Offshore Renewable Electricity

On 2 December 2021, the Commonwealth Parliament enacted the Offshore Electricity Infrastructure Act 2021 (Act) to establish a regulatory framework for the construction, installation, commissioning, operation, maintenance and decommissioning of offshore electricity infrastructure overseen by the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) as regulator and the National Offshore Petroleum Titles Administrator (NOPTA) as administrator. The Act will commence operation on 2 June 2022 (being six months from the date of Royal Assent) unless an earlier date is proclaimed.

Scope

The Act provides for 2 types of offshore electricity infrastructure:

• offshore renewable energy infrastructure that generates energy from prescribed sources including wind, solar, waves, tides, ocean currents, rain and geothermal heat; and
• offshore transmission infrastructure that stores, transmits or conveys electricity generated from an offshore development.

The Act applies to infrastructure in the Commonwealth offshore area which includes the territorial sea and the exclusive economic zone of Australia but excludes the coastal waters of a State or Territory.

Licensing regime

The Act provides for 4 types of licences as summarised in the table below.

Licence type	Authorisation	Term
Feasibility licence	Licence holder may assess the feasibility of an offshore infrastructure project in the licence area and apply for a commercial licence in relation to the proposed project.	Up to 7 years with the potential to extend for up to 7 years.
Commercial licence	Licence holder may develop an offshore electricity generation project in the licence area.	Up to 40 years with the potential to extend for up to 40 years.
Research and demonstration licence	Licence holder may conduct research, testing or demonstration of emerging technologies in the licence area.	Up to 10 years with the potential to extend for up to 10 years.
Transmission and infrastructure licences	Licence holder may develop offshore renewable energy infrastructure or offshore electricity transmission infrastructure in the licence area to store, transmit or convey electricity or a renewable energy product to onshore grid infrastructure and other end users.	Licence may be granted for the life of the asset. As this will vary across projects, a term has not been fixed.

The Act contemplates that the regulations (once enacted) will prescribe a licensing scheme to provide for procedures relating to licence applications, consideration of licence applications and offers to grant licences by the Minister.

Considerations for generators 

To develop an offshore electricity generation project, a project proponent must initially hold a feasibility licence.

• Licence area: Feasibility licences may only be issued in respect of declared areas, being areas declared by the Minister as being suitable for the development of offshore renewable energy infrastructure. The Explanatory Memorandum to the Offshore Electricity Infrastructure Bill 2021 states that following a declaration of a specified area, the Minister will issue public invitations to industry to apply for feasibility licences in respect of all or part of the declared area. Once granted, the licence area of a feasibility licence cannot overlap with the licence area of any other feasibility licence.
• Merit criteria: Successful applicants of feasibility licences must meet the merit criteria and any other requirements prescribed by the Act and the licensing scheme. Among other things, the merit criteria relate to technical and financial capabilities of the applicant, the viability of the proposed project and the suitability of the applicant to hold a licence. The licensing scheme may specify matters to be considered in any decision about whether an application meets the merit criteria. For instance, the applicant’s progress in securing funding for the project, environmental approvals and any key onshore project requirements (such as progress in grid connection applications) are likely to be key factors to be taken into account in the merit assessment. 
• Competitive bidding process: The licensing scheme may also provide a competitive bidding process for the grant of feasibility licences. The Explanatory Memorandum contemplates that where applications for feasibility licences over the same licence area are similarly meritorious, the Minister may be allowed to invite applicants to submit financial offers and determine the successful applicant on the basis of their financial offer.

Following completion of the works required under a feasibility licence, the project proponent may apply for the grant of a commercial licence.

• Licence area: A project proponent may only apply for a commercial licence in respect of an area that is within the licence area of their underlying feasibility licence. Accordingly, commercial licence areas cannot overlap.

If the licence area of a commercial licence is smaller than what was granted under the corresponding feasibility licence, the area that is not covered by the commercial licence will be surrendered and the Minister will be allowed to invite new applications for feasibility licences in the vacated area. 

