[+] Victoria’s Energy Future: The Deals, the Demand and the Wind Farm

In the first few weeks of the new year, a storm has been brewing off the coast of Victoria. As that state moves towards a net zero target and at the same time meet its energy demands, the Federal government stepped in to refuse permission for an offshore wind farm. The Victorian Renewable Energy Terminal and its wind farm at the Port of Hastings was chosen for that location particularly due to its deep water channels and proximity to other wind farm projects off the coast of Gippsland. And now two announcements have added to the situation. In Western Australia, plans have been announced for that state’s largest offshore wind farm, despite the issues it has faced with its Renewable Energy Terminal project. And global investment management firm BlackRock has played its cards, organising a deal to buy out Global Infrastructure Partners (GIP), taking over many of the Australian energy-related assets in its portfolio. That deal also sweeps up one of the biggest offshore wind farms, the Blue Marlin project, off the coast of Gippsland and a prospective neigbour to the Victorian Renewable Energy Terminal. It places one of the biggest companies in the world in charge of key energy and shipping infrastructure assets in Australia. The question being asked by many in the sector is—what is going to happen now? The Black Rock deal Singapore-based BlackRock will acquire GIP for $3 billion and 12 million Black Rock shares. GIP is the largest infrastructure assets management firm with more than $100 billion in equity and credit strategie,s and more than 40 companies in its portfolio. The deal will mean that Black Rock will own two batteries in NSW as well as the 2 GW Blue Marlin offshore wind farm in Gippsland, Victoria. Those assets were projects of Vena Energy, a GIP company. Other Vena projects include solar farms and batteries in Queensland and South Australia, while other GIP assets include the Port of Melbourne, the Port of Brisbane, the Sydney Airport and the Gladstone LNG project. The Port of Melbourne is Australia’s largest, with most of the country's freight imports and exports coming through it. GIP, also through its company Vena, also was a competitor for Mike Cannon-Brookes and Andrew Forrest’s Sun Cable project, the Riau Islands mega-project that would supply renewable power across the border to Singapore in partnership with Shell Eastern Trading. There were also projects with Chinese partners to set up energy generation and storage projects in Indonesia and partnerships to set up battery storage systems in the US. ▲ A concept render of the Victorian Renewable Energy Terminal. The Victorian plan Federal environment minister Tanya Plibersek’s refusal for the $27-million renewable energy terminal was based on environmental concerns. Plibersek cited the Ramsar convention, an agreement Australia is a arty to that seeks to protect and conserve wetlands. News emerged earlier this week that Victoria’s infrastructure body Infrastructure Victoria chose Bay West near Werribee rather than Hastings as a more viable site in 2017. It was concerned that it would be hard to reclaim land at the Old Tyabb Reclamation Area with the state needing to demonstrate it would take steps to minimise any damage or replace any habitats destroyed in the process. Plans or measures to do so were not set out in the proposal the state put to the federal minister. In a response to The Urban Developer, the Victorian Department of Energy, Environment and Climate Action said the state chose the Port of Hastings as it was the most suitable port for assembling offshore wind infrastructure and turbines. ▲ Houses in the township of Bright in the Victorian High Country. It said the port had large areas of zoned land, was close to other port precincts with deep water channels, and close to the offshore wind projects in Gippsland. Sites assessed for the project included Geelong, Portland, Melbourne, Newcastle and Bell Bay with environmental factors a key consideration in the assessment. Historically, the location of the terminal has been something of a political ping pong match,—Victorian Labor at one point preferring Bay West while the Victorian Liberal party wanted Hastings. Victorian environment minister Lily D’Ambrosio said that the plan would have passed if there had been a better federal framework and system to consider the environmental impacts of such projects. “If we had a national plan of national targets and national funding and national co-ordination, then we wouldnt have had the problem with the Port of Hastings terminal project,” Ambrosio said. With rising sea levels to consider alongside wildlife habitat, it is clear that a project to address the effects of climate change cannot itself irrevocably damage the environment in its implementation. But the pressure is on, with the state wanting 2GW of operational offshore wind ready by 2032 and the terminal a key part of the plan. A Victorian government spokesperson told The Urban Developer that the target for the state was 95 per cent renewable energy generation by 2035. “In 2023, renewables generated 38.6 per cent of Victoria’s power—more than double the share five years ago—and this continues to grow as we work towards our target of 95 percent renewable energy generation by 2035,” the spokesperson said. Victoria’s energy generation for 2023 Sources Energy GWh Contribution to generation Average Value $/MWh Solar (Rooftop) 4,638 8.9% -$3.23 Solar (Utility) 1,546 3.0% $20.50 Wind 11,076 21.2% $35.25 Hydro 2,450 4.7% $124.01 Battery (Discharging) 161 0.3% $113.37 Gas (OCGT) 439 0.8% $188.40 Gas (Steam) 213 0.4% $171.98 Coal (Brown) 31,667 60.7% $64.18 Imports 2552 -$41.58 Loads -7595 Exports -7398 $82.98 Battery (Charging) -196 $10.25 Net 47,147 Renewables 19,710 37.8% Source: OpenNEM, Victoria, 2023 Hitting the target But can Victoria reach this target? Divesting an entire state’s