RWE Walks Away From Offshore Wind, But Not From Australia
Germany’s RWE, one of the world’s largest renewable energy developers, has walked away from its flagship Australian offshore wind proposal, the 2 GW Kent project in Victoria’s Gippsland zone. The company’s decision highlights the difficulty of developing large offshore wind projects in a market where policy uncertainty, supply chain costs and rising capital expenses are putting pressure on margins.
As reported by RenewEconomy (1), RWE cited high project costs, supply chain challenges and uncertainty surrounding Victoria’s delayed offshore wind auction process as reasons for cancelling the Kent project. The Victorian Government postponed its first offshore wind tender until the end of 2025 while waiting for clarity on federal funding. That delay has added risk and cost for developers already grappling with global inflation and volatile material prices.
The Kent project had been planned to deliver around 2 GW of capacity into Victoria’s grid, enough to power roughly 1.5 million homes. It was one of several developments proposed within the Gippsland offshore zone, which could host up to 9 GW of capacity. RWE’s withdrawal follows Spain’s BlueFloat Energy, which abandoned its 2.5 GW Gippsland Dawn project earlier this year. There is also uncertainty surrounding Origin Energy and RES Australia’s Navigator North proposal.
Global Winds, Local Challenges
The challenges faced by RWE reflect the broader reality for offshore wind globally. Since 2021, inflation in materials such as steel, logistics costs and interest rates has driven project expenses higher. In Australia, where offshore infrastructure is still in its infancy, these pressures are amplified by deep-water conditions, long distances from grid connection points and the lack of dedicated port facilities. These practical hurdles have turned once-promising ventures into expensive exercises in patience.
As further reported in RenewEconomy, Climate Energy Finance director Tim Buckley described RWE’s withdrawal as a “wake-up call” for the local industry. He noted that offshore wind thrives in regions such as the UK and coastal China, where space for onshore generation is limited and demand centres are close to the coast. In contrast, Australia has abundant onshore wind and solar resources that are cheaper, faster and less complex to build. Buckley said offshore wind may eventually contribute to the final stages of decarbonisation when system reliability becomes a higher priority than cost.
However, not everyone is pessimistic. In that same article, the Smart Energy Council’s Connor Price remains confident offshore wind will play an important role in Australia’s future energy mix. He argues that as coal generation retires and energy demand grows from new industries such as data centres and green metals, large and consistent generation sources like offshore wind will be necessary.
The Realities of Offshore Risk
Offshore wind projects carry a unique mix of risks. They require long development timelines, significant upfront capital, and rely on international supply chains for specialist equipment. Developers are exposed to regulatory change, grid access delays and financing shifts that can alter project economics years before completion. For investors, these factors translate into higher uncertainty and longer time horizons before returns materialise.
Australia’s offshore wind sector is also competing for limited government attention and resources. Lautec Australia CEO Satya Tanner observed that Victoria’s auction process has attracted more capacity than the government can realistically support, comparing the competition to a “game of last man standing”. Some developers are likely to step aside before committing more capital, which may ultimately streamline the field to a smaller number of serious players.
A Strategic Pivot
Despite stepping away from offshore wind, RWE remains committed to Australia’s renewable energy market. The company is redirecting its investment focus to battery storage and onshore wind projects, which offer shorter delivery timelines and clearer regulatory pathways. RWE is currently testing the 50 MW/400 MWh Limondale Battery Energy Storage System in New South Wales and expects it to be commissioned by the end of this year.
Battery storage has become one of the most attractive areas of clean energy investment in Australia. It offers the flexibility needed to integrate intermittent renewables and can deliver returns faster than most large-scale generation projects.
As reported in the Australian Financial Review, Origin Energy CEO Frank Calabria has also voiced caution, describing offshore wind as “enormously complex” and acknowledging that the economics remain uncertain. He confirmed that Origin is continuing feasibility work but said developers must be realistic about timelines and costs. (2)
A Positive for Investors
While RWE’s decision may appear like a setback to renewable energy generation, it carries a positive message for investors. The withdrawal signals a more rational and disciplined approach to project selection. Rather than chasing scale for its own sake, developers are focusing on commercially viable opportunities that can be delivered with confidence. This kind of market correction is healthy, particularly in a young industry where enthusiasm has occasionally outpaced practicality.
For investors, the shift opens other avenues. Battery storage, transmission upgrades, port redevelopment and manufacturing supply chains will all benefit from government support aimed at building renewable infrastructure. Capital that might have gone into offshore wind can now be deployed in projects with shorter development cycles and more stable cash flow potential.
The offshore wind industry will return in time, likely leaner and more focused. When it does, it will benefit from clearer policy, improved grid connections and lessons learned from today’s challenges.
The Bottom Line
RWE’s exit from the Gippsland offshore wind project is not a retreat from renewables but an adjustment to the realities of cost, timing and risk. Offshore wind in Australia remains a long-term opportunity, not an immediate one. For now, capital is likely to flow towards technologies that can deliver both reliability and returns, such as grid-scale batteries and onshore wind.
Investors who remain selective, diversified and patient will be best placed to capture the benefits when Australia’s offshore wind sector eventually finds its rhythm.
References
R Williamson (2025), RWE scraps Gippsland offshore wind project due to costs and auction uncertainty, Renew Economy, 15 October 2025. Available at: https://reneweconomy.com.au
A Macdonald-Smith and R Cropp (2025), Origin Energy boss Frank Calabria casts doubt over offshore wind development in Australia, The Australian Financial Review, October 2025 https://www.afr.com/policy/energy-and-climate/fresh-blow-to-offshore-wind-as-german-developer-walks-away-20251015-p5n2lk
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