Australia delays its first offshore wind auction due to global investment retreat

Victoria, Australia, has delayed its first auction of offshore wind farm financing, citing global investments hurdles. This is a blow to an industry that's deemed crucial to Australia's transition away from coal-fired energy to renewables.

The state government announced on Tuesday it will delay the auction, originally scheduled for this month. A revised schedule is expected to be released by year's end.

Lily D'Ambrosio, Minister of Energy and Resources, said that global investment headwinds made it unlikely an auction would attract enough participants.

She said: "As global offshore wind investment market changes, we are making sure that the auction is attractive and competitive. We will also release a revised timeline for the process later this summer."

This was the first time in Australia that developers could bid on government-backed projects.

Winning projects would be guaranteed a fixed price for power generated through a system known as contract-for-difference.

The guarantee will help companies build the large and expensive farms Australia is looking for, due to their ability to generate more electricity than existing onshore farm.

Ben Carrozzi is a partner in Norton Rose Fulbright's energy and infrastructure group. He said that the delay will avoid the danger of "rushed auction programmes", which have happened on other markets.

He said: "We look forward to a continued dialogue on the next steps and to a clear understanding of what those steps are, so that the sector can continue to feel comfortable in continuing to invest."

The announcement is a blow to a nascent industry that faces rising costs, regulatory hurdles and market uncertainty. This is partly due to criticism directed at the sector by U.S. president Donald Trump.

This comes just days after Origin Energy announced that it would suspend plans to build an A$8 Billion ($5.33 Billion) farm in Gippsland because it could not meet the Victorian Government's initial auction deadline.

Others have also abandoned their projects. BlueFloat Energy, of Spain, abandoned one Gippsland’s most advanced projects in July citing market conditions. Equinor, a Norwegian energy company, pulled out of its A$10 billion Novocastrian Wind Farm in New South Wales in August. This was after several previous withdrawals from Australia.

D'Ambrosio stated that the state will now focus on securing approvals from environmental authorities for building ports in support of construction of future offshore projects.

"Offshore Wind is crucial to the nation's security of energy and lowering energy bills for Victorians. We continue to engage the Commonwealth in renewable energy projects, including a timetable and support package that will deliver Australia's very first offshore wind auction." $1 = 1.5015 Australian Dollars (Reporting and editing by Jacqueline Wong in Sydney)

(source: Reuters)