Australia's Offshore Wind Opportunity: Building the Market Before Scaling Ambition

A market unlike any other

One of Australia's defining characteristics is its geographic isolation. Offshore wind is intrinsically a global industry, reliant on specialised vessels, turbine manufacturers, installation contractors and supply chains that currently operate mostly outside Australia.

This creates obvious challenges. Transport distances are long, supply chains must largely be established from scratch despite existing capabilities, and Australian projects will compete with established markets for scarce vessels, equipment and expertise. During the industry's formative years, there is also a risk that Australia is perceived internationally as a costly and logistically complex destination for investment.

However, this same isolation creates a rare opportunity. Australia is not constrained by legacy infrastructure or outdated industrial systems. The country can develop modern port facilities, plan and develop the grid with today and future’ renewable energy demand in mind, , and build an industry designed around future requirements rather than historical constraints. Over time, Australia could establish itself as an offshore wind hub serving parts of the Asia-Pacific region.

The first offshore wind auction has already revealed an important market dynamic: only some of the most experienced international developers remain actively pursuing projects.

This should not automatically be interpreted as a weakening market. Similar consolidation has occurred in emerging offshore wind markets globally as projects progress from concept to delivery. The developers still engaged generally bring strong balance sheets, proven delivery capability and lessons learned from Europe, Asia and North America.

Their continued participation is arguably a sign of confidence in Australia's long-term potential.

Nevertheless, reduced competition could influence auction outcomes and may limit opportunities for smaller players and new entrants. Policymakers therefore have a balancing act to maintain competitive tension while ensuring projects remain deliverable.

The varying fortunes of Australia's declared zones often reflect differing levels of development readiness. Factors such as transmission availability, community acceptance, project economics, environmental and sites complexity and certainty around political commitment and permitting frameworks, as well as and confidence that new developments can deliver the firm, long-term energy capacity needed to replace retiring coal and gas assets all influence investor confidence.

Rather than viewing slower-moving zones as unsuccessful, governments should focus on identifying and addressing the specific barriers affecting each region. Better coordination between federal and state authorities, clearer development pathways and greater certainty around energy targets, grid connection and support mechanisms could significantly improve investor sentiment.

The value of creating a resilient and balanced energy system

Another challenge unique to Australia is the country's extraordinary abundance of onshore renewable resources.

Australia possesses some of the world's best solar and onshore wind conditions, creating constant pressure for offshore wind to justify its higher cost. Public and political debate frequently centres on the lowest-cost form of generation rather than the broader value that different technologies bring to the energy system.Yet offshore wind offers benefits that are often underappreciated. Generation profiles are generally more stable and predictable than onshore renewables, providing valuable diversity to the electricity mix. This reliability could prove particularly important for energy-intensive industries such as green hydrogen production, advanced manufacturing, critical minerals processing and hyperscale data centres that require large volumes of dependable renewable electricity.

In addition to its role in decarbonising the electricity system, offshore wind can help reduce overall system costs by diversifying the generation mix and lowering the amount of additional grid infrastructure required. As the Jacobs analysis for the Star of the South project found, deploying up to 7 GW of offshore wind capacity in the Bass Strait by 2040 could deliver almost A$3 billion in system cost savings by 2060 compared with a scenario relying solely on onshore renewable energy sources. This highlights the potential value of offshore wind not only as a source of clean energy, but also as a contributor to a more efficient and resilient electricity system.

The debate, therefore, should not focus solely on project-level costs but on the role offshore wind can play in delivering a more resilient and balanced energy system.

Political debate surrounding offshore wind is often portrayed as a risk to investment. While uncertainty undoubtedly affects project timelines and investor confidence, it can also create opportunities for improvement.

In several jurisdictions, political scrutiny has highlighted inefficiencies in permitting processes, overlapping regulatory responsibilities and inconsistencies between federal and state frameworks. Addressing these issues could ultimately accelerate project delivery and reduce long-term risk, preventing the risk of projects from being put on hold.

Political pressure can also strengthen stakeholder collaboration. Developers, governments, suppliers, network operators and local communities are increasingly being forced to work together to develop practical solutions to complex challenges. These conversations may result in projects that are better optimised, more socially accepted and capable of delivering broader community benefits.

Importantly, heightened scrutiny pushes the industry to articulate a stronger value proposition, demonstrating not only climate benefits but also regional economic development, energy security, local employment, research and innovation opportunities.

The opportunity to catalyse local content development

Perhaps the most important issue in Australia's first auction process is one that receives less attention than it deserves: local content requirements.

Governments understandably want offshore wind to stimulate domestic industry and create jobs. However, there is a risk of expecting localisation to occur faster than market realities allow.

Experience from other Asia-Pacific markets, including Taiwan, demonstrates that local content strategies are most successful when they evolve alongside project volumes and supply chain maturity. Australia's early projects will inevitably rely heavily on established international and regional suppliers.

The priority should therefore be to build the market first, then localise strategically. The key is to optimise the mix of international specialised expertise with local parts of the supply chain where Australia wants to invest in. Attempting to establish extensive local manufacturing before sufficient project volume exists may increase costs and discourage investment.

At the same time, workforce development deserves greater attention. Infrastructure can be built; skilled labour takes years to develop. The challenge is not simply creating offshore wind jobs but attracting and retaining workers in competition with established sectors such as oil and gas, mining and heavy industry, where skills are already in high demand.

As Australia moves towards its first offshore wind auctions, maintaining momentum will be essential, although challenges persist.

The good news is that not all challenges confronting Australia's offshore wind sector are unique. Other offshore wind markets have faced similar hurdles around permitting, supply chain readiness, workforce development and stakeholder engagement. Take Denmark for example, which is widely regarded as the birthplace of modern offshore wind, its success was not built overnight. It was underpinned by consistent policy support, close collaboration between government and industry, strategic investment in ports and infrastructure, and a willingness to scale local supply chains as the market matured. Critically, Denmark focused first on creating a viable market and investor confidence, enabling domestic capability to grow alongside project deployment rather than ahead of it.

For Australian governments, that means providing greater certainty around auctions and future pipelines, approvals and grid infrastructure while taking a pragmatic approach to local content requirements. For developers, it means continuing to demonstrate the broader value of offshore wind, not only as a source of renewable electricity but as a catalyst for regional economic growth, industrial decarbonisation, energy security and innovation.

Ultimately, the priority should be to build the market first and localise strategically as project volumes grow. If Australia can strike that balance, today's challenges could become tomorrow's competitive advantages. With world-class renewable resources, growing industrial demand for clean energy and the benefit of lessons learned from more mature markets, Australia is well positioned to develop an offshore wind sector that not only supports its energy transition but also creates new job opportunities and establishes a lasting industrial platform for the Asia-Pacific region.