energy grid from fossil fuels is no easy task. The state department of energy, environment and climate action (DEECA) says the state is on track to meet its renewable energy targets as well as its energy storage targets. It is aiming for at least 2.6GW of energy storage capacity by 2030 and at least 6.3GW by 2035. The department also claims that existing renewable energy policies and programs have allowed Victoria to reach 5281MW of energy via large-scale wind and solar capacity. That is equivalent to the energy needed to power around 3 million average Victorian households per year. DEECA also says that they have 4285MW of small-scale rooftop photovoltaic capacity and 537 of commissioned energy storage capacity which can power 1 million average Victorian households for a year. The Australian Energy Market Operator (AEMO) has forecasted Victoria’s electricity energy demand to hit 120,000 GWh in 2048. Figures from the Open National Energy Market (OpenNEM), an open source platform for energy data, show that in 2023, renewable energy consumption in Victoria accounted for 41.6 per cent of all energy consumption in the state but only 37.8 per cent of the energy generated in the state was from renewable energy sources. In 1999, renewable energy accounted for just 1 per cent of the total state’s energy consumption. Victoria’s energy consumption for 2023 Sources Energy GWh Contribution to demand Average value $MH/h Solar (Rooftop) 4638 9.8% -$3.23 Solar (Utility) 1546 3.3% $20.50 Wind 11,076 23.4% $35.25 Hydro 2,450 5.2% $124.01 Battery (Discharging) 161 0.3% $113.37 Gas (OCGT 439 0.9% $188.40 Gas (Steam) 213 0.4% $171.98 Coal (Brown) 31,667 66.9% $64.18 Imports 2,552 5.4% -$41.58 Loads -7,595 Exports -7,398 -15.6% $82.98 Battery (Charging) -196 -0.4% $10.25 Net 47,147 Renewables 19,710 41.6% Source: OpenNEM Victoria, 2023 A lucrative market Across the country, the number of renewable energy projects is growing. One of the key Gippsland offshore wind farms is the Star of the South with an installed capacity of up to 2.2.GW for a proposed supply of energy for more than 1.2 million homes. It is backed by Cbus Super and Copenhagen Infrastructure Partners, and has been developed under a Commonwealth Exploration Licence since 2019 with first output targeted for the end of the decade. In South Australia, overseas investors from the US and other countries are investing in solar farm projects, which prompted the South Australian government to put forward regulations in 2022 that SA workers would be preferred workers for any projects within the state. Elsewhere, companies such as supermarket giant Coles are taking matters into their own hands, building their own solar farms next to their assets. Other projects such as the Beveridge Intermodal Freight Terminal in Victoria are earmarked for massive rooftop solar projects as their planned size and horizontal rooftop space allows for enough energy to be generated and stored or fed back into the state grid. Traditional energy companies are also acquiring smaller renewable energy companies in a bid to offer renewable energy products to consumers. Others like BlackRock are keen to acquire and hold part or all of key energy assets to provide a revenue stream. The company’s top holdings in Australia prior to its deal with GIP also includes a 2.22 per cent stake in BHP Billiton with 2.86 per cent of its total Australian holdings in the energy sector prior to the deal. Projects like the Victorian Renewable Energy Terminal also provide opportunities to develop worker accommodation, services, other infrastructure and eventually entire residential and commercial projects to service the regions around them. This was the case with the Mornington Peninsula Shire Council, which had hoped surplus land around the proposed terminal would be used for much needed housing, conservation and some industrial projects. Governments are not sitting still either with some looking to change aspects of state-based planning systems and policies to encourage infrastructure and development projects that address climate change. In Victoria, in November, 2023, D’Ambrosio introduced the Climate Change and Energy Legislation Amendment (Renewable Energy and Storage Targets) Bill 2023, which is currently on its second reading. It not only sets out the state’s targets for renewable energy generation and its emissions targets for net zero by 2045 but also amends the Planning and Environment Act 1987. The changes would add an explicit climate change objective into the state’s planning framework meaning authorities would have to consider climate change concerns when preparing or changing planning schemes . That allows the state government to more easily adapt to and address climate change through planned projects and development. But it also allows developers to more easily address climate change in the projects they propose, providing an incentive for more sustainable development, something that local governments have tried to do with Melbourne’s retrofit strategy and Sydney’s gas ban policy . In the interim, the state will continue to work on the terminal project plan. “We’re working with the Commonwealth to determine the next steps for the Victorian Renewable Energy Terminal and continue to push for national leadership on offshore wind to help secure Australia’s future energy supply and reach its ambitious renewable energy targets,” the Victorian government spokesperson said. Prime Minister Anthony Albanese confirmed that last week. “We’ll work through those issues constructively with the Victorian government,” Albanese said. “We need to make sure that the objectives are met to provide for Victoria’s energy needs, while making sure that the environment is also subject to appropriate protections.” You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

[+] Victoria’s Energy Future: The Deals, the Demand and the Wind Farm

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