Building an offshore wind sector in Australia: economic opportunities and constraints at the regional scale

ABSTRACT

The recent passage of the Offshore Electricity Infrastructure Act (2021) (Cth) opened up the potential for Australia to produce renewable energy at unprecedented scale. Six regions have been identified as potential locations for developing offshore wind projects, promising thousands of new local jobs to legacy industrial regions. This paper charts the regulatory framework for Australia’s offshore wind industry and how it positions local economic benefits in the licencing of projects. It then draws on interviews with key stakeholders supported by media and policy analysis to examine the early development of offshore wind capability in one of the proposed regions, the Illawarra, in NSW. Here existing steelmaking capacity positions the region to play a key role in supply chains for local and potentially national projects, but considerable structural and geographical constraints in the labour market will need to be addressed. In light of overseas experience indicating that economic benefits often fall short of promises, greater attention by policy makers is required to ensure hosting communities can develop local skills in the industry and facilitate their relative supply chain capabilities. This paper also calls for careful evaluation of early projects to allow for adjustments to policy settings as the industry matures domestically.

KEYWORDS:

• Offshore wind
• renewable energy
• employment
• supply chains
• regions
• Australia

Introduction

Offshore wind electricity generation technology has over four decades of development in Europe and significant global uptake in recent decades but has only recently become legal in Australia (Goodman 2022). The Offshore Electricity Infrastructure Act 2021 (Cth) (OEI Act) opened the potential to tap into enormous offshore wind energy resources as part of Australia’s broader plans for an energy transition and newly legislated commitment to net zero by 2050 (Blue Economy CRC 2021; Bowen 2022). The energy generating potential of offshore wind is immense. It is estimated that if Australia utilises just 5% of its technically assessable offshore wind resources (close to existing infrastructure and transmission lines), it could double the current energy generation in the National Electricity Market¹ (Blue Economy CRC 2021; Goodman 2022). This substantial upscaling of renewable energy production will be critical if Australia is to decarbonise difficult to abate sectors such as manufacturing and heavy transport, as well as pursue its plans to generate a green hydrogen industry. To date, six regions have been identified as suitable for the establishment of offshore wind: the ocean areas off Portland and Gippsland in Victoria; the Hunter and the Illawarra regions in New South Wales; Bass Strait off the coast of Northern Tasmania; and Perth/Bunbury in Western Australia (Bowen 2022). These regions share important geographical features: they are located in the southern latitudes where wind speeds are strong and constant; and they are adjacent to existing industrial regions with deep water ports, existing industrial infrastructure and transmission lines into power stations (Bowen 2022). They are also legacy industrial regions, some of which are facing the brunt of economic pressures and industrial restructuring associated with decarbonisation (Gibson 2022). Offshore wind generation is thus part of the reimagining of select industrial regions by governments and the private sector (Hine, Gibson, and Carr 2022 ) through the dual promise of decarbonisation and jobs.

This paper explores how these promises stack up against extant regional conditions in one of the six proposed regions, the Illawarra in south-eastern NSW. Host to Australia’s largest industrial-infrastructure complex at Port Kembla, the Illawarra’s skilled industrial workforce and steelmaking capabilities are seen as central to the development of an offshore wind facility locally, and point to a broader role for the region in developing component manufacturing capacity for the emergent Australian market. The paper draws from interviews with key stakeholders in support of the emerging offshore wind industry at a point in time before the region was officially opened for public consultation under the OEI Act to identify the structural and geographical limitations in the current labour market and supply chains that will need to be addressed for local economic benefits to be realised. Reflecting on the international experience of offshore wind projects and literature on Australia’s decarbonisation impacts on workers and local communities, it ultimately makes the case for greater policy attention to ensure projects deliver the economic benefits promised to the hosting regions. It also advocates for greater coordination across hosting regions and careful evaluation of early projects to understand how regulatory frameworks and policy settings are shaping economic outcomes on the ground. This will allow policymakers to support hosting communities, while remaining sensitive to the complexities of establishing the industry in Australia.

It is now widely recognised that energy transitions involve more than technical shifts, they fundamentally re-shape economic and social relations (Bridge et al. 2013; Huber 2015). In Australia, resistance to renewable energy over the last decade has been fuelled by divisive national politics and the political influence of the fossil fuel sector (Wright, Nyberg, and Bowden 2021). Narratives have often centred on the loss of economic benefits and jobs in regional Australia (Ali et al. 2020; Curran 2021). Recently the narrative has shifted, particularly after the election of a federal Labor government in mid-2022, to one of abundant jobs in regional areas that will host substantial renewable energy and decarbonisation projects (Accenture 2021). Economic value to hosting regions is a key legitimisation strategy for actors promoting green economic development, alongside combatting climate change, establishing energy security, and securing energy cost reductions (Mackinnon et al. 2019, 2022). Social scientists have long highlighted gaps in the regional transformation narrative between social and economic benefits promised by metropolitan-based policymakers and the lived realities for regional workers, households and communities (Bamberry 2015; Gibson 2022; Weller 2017; 2019). This paper contributes to these discussions, with a focus on the emergent economic geographies of offshore wind.

Australia can benefit from the lessons of elsewhere, with a substantial body of international literature examining the economic and social implications of the offshore wind industry. Cronin, Cummins, and Wolsztynski (2021) note that debate over the economic impact of offshore wind development is characterised by polar extremes – as a panacea for regions, or likely to destroy the local economy. In the European context, economic benefits have often not lived up to promises (Allan et al., 2020; Gibbs and Jensen 2021; Van der Loos et al. 2022). Studies indicate that regional economic benefits are dependent on the ability of a region to develop capacity in the supply chain of projects, creating investment and jobs across multiple projects in the region and beyond (Allan et al. 2020; Capasso et al. 2019; Rose, Wei and Einbinder 2022). While developers are key decision-makers over supply chains, offshore wind projects are highly complex and multiple actors (often in competition) can shape the economic benefits they deliver to a hosting region (Blažek et al. 2020; Gibbs and Jensen 2021; MacKinnon et al. 2022). This paper builds on this evidence base, with an early examination of the way energy transitions land on the ground in a context that is geographically isolated from existing offshore wind markets, and identifying the promises and constraints for maximising economic benefits in regional Australia. In doing so, it contributes to a growing body of Australian literature that examines how decarbonisation efforts are unfolding in Australian communities in place-specific ways (Cass et al. 2022; Weller and Beer 2023) that require ongoing research attention.

