Australia has taken another step towards developing a large-scale offshore wind industry, with Victoria opening its first auction for offshore wind projects.

The Victorian government is seeking proposals for 2 gigawatts (GW) of offshore wind capacity, a scale expected to generate enough electricity to supply around 1.5 million homes each year.

The auction will allow offshore wind developers to compete for long-term government-backed contracts designed to give investors greater certainty that their electricity will have buyers over the life of their projects.

Victoria’s Energy Minister Jaclyn Symes said the move could attract billions of dollars in investment, create thousands of jobs and help replace electricity generation as ageing coal-fired power stations shut down.

Gippsland has been selected as the centre of Victoria’s offshore wind industry because of its strong winds, relatively shallow waters and access to existing electricity infrastructure in the Latrobe Valley.

Nine companies currently hold feasibility licences for proposed offshore wind projects in the region, although not all are expected to participate in the first auction.

The process will take time. Bids are due to close in August 2027, with contracts expected to be awarded in 2028.

The push comes as Australia prepares for major changes to its electricity system. Victoria’s Yallourn coal-fired power station is scheduled to close in July 2028, while NSW’s Eraring plant is due to follow in April 2029.

Australia’s latest electricity planning forecasts that two-thirds of the country’s remaining coal-fired power stations could retire by 2035, increasing pressure to bring new renewable energy capacity online.

Victoria has set targets of at least 2GW of offshore wind by 2032, 4GW by 2035 and 9GW by 2040.

Supporters say offshore wind could complement solar and onshore wind by providing electricity from a different wind resource. However, higher construction costs, political uncertainty and delays remain challenges.

With Victoria heading towards a state election in November, the future of the program could become a major political issue as parties debate the state’s energy strategy.