Is pivoting offshore the right policy for achieving decarbonisation in the state of Victoria, Australia's electricity sector?

Abstract

In 2022 the Victorian Government announced an ambitious offshore wind target of 9 GW by 2040. The aim of the target is to decarbonise Victoria's electricity supply through the replacement of ageing and incumbent brown coal generators. This paper explores potential pathways for Victorian electricity sector decarbonisation and assesses whether this policy is the best for Victorian consumers and industry when assessed against cost, price, and emissions criteria. The policy necessitates subsidies for the investment in offshore wind to be financially viable, as the capacity target of 9 GW exceeds the level of variable renewable energy that can be efficiently integrated into the National Electricity Market without financial support. These subsidies are necessary in offsetting the initial high costs of offshore wind to pursue Victoria's long term decarbonisation goals. This article is the first quantitative study of the policy on the Victorian electricity system and finds that total system costs are higher due to the pivot from onshore to offshore wind.