The paper begins with an overview of the regulatory framework governing the establishment of the offshore wind industry in Australia, exploring the interaction between Commonwealth and state laws that will shape offshore wind development, and how local jobs, supply chains and economic benefits feature in the licencing regime. We then situate the empirical case study within the international literature on offshore wind development, and the Australian literature on how energy transitions impact on regional workers and communities. Following a brief overview of methods, we turn to the empirical material and a discussion of the regulatory complexities and structural challenges in regional labour markets and supply chains and how responding to these will be necessary to ensure regional workers and communities receive the benefits they are being promised by developers and policymakers.

Developing a regulatory framework for offshore wind in Australia

In November 2021, Australia’s then conservative government passed the OEI Act, which came into effect in June 2022. The regulation of offshore wind energy infrastructure falls under Commonwealth powers because it is located in Commonwealth waters (including seabed and subsoil), beyond three nautical miles from the coastline (Goodman 2022). Under the OEI Act, the Minister for Energy and Environment is vested with the powers to make all licencing decisions. There are four types of licence under the OEI Act that progressively deal with the lifecycle of offshore wind development: feasibility licence; commercial licence; research and demonstration licence; and transmission and infrastructure licence. Licences under the scheme will be administered by the Offshore Infrastructure Registrar, assisted by staff within the National Offshore Petroleum Titles Administrator (NOPTA), the administrative body that regulates the oil and gas industry in Australia.

The Offshore Electricity Infrastructure Regulations 2022 (Cth) (OEI Regulations) were made in October 2022 by the newly elected federal Labor government. They expand on the three merit criteria for assessing applications² for licences to offshore wind developers under the OEI Act, by adding a requirement that the Minister must be satisfied that the licence would be ‘in the national interest’ (OEI Regulations, s.25). In doing so, the government signalled clear recognition that as large-scale infrastructure, offshore wind projects raise complex socio-economic and political issues for the nation and the communities that host them. Section 25(4) specifies the matters that the Minister has discretion to consider when assessing the national interest, which include national security, whether the project is delivered in time, is an efficient use of the area and conflicts with other users of the area.

Of particular relevance is section 26(4)(a), which states that, in considering the national interest, the Minister may (not must, emphasis added) consider the economic benefits to Australia, and more specifically to regional development, job creation and the use of Australian goods and services. It is clear that the national interest test does not require or specify a precise proportion of local jobs or local content in the supply chain of offshore wind.³ It is also worth noting that the overarching test is the national interest, not the local interests of individual hosting regions; and further that these are only part of one matter that the Minister has discretion to consider. Nevertheless, the clause requires that economic benefits to local regions will need to be specifically addressed by applicants in the competitive licence process and are relevant to the Minister’s decisions on granting licences. Once licences are granted, there is no express statutory power in the OEI Act to ensure that local economic benefits are delivered, however this could be an enforceable condition of a licence under the legislation. State government laws may also mandate further local content rules. At the time of writing, Victoria (where the first offshore wind area was declared) has indicated that supply chain requirements will increase as the industry develops (D’Ambrosio 2023). In the case of New South Wales, a Labor government was recently elected on a policy platform that seeks to reinvigorate domestic manufacturing (Australian Labor Party (NSW Branch) 2022), but at the time of writing no specific policy on offshore wind has been announced.

In addition to the regulatory framework being developed specifically for the sector, Commonwealth, state and local government planning and environmental regulatory frameworks are relevant because offshore wind involves transmission lines into state waters and onshore to power stations (Department of Climate Change, Environment, Energy and Water 2022a). At a Federal level, this includes assessments under the Environment Protection and Biodiversity Conservation Act 1999 (Cth). At the state level in New South Wales, proposed offshore wind developments (in particular the aspects that come onto state waters and onshore) will be determined under the Environmental Planning and Assessment Act 1979 (NSW) by either the state Planning Minister or the Independent Planning Commission. While efforts have been made to synchronise Commonwealth and state environmental and planning processes in some states (notably Victoria), this is not yet the case in New South Wales. This potentially means two separate application processes for NSW offshore wind developers, with parallel community consultation processes, in addition to initial federal consultation before an area is declared under the OEI Act. The alternative – and given their scale, a likely pathway – is that offshore wind projects in NSW may be determined as State Significant Infrastructure, effectively placing decision-making into the hands of the NSW Minister for Planning. While the full extent of how this plays out is yet to unfold, the emergent regulatory context highlights the complexities of establishing an offshore wind sector in the context of the Australian federation where projects involve overlapping and uncoordinated Federal and state regulatory regimes (Kallies 2021; Weller and Beer 2023). In the following section, we turn to the international offshore wind literature to examine what might be learnt from regions where the industry has already matured to best offer workers and communities the economic benefits they have been promised.

Theorising offshore wind as part of decarbonisation

In recent years, the geographies of energy transitions have evolved as a conceptually pluralistic body of literature (Baka and Vaishanava 2020; Bouzarovski 2022; Bridge et al. 2013; Calvert 2015; Huber 2015; Bridge 2018). Geographers have called attention to the importance of multi-scalar approaches to understanding the complex and place-specific ways that energy transitions unfold through the interplay of diverse actors and institutions (Truffer and Coenen 2012; Mattes, Huber, and Koehrsen 2015; Coenen et al. 2021). Trippl et al. (2020), drawing from Martin and Sunley (2006), propose four forms of regional green path development, namely: path renewal (the greening of established sectors in a region); path diversification (diversion of knowledge and assets from existing green or brown industries into emerging green industries); path importation (insertion of existing green industries and knowledge into a region by non-local firms); and path creation (creation of completely new industries). As the analysis below suggests, offshore wind in the Australian sector is characterised as path importation of assets and knowledge, at least with early projects.

