Amid the rise of the clean energy space and ESG issues increasingly making their way into boardrooms, an increase in offshore wind projects, along with wind and solar projects and green hydrogen, will reportedly aid in reducing organisations’ carbon footprint.

Following these developments and continued growth in the clean energy, decarbonisation and offshore wind sectors, Lawyers Weekly spoke to Clifford Chance partner Nadia Kalic, who specialises in projects in the energy and infrastructure sectors, about the rise in offshore wind projects in recent years and how this rise is set to impact legal work moving forward.

Offshore wind energy generates electricity through wind farms within bodies of water — and is a “key contributor to achieving Australia’s emission reduction targets through decarbonisation of the Australian electricity grid,” according to Ms Kalic.

“The offshore wind sector has been one of the fastest developing renewable energy sectors globally, and the size and complexity of these transactions typically requires (and attracts) significant amounts of private capital. While the Australian market has been a relative latecomer to the offshore wind sector, significant public and private interest has developed over the past few years.

“We have been talking to clients about offshore wind in Australia since 2019, coming off the back of the market-leading transactions that our Australian team has been involved in across Asia-Pacific.

“While the offshore wind sector in Australia is still in its infancy, it has the potential to play a key role in Australia’s energy transition, and our Australian team are working on a number of live transactions in this space.”

In addition to the transactions Clifford Chance has worked on, there have been a number of notable deals related to offshore wind projects and renewable energy this year alone, including the BOWE project, the sale of WIRSOL Energy and the acquisition of Warrego Energy for $440 million.

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This comes with an uptick in investment activity, which Ms Kalic said follows recent regulatory developments in Australia — including Australia’s national regulatory framework for offshore energy coming into effect in June 2022, the Bass Strait off Gippsland in Victoria being declared as Australia’s first offshore wind zone in December 2022, and “invitations for proponents to apply for feasibility licenses in the Gippsland declared area opening on 23 January 2023 and closing on 27 April 2023”.

“The government has earmarked a number of other potential offshore wind zones, including one in the Hunter region near Newcastle in NSW, so we expect this will continue to be an area of focus. In addition, we have seen states and territories set ambitious renewable energy targets to facilitate investment, including (relevantly in the context of Gippsland) the Victorian government announcing targets to bring online 2GW of offshore wind capacity by 2032, 4GW of capacity by 2035 and 9GW of capacity by 2040.

“There are a number of areas that will require focus and investment to facilitate the growth of the offshore wind sector in Australia. A key aspect is building out the transmission infrastructure to coordinate offshore wind connection to the grid and the associated role of government, network service providers and the private sector (including in the context of infrastructure sharing arrangements),” Ms Kalic outlined.

“Other areas of focus are vessel availability for supply, installation and servicing campaigns, as well as port and road upgrades to facilitate the transportation (including by specialist vessels) and storage of wind farm components, including WTGs and towers. Finally, pricing support from government is another area of focus, particularly given the significant construction risk being assumed by private capital providers.”

However, given that regulation within this space is still in its infancy, the nature of legal work within this sector has predominantly been focused on a handful of key areas.

“Firstly, navigating the regulatory landscape and approvals required to perform pre-development and construction activities for offshore wind projects in Australia at both the federal and state/territory level. This includes FIRB, land tenure, environment and planning, marine and coastal, civil aviation, native title and cultural heritage,” Ms Kalic added.

“Another key focus area is identifying the key stakeholders for consultation purposes to facilitate the application for licences and approvals and to facilitate project proposals from a broader ESG perspective (i.e. social license to operate).

“This includes owners and regulators of existing petroleum tenements, existing infrastructure such as telecommunications cables, holders of fishing concessions and permits (recreational and commercial), native title and traditional owners, defence operations and radar capability, maritime navigation, and safety and port authorities.”

These permits are particularly important given the “significant upgrades” required for both the construction and ongoing servicing of these offshore wind farms, Ms Kalic added.

“Additionally, legal work in this space also involves assisting with the preparation and submission of applications for feasibility licenses, as well as assisting with the structuring of equity arrangements associated with investments in these projects,” she said.

“The latter includes general corporate advice, incorporation of entities, joint ventures, co-investments and associated M&A activity.”

And moving forward, Ms Kalic said that legal work in this space is likely to expand as the sector does.

“As project proponents continue to progress towards the ready-to-build or FID stage on their projects, we expect that legal work will expand accordingly to cover construction, procurement, offtake and financing arrangements for these offshore wind projects. Incoming equity investment is also expected to result in an increase in associated M&A and corporate advisory work in this sector,” she said.

“Given the global nature of the supply chains (including OEMs) and private capital for offshore wind projects, it will be important to draw on lessons learnt from the development of the offshore wind market across Asia-Pacific and bring these to bear in the Australian market.”