• Merit criteria: Successful applicants of commercial licences must meet the merit criteria (refer to the summary above for feasibility licences).

Considerations for transmission infrastructure developers

A developer of transmission infrastructure is required to hold a transmission and infrastructure licence.

• Licence area: Transmission and infrastructure licences can cover areas that are outside of a declared area. The licence area of transmission and infrastructure licences may overlap other licences provided that impacts on existing users of the area can be managed and the Minister is satisfied that the activities undertaken under each licence will not interfere with each other.
• Merit criteria: Successful applicants of transmission and infrastructure licences must meet the merit criteria (refer to the summary above for feasibility licences).

Considerations for pilot projects

A project proponent who wishes to undertake small scale pilot projects for the purposes of researching, testing or demonstrating emerging technologies that are not yet commercial is required to hold a research and demonstration licence. These licences will be granted through direct applications.

• Licence area: Research and demonstration licences may only be issued in respect of declared areas. The licence area of a research and demonstration licence may overlap other licences if the Minister is satisfied that the relevant activities can coexist.
• Merit criteria: Successful applicants of research and demonstration licences must meet the merit criteria (refer to the summary above for feasibility licences).
• Additional licences for commercialisation activities: When the project proponent is ready to commercialise the emerging technology, it must obtain the relevant licence. For example, where the relevant technology relates to offshore electricity generation, the project proponent must obtain a feasibility licence and complete the works required under that licence before applying for a commercial licence.

Key obligations of all licence holders 

A licence holder is generally required to:

• pay any prescribed levies (to this end, the Offshore Electricity Infrastructure (Regulatory Levies) Act 2021 has been enacted);
• develop a management plan including in relation to environmental, health and safety, and infrastructure integrity matters, and have this approved by NOPSEMA before commissioning, operating or decommissioning any offshore infrastructure in accordance with the approved management plan. An approved management plan is a prerequisite for the grant of a commercial licence to an existing feasibility licence holder;
• provide financial security that covers the cost of decommissioning all licence infrastructure and remediation of the licence area before any infrastructure can be installed; 
• comply with provisions of the Act and the regulations including in relation to restrictions on transfer of licences and change in control of licence holders; and
• comply with any specific terms and conditions of the licence.

Non-compliance may result in a cancellation of licence if the licence holder fails to implement remedial measures. Civil and criminal penalties may also apply.

Energy products

While the primary focus of the proposed regulatory framework is offshore electricity generation from renewable sources, the Act contemplates the possibility that transmission infrastructure may be used to connect electricity generation projects from non-renewable sources. To this end, the Act allows for research and demonstration licences to facilitate the development of new offshore generation technologies.

Interface with EPBC Act

In addition to development of a management plan requiring approval by NOPSEMA, which involves a consideration of the environmental impacts of offshore electricity infrastructure, licence holders may also require separate approval under the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act). Actions which will have or are likely to have a significant impact on one or more “matters of national environmental significance” (MNES) require approval under the EPBC Act. MNES include Commonwealth marine areas, threatened species/communities and listed migratory species.

Therefore although the Act does not apply to the coastal waters of a State or Territory, the requirements of the EPBC Act will still apply to transmission lines that cross State/Territory waters, and to the development of offshore electricity infrastructure generally (ie in areas to which the Act does apply), where the environmental impacts of such activities meet the significant impact threshold.

In addition to any EPBC Act approval requirements, proponents of offshore wind projects will also require planning and environmental approvals from the relevant State or Territory government for those parts of the project that are proposed in or on State/ Territory waters or land.

Interface with State and Territory requirements

It should be noted that for offshore projects to supply domestic customers, transmission infrastructure will be required to connect the offshore electricity infrastructure to onshore electricity systems. To that end, additional State and Territory licences may be required to bring offshore transmission infrastructure across State and Territory coastal waters to connect to onshore infrastructure. In due course, similar to the offshore petroleum regime, each State and Territory may need to adopt legislation to provide a uniform licensing regime for offshore electricity infrastructure in their coastal waters to provide certainty and consistency to project developers.

Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).