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26 March 2021

Victorian Government Department of Environment, Land, Water and Planning

To whom it may concern

Re: Victorian Zones (REZ) Development Plan Directions Paper

Thank you for providing the opportunity to give input into the REZ Development Plan and the establishment of VicGrid.

Flotation Energy Flotation Energy Pty Ltd (“Flotation”) is a wholly owned subsidiary of Flotation Energy Plc, a specialist offshore wind developer. The directors of Flotation have a distinguished track record in offshore wind development and project delivery, and have developed over 3 GW of pioneering operational offshore wind projects including the 588 MW Beatrice Wind Farm and the world’s largest floating wind farm, Kincardine, in the UK. The Flotation Energy group is known for its innovative approach to offshore wind farm development, and for navigating complex and emerging legislative regimes and government policy. In February 2021 Flotation, with partners Cobra ACS, were successful in winning a 480 MW Round 4 project in the East Irish Sea (North West England), on seabed licenced to Spirit Energy Ltd.

Gippsland Offshore Wind Farm Project Flotation is bringing its experience and expertise to Australia for the development of the Offshore Wind Farm, which will be a 1.5 GW bottom-fixed offshore wind development in , commencing operation by 2030. The wind farm will be located in close proximity to existing oil and gas facilities in the Bass Straight, offering the opportunity for re-use of petroleum facilities set for decommissioning, sharing knowledge and experience from a 50-year petroleum legacy, and a transition to a renewable energy future. The project has completed initial feasibility studies and has moved into the development phase, during which Flotation will study the feasibility of oil and gas asset reuse, confirm the technical and commercial feasibility of the wind farm, commence key offshore surveys and undertake offshore and onshore consenting activities including EIA scoping and referral.

This project is an excellent example of businesses working together to achieve a smooth energy transition for their mutual benefit, and for the benefit of the State of and local communities. It will create regional jobs and a new offshore industry for an existing capable technical and offshore workforce as the oil and gas fields wind down and decommission. The project will connect to the National Market (NEM) in Gippsland, helping to replace the thermal coal generators due to retire in the coming decades and maintain the region’s contribution to the energy market. Offshore wind has approximately double the uptime of onshore wind, supporting grid stability. The presence of more than one offshore wind project in the Gippsland area will accelerate the development of local supply chains supporting offshore wind and attract significant infrastructure investment, further driving down the cost of delivered energy. Large offshore wind projects in Gippsland diversify the Victorian wind generation network beyond the onshore wind generation hub in the Portland area, helping to balance the renewables portfolio and reduce risk.

Flotation’s Response to the Directions Paper Flotation is encouraged by the proactive position of the Victorian government to actively promote and coordinate renewable energy and the development of the REZ’s. We welcome the identification of specific projects to address the REZ opportunities identified in AEMO’s Integrated System Plan (ISP), which can reduce project risk premiums by reducing the risk of generator constraints. We appreciate the opportunity to engage with the government on REZ development and implementation.

Comments on matters addressed in the Directions Paper: 1. It is important that immediate constraints to existing projects under development are resolved in a coordinated and timely way, maintaining momentum and investor confidence in the renewables sector. For this reason, we support investment in the Stage 1 projects outlined in the paper. 2. Establishment of VicGrid is an important step in bringing the REZ Developments to fruition. Coordination between AEMO’s accountabilities as the Victorian jurisdictional planner and the accountabilities of VicGrid will be very important. To enable clear, timely decision making and single point of accountability, it is suggested that the AEMO planning role in Victoria be amalgamated into the formation of VicGrid. This will ensure alignment on objectives and deliver a coordinated plan that delivers on the transition to renewables whilst maintaining appropriate levels of electricity supply security. The alternative may lead to conflict between AEMO’s obligations to develop the most efficient grid and the pace of renewable developments required to achieve the VRET. 3. The identification of specific developments in each REZ is an important first step. Clearly, an implementation plan for Stage 1 projects is an important further step. 4. Given the time horizon for large scale energy infrastructure projects and the need for investor certainty, a clear roadmap for determination of Stage 2 projects must be a priority. It is recommended that separate teams be established for implementation of Stage 1 and development of Stage 2. This would ensure that any delays in Stage 1 projects do not affect decisions regarding the pursuit of Stage 2 projects, providing investor certainty for the next tranche of renewable energy generation and storage projects.

Page 2 Comments on development of the REZ Implementation Plan: 1. We acknowledge that geographical diversity in REZ development is important to maximise the overall availability of renewable capacity and optimise the amount of battery and other storage required. 2. It is clear that there will be winners and losers between renewable developers depending on the prioritisation of each REZ and therefore prioritisation criteria need to be clearly established. The process must be transparent and seek to deliver a balanced and geographically diverse portfolio of renewable resources.

Comments on the framework for investment in renewable : 1. It is important that the government provides strong support for transmission opportunities, as these are often the highest risk element for renewables project and a significant part of the capital costs, especially where major overhead lines are required. Timely provision of transmission assets also act to accelerate development. Government support for renewables projects to connect to the transmission network, both financially and in the planning processes, is crucial. De-risking this process will give investors’ confidence to progress. 2. REZ’s are about providing capacity that can be shared between multiple renewables generators, and without government leadership, sharing will not happen naturally. 3. An opportunity exists for independent transmission owners to develop, own and operate REZ assets under a separate regime from the declared shared network. 4. Renewable developers should be prepared to pay a fair contribution to share REZ assets but will seek firm access for the design life of their projects in return. 5. A mechanism that does not disadvantage first movers will be required; this may mean subsidies are required initially.

Comments specifically relating to the Gippsland REZ: 1. The offshore wind resource offshore of 90 Mile Beach is excellent and Gippsland provides significant diversity from the existing wind generation concentrated in south west and western Victoria. 2. Timely development of the Gippsland REZ is important to enable the efficient development of offshore wind. 3. Two significant projects are under development, totaling 3GW or more of offshore wind. Each is currently proposing underground connections from 90 Mile Beach to Hazelwood or Loy Yang due to perceived public opposition and long consenting lead times for overhead lines. This is expensive and inefficient, ~$0.5bn / GW. 4. Overhead transmission lines would be clearly more efficient and more likely to be accepted by the public if coordinated and shared. However, any overhead line project will be contentious and a strong framework is required to avoid lengthy delays. It is suggested that consideration be given to use of acts of parliament similar to those used for major road developments, providing the necessary powers together with appropriate controls to a government-backed entity such as VicGrid to run the permitting and property rights acquisition processes. 5. Location of a connection substation needs to factor in and balance the needs of different developers in the Gippsland REZ 6. Flotation questions the proposal for a double circuit line to Gippsland from Hazelwood or Loy Yang, which might create too much risk on a single asset and will cause security of supply concerns for AEMO. For this reason, it is suggested that consideration be given to two single circuits. In general, the transmission arrangement needs to be considered in the context of the proposed generation developments and security of supply.

Thank you again for the opportunity to engage with the REZ development process. We look forward to working closely with the Victoria Government as development of the REZ progresses.

Yours sincerely,

Tim Sawyer Chairman Flotation Energy Pty Ltd [email protected]

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