The recent announcement that Victoria will commence a contract-for-difference (CfD) auction in 2025 marks a significant milestone in delivering net-zero ambitions by 2040.

In 2024, the Australian Commonwealth government awarded feasibility licences to 12 offshore wind projects in the Gippsland region of Victoria, totalling 25 GW of potential capacity. Building on this momentum, Victoria plans to launch a Request for Proposal (RFP) process in Q3 2025, aiming to award contracts by Q3 2026.

All feasibility license holders in Gippsland are invited to participate in a Registration of Interest (ROI) process to provide further comments and feedback to Offshore Wind Energy Victoria (OWEV) on their Round 1 CfD plans.

This auction is not merely a procurement exercise; it’s a strategic move to transition from coal in Victoria to clean energy. The state’s targets are ambitious: 2 GW of offshore wind capacity by 2032, 4 GW by 2035, and 9 GW by 2040. The Victorian government is implementing measures such as the CfD to provide investment certainty and developing ports and grid infrastructure to enable these goals.

The auction will feature scoring based on a pricing element for availability payments, project deliverability, including positive social license engagement, and local content commitments. Up to 2 projects of approximately 1GW are anticipated to be awarded to two developers with Commercial Operational Dates (COD) of 2032-33.

However, challenges remain.

• A new market for offshore wind. This means new regulations and processes must be adapted from offshore industries and onshore renewables to match the differences in offshore wind and ensure safe and reliable delivery.
• Global headwinds for offshore wind with rising costs and high upfront development costs prior to bid submission, will require smart and innovative plans to ensure the highest chance of winning and managing risk.
• Globally priority markets will emerge for project delivery. Australia both state and federal need to support together all aspects of offshore wind delivery.
• The supply chain is not yet committed. Without the successful completion of auctions and long-term visibility for future auction rounds, early projects will be at risk of delivery as the industry may not develop without the appropriate signals.
• The state legislated targets (9GW) and the awarded project capacity (25GW) do not guarantee that all projects will be successful or will be required.

Over the coming months, feasibility licence holders will assess their project against the auction criteria and timeline for submitting bids. This will require strategies from stakeholders, local jobs and content, technical assessments, and procurement models to ensure a competitive and deliverable bid. It requires upfront development expenditure at risk.

CoralPoint is here to partner with those organisations leading Australia’s energy transition. Our team has deep, global knowledge and has guided offshore wind players from market entry and development through winning auctions and closing acquisitions and financing to safe and successful execution and operations.

The upcoming CfD auction will test Australia’s commitment to renewable energy and net-zero targets. By embracing this opportunity, Victoria can solidify its position as a leader in offshore wind, driving economic growth in harmony with the local communities and Traditional Owners.