The Offshore Renewable Energy Infrastructure regulations

In November 2021, the Australian Federal Government unveiled its legislative framework for offshore renewable energy generation and transmission infrastructure (see our article Unfurling the sails - the future of offshore electricity investment in Australia for further discussion). This legislative framework included the Offshore Electricity Infrastructure Act 2021 (OEI Act) and Offshore Electricity Infrastructure (Regulatory Levies) Act 2021 which were passed on 25 November 2021 and received royal assent on 2 December 2021. While this legislation laid the foundations for a regulatory regime for offshore electricity infrastructure, specifics were deferred to the associated regulations.

On 22 March 2022, exposure drafts of the Offshore Electricity Infrastructure Regulations (Draft Regulations) and Offshore Electricity Infrastructure Licensing Scheme Guidelines (Draft Guidelines), and the accompanying explanatory statements (including a Cost Recovery Implementation Statement), were released on the Department of Industry, Science, Energy and Resources’ (DISER) website. These documents are currently open for public consultation until 22 April 2022.

The offshore renewables industry takes shape – the key takeaways

Whilst the Draft Regulations, Draft Guidelines and Cost Recovery Implementation Statement will the be the subject of detailed analysis and comment over the coming months, G+T’s initial review of these documents identifies a number of aspects that will be of key interest to sponsors, financiers and stakeholders of offshore renewable energy infrastructure projects.

Merits criteria

The Draft Regulations elaborate on how the Minister may assess the 3 merits criteria in the OEI Act, as well as introducing a 4th criteria – national interest. The merits criteria are:

• Technical and financial capability: the availability of technical expertise and financial resources of the applicant. This includes an assessment of the employees, consultants and parent company. In demonstrating technical capability, the applicant’s past experience in electricity infrastructure projects will be considered (onshore, offshore or outside Australia).
• Viability: the applicant’s commercial assumptions (including project costs and returns) as well as commercial arrangements such as the applicant’s route-to-market channels and key upstream / downstream supply chain participants.
• Suitability of the applicant: the applicant’s corporate governance (such as policies, leadership and other related factors) and compliance history (within and outside Australia).
• National interest: the impacts on the Australian economy and community (such as job creation, emissions reduction and international relations), as well as national security and the existing relationships with other users of the licence area.

These 4 merits criteria would apply to all licence types. It is important to note that the factors described above are not prescriptive (that is, the Minister is not bound to consider each of them, and may consider any other factors that the Minister considers relevant).

Overlapping licence applications

One area of key interest when the OEI Act was passed, was the mechanism for dealing with licence overlap between applicants and areas. The Draft Regulations provide that where multiple feasibility licence applications overlap, the Minister will assess the merits of each application. If the applications are equal in merit and the overlap cannot be reconciled (for example, neither party is willing to amend their application), the Minister may invite financial offers to determine the successful applicant. When coupled with the merits criteria, it seems likely that the higher offer will be awarded the licence.

In the context of budgeting, DISER made a prediction that it would receive 2-3 applications per year across the next 3 financial years. However, it remains to be seen how often overlaps will arise in reality and how many of these will be resolved through the bidding process.

Form of licence application

The Draft Guidelines describe that each application will need to include location information (maps, coordinates and area) as well as certain specifics of the planned project (type, capacity, life span and construction costs).

Ultimately, licence applications will need to take the form that is published on the National Offshore Petroleum Titles Administrator’s (NOPTA) website – a draft of which has not yet been released.

Fees

Licence applicants will be subject to 2 fees, and 3 annual levies, a summary of which is tabled below. The final quantum of each charge has not yet been set.

As can be seen, there will be a number of regulatory costs incurred when making submissions, and eventually constructing and operating an offshore project.

What’s next?

There seems to be no deceleration for the Australian offshore electricity sector, as the release of the Draft Regulations comes hot on the heels of Victoria’s Offshore Wind Policy Directions Paper on 4 March 2022, in which the Victorian State Government unveiled its vision for a renewable future and its plan to “spearhead” wholesale energy reform with an enormous 13 GW of offshore wind.

For now, industry has its chance to respond. The Draft Regulations will be subject to public consultation via a submissions process until 22 April 2022.

Gilbert + Tobin will continue to monitor the commercial and regulatory environment, sharing our perspectives on regulatory and approval pathways, financing and project structuring. If you have any questions in relation to offshore renewable energy in Australia or the Draft Guidelines, we would be delighted to assist.