Offshore wind researchers have drawn from both transition studies and path dependency theories (Mackinnon et al. 2019; 2022) to examine how an industry emerges within specific regional areas and the legitimisation strategies employed to support the industry. In Norway, Steen and Hansen (2018) identified offshore wind as a form of pathway diversification from the oil and gas industry, whereas in Germany, the industry developed as diversification from the onshore wind industry (Fornahl et al. 2012). Significantly, this literature challenges earlier firm-centric accounts of path development, drawing attention to the role of policy (Dawley 2014) and the complex interaction of actors (often with competing interests) – including local government, advocacy groups and transnational firms – in shaping power relations and the local experience (Dawley et al. 2015; Gibbs and Jensen 2021; Nilsen and Njøs 2022). In the European context, the research suggests that regional economic benefits often do not live up to project planning estimates, with major leakages to global firms in what is an increasingly globalised supply chain market (Allen et al. 2020; Gibbs and Jensen 2021; van der Loos 2022). Gibbs and Jensen’s (2021) study of the development of offshore wind in two German regions used qualitative interviews, desktop-research and stakeholder engagement interactions to document how global firms influential in the supply chain dictated short contracts for smaller suppliers, effectively sidelining local businesses. So too, local environmental opposition to offshore wind in one region delayed the planned project, prompting developers to shift to another region, along with the associated supply chain development (Gibbs and Jensen 2021). This points to the multitude of actors that may influence economic outcomes for hosting communities despite the planning of developers and policymakers.

Recognising that projects often fail to live up to promises, a growing debate has emerged around the effectiveness of local content rules (Allan et al. 2020; Van der Loos et al. 2022). While some studies suggest that local content rules do deliver enhanced economic benefits for hosting regions (Allan et al. 2022), complex dynamics are at play and researchers have pointed to the often inadequate monitoring of offshore wind projects to assess local economic benefits, particularly beyond the construction phase (Glasson et al. 2022). Developers are central decision-makers in offshore wind projects, yet their capacity to coordinate varies across the extensive supply chain, with some highly complex segments requiring extensive collaboration with suppliers to address technical difficulties (Van der Loos et al. 2022). A quantitative evaluation of the use of local content in six European countries with offshore wind projects (involving 97 wind farms) by Van der Loos et al. (2022)⁴ reveals that, in the European context, local developers have a greater tendency to select local businesses than foreign developers, particularly with the more complex and specialised relational components. Local content rules did substantially increase the use of local input into the supply chain but the impact was most heavily concentrated on simple and market integrated parts given local alternatives were available. The drive to minimise costs, however, led to less reliance on local sources for more complex, relational parts which involve greater economic benefits. They conclude that higher benefits for local suppliers are more likely if contracts are awarded to local developers without imposing local content requirements. That study, however, was conducted in the mature European market for offshore wind. While developers in the Australian context would no doubt welcome the absence of local content rules, the policy implications for the Australian context are less clear given the industry is new to the region (as opposed to new to the world – see Binz and Gong 2021), but some distance away from established supply chains. In this case, a compelling argument can be made for the role of local content rules to ensure that hosting regions are able to compete with well-established overseas markets, particularly while local specialist knowledge develops. This inevitably raises a question of what constitutes ‘local’ content where definitions might range from ‘local to the region’ through to ‘local to Australia’, with different outcomes for hosting regions.

There is much to learn from international case studies on offshore wind development as Australia embarks on its own journey, including managing broader social and environmental impacts, along with conflicts around visibility, public acceptance and competing land use (see for example Bush and Hoagland 2016; Cronin, Cummins, and Wolsztynski 2021; Devine-Wright and Wiersma 2020; Heidenreich 2016; Mani and Dhingra 2013; Parsons et al. 2020). Yet we should also not lose sight of the specific domestic context in which the industry is evolving in Australia. Here, geographically distant regions are governed by national, state and local government policy that is (at least historically) largely uncoordinated. How an offshore wind industry develops in each of the six regions will also differ depending on the region’s history, environment, local politics and material context (Massey 1984). Shaped by these factors, research on how other energy transitions have unfolded in Australia at the regional level prove instructive.

Energy transition lessons from regional and rural Australia

Australian researchers have drawn attention to the way power is centralised at the state level for regional development, energy and skills in ways that limit the ability of local councils and communities to impact their own trajectories (Kallies 2021). Yet differences exist between Australian states’ approaches (Weller and Beer 2023) and contests between powerful actors at the regional level, such as global capital and trade unions, can shape federal and state policy agendas (Ellem 2015). Others have identified the challenges for regions hosting decarbonisation projects in the context of broader regional transformation and pandemic-led internal migration, intensifying social dynamics such as skills and housing shortages (Pearse and Bryant 2022). Weller’s (2017, 2019) work on efforts to transform the Victorian Latrobe Valley away from coal document how metropolitan-led and so-called international best practice policies reimagined the region in ways that made no sense to local communities, failed to properly engage with local actors and institutions, focused on an imagined future rather than the daily lives of the local people, and entrenched existing relative disadvantage in the region. Such failures left those most heavily impacted by the transition unsupported, disillusioned and disempowered. Weller’s work compels an attentiveness to the proper engagement of local communities and those most impacted (not select actors) in decision-making around energy transitions. It draws attention to the potential gap between policy design and how initiatives land on the ground at the local level, where the effects of energy transitions and industrial decarbonisation are experienced in everyday life.

Based on a decade of research on the transition from coal fired power generation in the Gippsland region of Victoria, Fairbrother (2017) draws attention to the contested nature of regional change and energy transitions. He observes that regional development in the contemporary Australian context involves multiple levels of governance that are complex, overlapping and often unclear. This multi-level governance structure shapes the involvement and influence of a broad range of regional actors, including trade union representation beyond single industries and civil society (see also Pape, Fairbrother, and Snell 2016). Fairbrother advocates for a more inclusive and open form of governance, so that a more diverse range of actors with broad interests may play a role in regional development and policy formation in ways that are deeply connected to local workers and communities, and capitalise on key assets in the region. Fairbrother reminds us of the importance of bringing an analysis of power relations to the forefront of place-based examinations of how energy transitions unfold at the regional level, and this is especially important as legacy industrial regions and communities grapple with a new wave of ‘green’ capital led by large-scale offshore wind and a broader range of actors with competing interests begin to emerge.

