:

  • Offshore wind more expensive per megawatt hour than other renewables when compared directly
  • Value proposition based on portfolio approach combining onshore and offshore technologies
  • Lower costs achieved through building maximum generation capacity as quickly as possible

Employment and Local Impact

Job Creation:

  • Construction Jobs: 2-4 years, mix of local and imported skills (more transient)
  • Operations Jobs: ~200 permanent positions for Star of the South, mostly local, long-term sustainable positions in Gippsland
  • Indirect Benefits: Local industries spinning out from project development, small businesses receiving significant contracts

Infrastructure and Logistics

Port Requirements:

  • Victorian Government favoring Hastings for purpose-built port
  • Alternative: Minor upgrades to existing ports (Geelong, Hastings, or Tasmania)
  • Requirements: Significant port infrastructure, right cranes, lay-down areas, specialized vessels
  • Lead Times: Vessels need 2+ years notice for construction windows

Technical Specifications:

  • Turbine Components: Thousands of tonnes, nacelles equivalent to 2-3 storey buildings weighing ~1000 tons
  • Tower Height: ~200 meters
  • Blade Length: 100+ meters
  • Installation Complexity: Enormous logistical exercise requiring specialized equipment and timing

Timeline and Development Process

Current Status:

  • Feasibility license obtained, most required activities completed
  • Well-advanced in understanding geotechnical layout, bird life, underwater ecosystems
  • Progressing through Environmental Impact Assessment (EIA) process

Future Timeline:

  • Financial Close: ~1 year after auction award
  • Construction: 2-3 years, approximately 500 megawatts per year
  • Energy Delivery: Unlikely before 2030

Market Context and Challenges

Energy Replacement Needs:

  • Coal Phase-out: 22 terawatt hours of coal exiting by 2032
  • Onshore Capacity: Victoria has 4 gigawatts installed onshore wind; transmission plan calls for additional 6 gigawatts (150% increase)
  • Challenge: Doubling current onshore renewable terawatt hours to replace coal is extremely difficult

Political and Market Risks:

  • Political risk significant for offshore wind projects
  • Industry requires multiple projects and sustained government commitment
  • 9 gigawatt Victorian target requires pipeline of subsequent auctions
  • Changes in US market (post-election) may have limited impact on Australian supply chain capacity

Supply Chain:

  • Need to attract suppliers to Australian market (far from European factories)
  • Alternative supply opportunities from Korea, Taiwan, and Europe continuing to absorb factory utilization

Key Opinions Expressed

Charles Rattray emphasized that offshore wind should be viewed as complementary to, not competing with, onshore renewables, with the combination delivering the lowest cost energy to consumers. He stressed the importance of maintaining government momentum and having multiple projects to establish a viable industry rather than just delivering Star of the South alone.