Turbulence in the Water: Why Giants Are Abandoning Gippsland

a day ago

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AGL Backs Out of Offshore Wind — And What It Means For Your Business Energy Strategy

Australia’s most mature offshore wind zone — Gippsland, Victoria — has been hit with a reality check.

AGL Energy has officially withdrawn its massive 2.5 GW Gippsland Skies project. They cited "challenging economics" and a strategic pivot toward faster, surer bets: onshore wind, big batteries, and firming technologies.

This isn’t just a single company changing its mind. It’s a trend. This marks the third major withdrawal from Gippsland’s pipeline in recent months, signaling a massive recalibration in Australia's renewable ambitions.

Turbulence in the Water: Why Giants Are Abandoning Gippsland

❌ The Dominoes Are Falling

AGL’s exit follows a concerning pattern of industry heavyweights walking away from the Bass Strait:

AGL (Gippsland Skies): Surrendered its feasibility licence to focus on 900 MW of grid-scale batteries.
RWE (German Giant): Cancelled its 2 GW Kent project due to supply chain inflation and auction delays.
BlueFloat Energy: Exited its 2.5 GW Gippsland Dawn proposal in July.

🧭 The "Expert" Take: Why is this Happening?

As someone watching these markets for a decade, I can tell you this isn't about a lack of wind. It’s about Capital Efficiency and Regulatory Limbo.

Here is the "inside baseball" on why the math isn't working for offshore right now:

1. The "Green Premium" Gap (LCOE) The Levelized Cost of Energy (LCOE) for offshore wind in Australia is currently estimated around $170/MWh. Compare that to onshore wind at roughly $80/MWh. When you look at the balance sheet, onshore delivers double the energy for the same dollar today.

2. The "Capacity Investment Scheme" (CIS) Effect This is the trending topic no one is talking about enough. The Federal Government's new Capacity Investment Scheme is a race to fill the grid by 2030.

The Problem: Offshore wind takes 7-10 years to build. It won't be ready by 2030.
The Result: Developers are rushing capital into projects that can win CIS tenders now—like onshore wind and batteries (BESS). AGL isn't quitting renewables; they are just moving money to where the government contracts are active.

3. Regulatory Bottlenecks The Victorian government has paused the offshore wind auction until late 2025. In the energy world, uncertainty is a project killer. You can’t hold billions in capital waiting for a "maybe."

🔦 The Lone Survivor: Star of the South

It’s not all doom and gloom. Star of the South remains the beacon of hope. As the most advanced project (backed by Copenhagen Infrastructure Partners), it is pushing ahead with feasibility studies. But for the rest of the pack? The herd is thinning rapidly.

📉 What Does This Mean for Australian Businesses?

If you are a business owner or facility manager waiting for offshore wind to lower your bills in 2032, you are waiting too long.

With 2 GW of potential power effectively wiped off the near-term map, the grid will remain tight. This creates:

Continued volatility in wholesale electricity prices.
Higher demand for immediate "firming" power (batteries).
A premium on businesses that generate their own power.

The message from the market is clear: Don't wait for the ocean. Build on your roof.

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