In the NSW context, Cass et al. (2022) adopt an ethnographic approach to examining community responses to multiple utility onshore wind and solar projects in the inland Renewable Energy Zones (REZ) of Central West Orana and New England. They conclude that renewable energy projects offer considerable economic benefits for hosting regions, but their unevenness is a source of major conflict at the local level. In particular, landholders hosting projects were generally consulted early and received substantial economic benefits that could drought-proof their farms, whereas neighbouring landholders often felt shut out of consultation, with little to no economic benefit for living alongside projects. The authors advocate for more inclusive planning of renewable energy projects to properly engage and consult with Aboriginal people, impacted neighbours and the wider community. They also found there is a need for greater attention by state policymakers to the pace and pattern of planning renewable energy projects to mitigate the cumulative impact of projects on hosting communities as well as opportunities for coordinating community benefit sharing to deliver more sustainable benefits over time.

Read together, the literature on Australia’s decarbonisation efforts points to the need for policymakers to take a more place-based and inclusive approach to regional decarbonisation. This must be guided by granular research at the local scale that accounts for uneven power relations, places a focus on transparency in decision-making, and foregrounds issues for local workers and communities in analysis.

Methods

Empirical data for this project is drawn from 11 semi-structured interviews with key stakeholders in the Illawarra offshore wind industry conducted between July–December 2022. Participants consisted of senior executives in offshore wind development who were either based in the region or had the region as part of their project responsibilities, national representatives of unions, locally-based vocational educators, University of Wollongong staff and a sitting member of the NSW Parliament representing the state seat of Wollongong. Given the early stage of the industry in the region and the period when fieldwork was conducted, the 11 participants constituted a majority of available key stakeholders covering a diverse range of perspectives beyond those of developing firms. Local educational stakeholders were drawn on for their technical and commercial expertise in energy transitions and how the region would prepare for skilling people in offshore wind. The Member of Parliament played a key role in securing the Illawarra’s status as a NSW Renewable Energy Zone. Participants were selected based on media profiles and through snowballing, with the University participant providing most of the connections to the other key stakeholders.⁵ The interviews ranged from 60–180 min. Participants were given the option to be identified or de-identified in analysis. The majority of participants consented to be identified, with the exception of two people working for offshore wind developers. A decision was subsequently made not to identify any developers as this could inadvertently identify those who chose to remain anonymous.

To supplement the interviews, supporting data has also been retrieved from online sources, including the Australian Bureau of Statistics, local, state and national media sources, corporate websites and social media content directly concerned with the Illawarra’s offshore wind industry. This data adds context to the interviews, particularly around the reporting of offshore wind and the community response to it. In terms of media analysis, sources were drawn mainly from the Illawarra Mercury (a regional newspaper), including posts and public comments made on its public Facebook account concerning offshore wind in the region. This material was used to contextualise qualitative interview analysis and does not constitute a comprehensive media review. At the time the data was collected in 2022, there was not yet the substantial community responses to offshore wind that emerged following the area being opened for consultation in September 2023. Community and small business perspectives form the basis of ongoing research for the project, and will be the subject of further data collection, analysis and publications.

Discussion

The Illawarra: an industrial region in transition

The Illawarra region of NSW is located 80 kilometres south of Sydney. The physical landscape of the region is distinctive in shaping community responses to offshore wind: bounded by the ocean to the east and the escarpment to the west, most people live within 10 kilometres of the coast. Once a region heavily dependent on metallurgical coal mining and steel production, the economy is now highly diversified after decades of industrial restructuring and associated employment crises (ABS 2021; Warren and Gibson 2023). This process has fundamentally reshaped the region as a service based workforce but where industrial production remains economically and symbolically important (ABS 2021). Today the region hosts four operating metallurgical coal mines and Australia’s largest steelworks based in the industrial precinct of Port Kembla.

At a state level, the Illawarra was recently included as one of five Renewable Energy Zones (REZ) for targeted investment and infrastructure (NSW Department of Planning, Industry and Environment 2021b). A Registration of Interest process conducted in mid-2022 for the Illawarra REZ revealed interest in developing 44 projects representing over 17 gigawatts of energy and $43 billion in investment. This included eight offshore wind projects (Energy Co 2022). In the Illawarra alone, it is estimated that offshore wind could produce 10 gigawatts of energy, more than one and a half times the current consumption of the entire National Energy Market.⁶ In terms of offshore wind projects, most developers undertaking preliminary planning in the Illawarra are positioning their projects around the 2-gigawatt (GW) mark, meaning in the long-term there could be a number of projects by different developers in the region.

There are also a number of major hydrogen projects under development, oriented around decarbonising difficult to abate sectors such as manufacturing and transport. The co-location of green hydrogen with offshore wind and existing industrial infrastructure (also occurring in the Hunter region) is seen as key to industrial decarbonisation regionally and nationally and requires a substantial increase in renewable energy. Steelmaker BlueScope alone estimates that it will require 15 times the energy consumption to decarbonise its operations (Stephens 2022). Hydrogen also offers an export opportunity for Australia in renewable energy (Finkel 2021). In this context, offshore wind and hydrogen are symbiotic industries viewed as critical to Australia’s long-term industrial energy transition. They present a range of opportunities for the Illawarra, but also require substantial integrated planning to lift local labour market and supply chain capacity. Reflecting this, the region was recently awarded $12.5 million for renewable energy skills development by the Federal government.

Skilled labour shortages loom large for all renewable energy projects (Bowen 2022) and this is no exception for the offshore wind industry in the Illawarra. Reversing historical trends, the unemployment rate in the region is currently low, and less than the state and national average (3.9% in July 2022 compared to state average of 4.1%), with low youth unemployment (8.1% compared to NSW average of 8.7%). More recent growth in professional occupations in the region (23.3% of the labour market in 2021 Census compared to 25.8% in NSW and 24% for Australia) sits alongside a higher than state and national percentage of workers with technical and trade qualifications (14.7% of the labour market compared to 11.9% in NSW and 12.9% nationally) (ABS 2021; Warren and Gibson 2023). Significantly for offshore wind projects, while the region has a current shortage of trade-skilled labour for the substantial capital and infrastructure projects already planned in the region (Langford 2023), this is countered by its proximity and connectivity to Australia’s largest labour market in Sydney and surrounding areas.

In what remains of this paper, we draw on interviews with key stakeholders in the offshore wind industry in the Illawarra along with secondary data sources to identify some key structural and geographical barriers that will need to be addressed for offshore wind to deliver the promised economic benefits to the region. In doing so, we seek to bring a more nuanced understanding to the blanket claim that establishing an offshore wind sector will guarantee long-term economic benefits to the hosting regions while also drawing attention to how the specific geographies of the region may shape the economic impacts of establishing an offshore wind sector.

Pathway development of the offshore wind sector: locating expertise

Although there are a number of players in the field, the two most publicly visible contenders for offshore wind in the Illawarra are Australian company Oceanex (partnering with Norwegian energy giant, Equinor) and Spanish offshore wind company, Bluefloat. In 2022, Oceanex released plans for 100 floating turbines situated about 20 kilometres offshore; a $10 billion project they estimate will take 3–4 years to build, employing 3,000 people in construction and 300 people in the ongoing operations and maintenance (O&M) phase (Oceanex 2022, 2023). The Oceanex/Equinor partnership, along with Bluefloat and other potential developers, also have proposals in other hosting regions, so how this pans out over time is yet to be seen.

Although offshore wind infrastructure requires enormous amounts of capital investment, all developers interviewed for this research indicated that finance was not the issue of concern in bringing new projects to fruition:

So we're actually at a time now in the project where the money is not the problem. It's the regulatory framework and the speed with which we can convince government to come along on the journey and to accelerate efforts to start a new industry.

Development Executive

This reveals the capital-led nature of the offshore wind industry at this early stage in its development and conveys the sense of urgency expressed by developers for government to facilitate the sector. A number of stakeholders identified the complex regulatory regime as the key factor currently impeding the industry’s development. This is particularly the case in NSW where there is currently no coordination between federal and state environmental planning processes, potentially duplicating consultation phases under the different regulatory regimes. Stakeholders suggested this could significantly impact on the Illawarra community’s acceptance of offshore wind and raised the possibility of ‘consulting fatigue’, particularly if different developers were all conducting their own consultation processes at the same time as is envisioned by the OEI Act.

A further noted challenge for the speed at which the sector can be developed in Australia was the absence of suitable expertise among the Federal public service – a legacy of austerity and a decade of intransigence on decarbonisation under the previous conservative government, as described by a university stakeholder with long-term energy industry experience:

The reality is that in outright numbers, the public service contracted significantly under the Coalition Federal government and, moreover, people who were more aligned with a clean energy future didn’t see their views as being aligned with or supported by the previous government. As a result, there has been a volumetric contraction as well as a deficit in the skill set that is required now for offshore wind industry development.

Ty Christopher, Director Energy Futures Network, University of Wollongong

A lack of local expertise in offshore wind development means the Australian sector is developing as a form of ‘path importation’ (Trippl et al. 2020), where Australian firms (that have not originated from the hosting regions) are working in partnership with European firms with substantial experience in the offshore wind industry. Over time, there may be aspects of path diversification and path creation in offshore wind projects if local firms are actively engaged in more specialised and technical aspects of projects.

While much of the marketing material for offshore wind presents images of mesmerising towers in pristine waters, the reality of an offshore wind industry is a massive infrastructure project with substantial onshore and offshore aspects, as reflected in this statement by a Senior Executive for a potential developer:

We’re major infrastructure, heavy industry, manufacturing. Yes, we produce electricity to decarbonise the grid, but the embodied energy and steel required in the build out of these infrastructure projects is enormous.

Development Executive

It is this considerable infrastructure undertaking that offers the economic benefits to hosting regions, which interviewees identified as coming from two main sources:

1. the planning, construction, operation and maintenance of a project where most jobs were in the construction phase; and

2. local businesses, especially those already engaged in steel manufacturing, diversifying to provide essential components in the supply chain such as metal fabrication and tower manufacturing (see for example, Oceanex 2022).

In general, stakeholders interviewed expressed a real sense of enthusiasm for engaging local workers and businesses but saw the biggest challenge as getting regional workers skilled for the industry and supply chains set up in time. In practical terms, stakeholders described how, across the proposed offshore wind regions, the competitive process for obtaining a right to develop projects means that a range of actors are conducting their own skills and supply chain assessments in an uncoordinated way – from developers to the three tiers of government and the university sector. The upshot is that, until developers get the licence to develop a region, they are unlikely to significantly invest in skills and training in concrete terms. The lengthy planning process involved in offshore wind and the development of multiple projects over time may allow for skilling of a local workforce but this too will depend on timely investment in local skills and training in a targeted way that responds to the geographical and structural nature of the local labour market. Given skills, energy, infrastructure and regional development are largely matters for state governments under constitutional arrangements (see Weller 2017), this points to a greater role for state governments in the early coordination and planning phases of offshore wind, if opportunities for local labour markets are to be maximised.

Regional employment and skills development for offshore wind

The existing tight industrial labour market in the Illawarra means that there are three main sources of labour for the emerging offshore wind sector: people coming from outside the region (both overseas and Australian); workers from other industries in the region (declining, stable and expanding); and new entrants into the labour market. The industrial scale of offshore wind and the opportunities for industrially skilled workers has attracted widespread support for the development of the industry from some key unions, particularly the Electrical Trades Union (ETU), the Australian Manufacturing Workers Union (AMWU) and the Maritime Union of Australia (MUA). For the MUA, offshore wind is seen as part of a just transition for workers in the oil and gas industry (MUA 2023), whereas the Electrical Trade Union sees the opportunity to expand participation in their industry beyond those historically engaged:

To be honest, I think that there will be more jobs than there are workers!

… Australia’s got a skills shortage, we could perhaps use an entirely under-utilised gender in our occupation … First Nations apprenticeships, long term unemployed, I think there’s some big opportunities in and around there.

Trevor Gauld, Electrical Trades Union

Other key voices also echoed the skill shortages across renewable energy projects and the desire to widen the participation of workers historically under-represented (Briggs et al. 2022; Clean Energy Council 2022). For unions, a key condition in their support of the offshore wind industry was the view that jobs in the offshore wind sector would be well paid jobs for which there would be union oversight.

It was widely agreed across different stakeholders that in the early days of development the highly specialised nature of the industry and the lack of local experience would require workers to be drawn from the offshore wind sector overseas, with the view that this would facilitate the transfer of skills to local workers over time. Stakeholders pointed specifically to European workers with experience in offshore wind, and workers from the globally renowned Filipino maritime industry, identified as having been critical to the European offshore wind industry. In terms of path development, this again speaks to the importation of knowledge from outside the region (Trippl et al. 2020). In practical terms, the global explosion of offshore wind projects suggests that Australian projects will be in fierce international competition for highly skilled and experienced workers in the industry until local skills are developed.

Stakeholders also identified that offshore experience would be sought from workers in Australia’s offshore oil and gas industry, where workers already have experience working in an offshore context. One striking difference between the European experience and the proposed locations of offshore wind in Australia is the lack of co-location of the proposed offshore wind regions and the existing offshore oil and gas industry. Australia’s offshore oil and gas industry is predominantly located in the north-wWest of Australia, some 3,000 kilometres away from the Illawarra (and the other eastern states’ hosting regions, Perth/Bunbury in Western Australia is an exception). This means relocating workers (and their families) to take up work in the offshore wind industry and, for some families, the opportunity to return to the region. Here there was recognition by some developers that, unless the region could develop a pipeline of projects, employment would not be reliable or long-term in ways that might justify the social and economic costs of relocation. As a development executive explained:

No one wants to work on one project and be involved in the construction and then there's a massive lag until the next project and so they're, like, redundant for a little while, and then they ramp up their work.

Development Manager

The early reliance on workers from outside the region for planning and offshore aspects of developments may well undermine the community acceptance of offshore wind, especially given the promises of local jobs and economic benefits espoused by governments and developers. This raises the question of how ‘local jobs’ are defined by policymakers, capital interests and communities themselves, which are not uniform across policy settings (see Briggs et al. 2022, 8). For the latter, local jobs may not mean jobs for people across Australia or even within the state, but for those who already live in the community. In the US context, Tyler et al. (2022) found that scepticism about the possibilities for local employment is highest in the early planning phases of the industry, whereas in Ireland, researchers have concluded that people who are more educated or have more exposure to offshore wind are more likely to support the industry (Cronin, Cummins, and Wolsztynski 2021). This early scepticism may play a significant role in shaping community support for the industry across all hosting regions in Australia, but particularly those regions where projects coincide with massive job losses associated with decarbonisation. In line with Fairbrother et al. (2012), this points to the need for policymakers to conceptualise skills and training in ways that are attuned to regional labour market dynamics, including conflict and class dynamics shaped by key actors, so that workers already living in the region who are interested in the industry are best placed to participate.

The question of transition: workers in ‘sunset’ industries

A key narrative across the proposed offshore wind areas is the potential for workers in the coal industry and other so-called sunset industries to obtain work in offshore wind. To date, however, the focus in Australia has been to map pathways from the oil and gas sector into offshore wind, indicating strong transferability between these sectors. A key – and currently missing – piece of work (as identified by a number of Illawarra stakeholders) is mapping pathways for transitioning workers in coal mining or other carbon intensive industries into offshore wind. While opportunities for coal workers may be key to legitimising the industry in the Gippsland and the Hunter regions undertaking a transition from coal fired power generation, this is not the case in the Illawarra. The coal in the Illawarra is predominantly metallurgical coal (used in steel production) and the industry directly employs only 2% of the population (ABS 2021). With infrastructure demands growing both nationally and internationally, the Illawarra’s largely export orientated coal industry is currently experiencing a boom period where skilled labour is in short supply and workers are paid well. In the current context, there is no imperative to transition from employment in the local coal industry, but this may well change in time given the multitude of factors that will impact on local coal employment, tied to international commodity markets and owned by foreign capital. Regions undergoing energy transitions must also grapple with the practical challenges of re-training for transitions into a new industry, as recognised by the local state Member of Parliament, Paul Scully:

Well how do you support them (coal workers) and not just say, ‘There’s a free course you can do’ … they still have to pay the mortgage and feed their kids. And that’s the challenging part of the spectrum.

Paul Scully, NSW Member of Parliament for Wollongong

In practical and quantitative terms, while providing jobs for coal workers might be a good news story for the decarbonisation agenda, this is unlikely to be a significant feature of the Illawarra’s offshore wind industry given the size of the workforce and the ongoing need for metallurgical coal in domestic and international markets. In order to maximise any participation of the Illawarra’s coal workforce, early work is needed on mapping skills transition pathways from the local coal industry into offshore wind, along with canvassing interest from workers to understand the practical challenges they face in transitioning from their current roles.

Looking at other routes to grow the existing labour market for both project phases and the supply chain, stakeholders spoke of the need to increase the number of people in the region with industrial trades, particularly by attracting more young people into apprenticeships, to develop electrical and metal fabrication skills. The lack of engagement of young people in industrial trades nationally and the historical defunding of public vocational education at the state level invites further research, but may also reflect regional factors in the Illawarra, such as: the changing demographics of the region and the lived experiences of cycles of industrial restructuring, leaving an intergenerational imprint that industrial work is insecure (Burrows 2012). Some stakeholders identified issues with the existing vocational education model, which is based on students having a current apprenticeship with an existing employer and combining formal learning with on-the-job experience. Offshore wind brings a different temporality, where long lead times mean there is a window where skills acquisition can occur prior to construction commencing, but the model of combining formal learning and on-the-job experience may require adjustment. Institutional capacity was also an issue and requires not only specific funding but coordination with industry, as was expressed by one stakeholder in the following way:

So we tend to get criticised, you know, but I think it's the only way we're really going to get results is to really be collaborative. So teachers as an example, right, so we struggle to get enough [vocational] teachers at the moment and part of that is that they're earning such good coin in industry at the moment … 

Vocational educator

While the skills development pathways in the region are not yet apparent, policymakers should attune to the specific regional dynamics at play and the competing and vested interests that will impact on skills formation in a place-based approach (Beer et al. 2020). This points to the need for ongoing place-based research to understand the impacts on local workers and communities.

Supply chains, local content and sustained employment opportunities

In the longer term, international experience indicates that employment prospects for local workers and the economic benefits for the region will depend on its capacity to contribute to the supply chain, linking employment to multiple projects in the region and beyond (Allan et al. 2020; Rose, Wei and Einbinder 2022). Here there is compelling evidence that a region’s ability to diversify will depend on its pre-existing capacities and knowledge (Binz and Gong 2021; Boschma 2017), placing the Illawarra in a good position given its steel manufacturing and fabrication experience. Yet more nuanced geographical analysis is needed to understand how existing activities will shape regional capabilities in new industries (Boschma 2017). Decisions on the supply chain for the hundreds of components used in offshore wind largely sit in the hands of developers, although in the case of some components (such as turbines) there is limited market competition (Allan et al. 2022). Again, there was widespread enthusiasm from stakeholders for what a new offshore wind sector could mean for the Illawarra in terms of diversifying existing manufacturing businesses to supply some key components. Developers spoke of doing their own supply chain analysis, and in the case of Oceanex, this has been publicly released (Oceanex 2022). The very specialised nature of some of the componentry and the sheer volume of steel required for some components means that challenging strategic decisions lie ahead around which components may be practically supplied locally:

I mean, obviously, we’d love to employ local people, local jobs, local businesses, use local content. But even like, we were talking to BlueScope, and they don't have a plate big enough to make the turbine towers … 

Developer employee

While planning is evolving quickly and local solutions may well be in sights, there are challenges with the steel demands of offshore wind projects. To give some insight into the scale of offshore wind projects, a single offshore floating turbine platform (excluding the tower, nacelle⁷ and blades) requires approximately 3,000 tonnes of steel. Proposed offshore wind developments for the Illawarra indicate around 100 individual floating turbine platforms per project, resulting in a steel demand of 300,000 tonnes for each project. This represents 10% of the current annual steel production of the BlueScope Port Kembla steel works, the nation’s largest steel manufacturer (Nowland 2019). Read together, these factors indicate that strategic decisions need to be made around what components can be provided by local content. While initial planning by developers and associated larger stakeholders (such as BlueScope and NSW Ports) is underway, the competitive nature of the regulatory framework means that smaller local manufacturing firms are unlikely to make the substantial capital investment needed to re-orient their businesses without firm contracts for supply with developers. This is in turn dependent on the competitive licencing process under the OEI Act. A further factor is whether local businesses see opportunities beyond the proposed Australian offshore wind regions to their relative competitiveness in supplying the wider Australian market as well as potentially an export market.

The six proposed offshore wind locations in Australia are located not only in vastly distant regions from each other, but also in four different states and some considerable distance from the developed European supply chain. This will inevitably present challenges for the planning process around supply chains but also opportunities for Australia to develop a national industry. There is potential for regions to be played off against each other, not only by developers but also by state and local governments. If this proceeds in an uncoordinated way, it could seriously undermine the capacity to develop the sector nationally. The National Policy Officer of the Electrical Trades Union spoke to some of the issues already evident in what is emerging as a competitive-driven process:

Every state and territory department is engaging the exact same consultancy firms, who are advising them independently that their state or territory is the first mover and has the competitive advantage to establish the supply chain opportunities … They actually need to talk to each other and figure out what [their] competitive advantage is, and agree to that, and then scale.

Trevor Gauld, ETU

This points to a need for states to improve their participation in supply chain planning and coordination both at the regional level and across the hosting regions. In the European context where offshore wind has several decades of maturity, van der Loos et al.’s (2023) study indicates that local content rules are effective for securing local content in the market integrated parts of the supply chain but undermine the region’s ability to supply more complex, relational and customised components and services associated with offshore wind. How this applies to the Australian market, where global supply chains are more geographically distant but the domestic industry is in its infancy, it not yet clear. A careful and integrated analysis of the supply chain capability of each of the potential hosting regions could be instructive for policymakers here. Further, policymakers would be wise to carefully monitor and evaluate how different state policy settings (and licence conditions) hamper or facilitate supply chain development at the regional level over time. This will allow policy to evolve in a way that is sensitive to the development of the industry while maximising local benefits. More broadly, there may be opportunities for stronger direct public sector involvement to maximise economic benefits in hosting communities. At the time of writing the Victorian Labor government has indicated their intention to directly invest in offshore wind transmission infrastructure (D’Ambrosio 2023). Meanwhile, the policy settings for the newly elected Labor government in NSW indicate a preference for facilitating private investment in renewable energy more broadly, but a specific offshore wind policy has not yet been announced.

Finally and in the longer term, community support for offshore wind projects will depend on how the region experiences not just one development, but the cumulative impacts of all of the projects in all its social and economic dimensions. This was expressed by one interviewee living in the Illawarra, but consulting for developers in another region in the following way:

I think it will actually be really pretty darn impressive … My biggest concern is the cumulative impacts of all this on society and recreation, on what we value, on existing industry, on marine and wildlife. At the same time, we are humans and we need electricity, and this is the best option.

Offshore wind industry consultant living in the Illawarra

This points to the reality of living with industrial scale projects, and the complexities for hosting regions that need to be considered alongside claims that they will be the beneficiaries of local jobs and economic benefits. In the Illawarra, this includes a longstanding native title claim over the land, coastal water and seabed stretching the length of the region (Wellauer 2022), an active environmental movement engaged on local issues and coastal communities with deep attachments to the ocean (Brown and Cahill 2005; Voyer et al. 2015). In addition, cost of living pressures and in particular high energy prices caused by the privatisation of energy assets in Australia may fuel resistance to offshore wind infrastructure, especially given private and foreign ownership dominates the sector. Counter to this, forthcoming research suggests that young people in the region view offshore wind as monumentally important for Australia’s capacity to move away from fossil fuel dependency. These competing viewpoints point to the significant task ahead for regulators and developers to engage meaningfully with local communities, to be sensitive to the regional issues, and to make commercially viable choices and policy decisions that deliver genuine economic benefits for hosting communities. It also points to the need for further place-specific research to understand how offshore wind projects evolve across Australia by engaging with a wider range of participants than available at the time of this study.

Conclusion

As Australia undertakes a rapidly accelerated effort to decarbonise its domestic economy, labour and supply chain constraints loom large across all renewable energy industries. In this paper we have sought to draw out some of those specific industry challenges in Australia’s emerging offshore wind sector, looking at how these projects will land on the ground and intersect with extant regional conditions. In the case of the Illawarra, the emerging offshore wind generation industry is part of the re-industrialisation of a now economically diversified region, largely through path importation of global capital and knowledge from outside the region (Trippl et al. 2020). Indeed, path importation of assets and skills will characterise the early projects across Australia given the infancy of the sector in the country, the substantial cost of development, and the specialist skills required across the different project phases. In this sense, offshore wind represents a new phase of integrating Australia’s energy resources and electricity generation assets within globalised circuits of capital and labour. In this context and given that state policymakers are responsible for much of the regulatory oversight of energy projects, regional development and skills, they will need to play a more pro-active role to ensure local workers and communities are afforded the economic benefits – in the form of jobs and supply chains – they are promised. Drawing on the lessons from Australia’s decarbonisation efforts to date, this requires attention to the place-based, temporal and contested dynamics in each hosting region, as divergent and competing interests emerge to shape the skills and industry at the local level.

The stakeholders interviewed were largely in support of the Illawarra’s emerging offshore wind industry, and expressed real enthusiasm for the economic benefits the industry could bring to the region, centred around the region’s existing steel making capabilities. Nonetheless, they did not shy away from identifying the challenges ahead in skilling the workforce and engaging local businesses in the supply chain. As the above analysis reveals, international evidence suggests that offshore wind developments often fail to deliver the economic benefits promised by developers, with major leakages to global firms. The analysis in this paper suggests that the confirmed and proposed offshore wind regions have different policy settings that will impact on local content and are already effectively in competition with each other to attract investment and develop supply chain capabilities at the local level. This points for a greater need for coordination across the regions to identify their relative strengths in developing national supply chain capability and demands direct consideration of the role of local content rules in the offshore wind industry. As the only state with more than one proposed offshore wind region (the Hunter and the Illawarra), the recently elected NSW Labor government is uniquely positioned to coordinate supply chain planning across these regions. At a national level, as Australia embarks on the first offshore wind projects, much will be gained if regulators properly chart the regional economic benefits of those projects through all the project phases, including how regulatory frameworks and policy settings shape the economic benefits for hosting regions. This will allow policymakers to respond in ways that maximise local economic benefits while being sensitive to the complexities of establishing the industry in Australia. Together these issues point to the need for ongoing place-based research that places the experiences of local workers and communities at the forefront of analysis. It is important to note that the cohort of interviewees interviewed in 2022 self-claimed an interest in the development of the sector, and further research is ongoing to understand the range of community perspectives that are now rapidly emerging in the Illawarra region, including from other sectors not connected with offshore wind, the small business community, First Nations communities and other recreational and commercial ocean users.

While identifying the path development for offshore wind is useful to understanding how the industry is established, it should not be confused with a linear or predetermined trajectory. As others have observed, energy transitions are inherently political processes (Bridge et al. 2013) and experience domestically suggests they can be both messy and, if done badly, entrench existing disadvantage in communities that bear the brunt of decarbonisation (Gibson 2022; Weller 2017, 2019). The evolving lessons from energy transitions in regional and rural Australia indicate that inclusive and comprehensive community consultation is critical for gaining support for projects and that economic benefits ought to extend beyond local jobs and businesses to wider benefit sharing that recognises the cumulative impact of projects on the whole community (Cass et al. 2022). Here state and federal policymakers have a critical role in coordinating consultations across regulatory regimes and canvassing opportunities for benefit sharing beyond voluntary schemes offered by developers. How these issues unfold in the Illawarra and the other Australian offshore wind regions offers opportunities for further research.

Acknowledgements

The authors would like to thank Ty Christopher, Dr Camille Goodman and Professor Chris Gibson for offering insightful suggestions on earlier drafts of this article and the anonymous reviewers for their valuable suggestions which have greatly enhanced this paper.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Correction Statement

This article has been corrected with minor changes. These changes do not impact the academic content of the article.

Additional information

Funding

This work was supported by the Australian Research Council [Grant Number DE210100989].

Notes

1 The National Electricity Market is the wholesale market for all Australian states/territories except Western Australia and the Northern Territory. It generates 80% of Australia’s energy consumption.

2 These include (1) the technical and financial capability to carry out a proposed project; (2) the viability of the project; and (3) the suitability of the applicant.

3 See also Guidelines for Feasibility Licences issued by the federal Department of Climate Change, Energy, the Environment and Water in December 2022 (DCCEEW, 2022b).

4 This research used the 4C offshore wind database, a dataset of all offshore wind projects across the world produced by marine market research consultants TGS.

5 This first phase of fieldwork primarily focused on directly related capital interests at a time when the region had not been federally declared as a Proposed Offshore Wind Zone. We want to be clear that we are not claiming it is representative of the full range of regional and local interests that have emerged since. There are some gaps worth specifically noting in this cohort of stakeholders. Local council representatives were not approached for an interview at the time of fieldwork, as requests for interviews on a related ARC Discovery Project indicated they were unable to obtain organisational consent to participate. Wollongong City Council has since moved a motion of conditional support for the Illawarra Offshore Wind Zone (9 October 2023). The primary regional employer association were also not approached for interview during this fieldwork stage. They have however indicated clear and vocal support for the Zone since 2022, as have major regional employers.

6 The National Energy Market has a base load of about 6 gigawatts (DCCEEW, 2022b). Base load is the minimum amount of energy required to run the grid at any one point in time, factoring in both peaks and lows in demand.

7 The nacelle sits at the top of the tower and contains the gearbox, brakes and generator.