THE federal government has approved a deed of licence to allow Offshore Energy to undertake resource exploration for a wind farm off the Gippsland coast.
The licence will allow Offshore Energy to undertake exploration in Commonwealth waters about eIght to 13 kilometres off the coast near Port Albert.
This exploration will determine if the site is appropriate to construct Australia's first offshore wind farm, labelled as Star of the South.
Offshore Energy has claimed the 2000 megawatt project, worth $8 billion, will power up to 1.2 million homes.
The company wants to construct 250 wind turbines, which could generate up to 20 per cent of Victoria's electricity needs and feed the power into the National Electricity Market via an underground cable to the Latrobe Valley.
Offshore wind farms could provide Australia with significant new investment and employment possibilities while also contributing to the stability of the grid and lowering power prices.
According to a government statement, offshore wind is more plentiful and consistent than onshore wind and aligns better with energy demand.
Through the licence, Offshore Energy will be allowed to undertake activities to assess wind resources and sea bed conditions understand whether an offshore farm is technically feasible.
Offshore Energy has not been given any rights to develop or operate an offshore wind farm under the licence.
The licence requires the company to undertake extensive consultation with the community and industry before undertaking any activities.
As this offshore wind farm exploration is an Australian-first, the government has carefully considered the proposal.
The government's engagement with the proposal is only in relation to the exploration licence and it is not providing financial support toward the development of the project.
The exploration licence allows for a range of studies, including wind monitoring and investigations into the seabed and the marine environment.
Star of the South chief executive Andy Evans said the company was excited to begin the next phase of work.
"We've done a lot of background studies and look forward to getting out there and further understanding the marine environment," he said.
"While it's still early days for the project, these crucial investigations will help us move forward and understand how we might progress an offshore wind project in Australia.
"We look forward to working with government, stakeholders and local communities in Gippsland and the Latrobe Valley throughout our investigations."
The Star of the South project has secured financial backing from a major international green energy investment fund.
Formed by Australian developers, Offshore Energy has joined with Danish fund management group Copenhagen Infrastructure Partnership to develop the renewable energy project.
CIP partner Michael Hannibal welcomed the government's decision.
"We look forward to continue investigating the opportunities for offshore wind in Australia, in addition to our projects developing in Europe, Asia and North America," he said.
If the project goes ahead, it could provide one and a half times the energy of the now-closed Hazelwood coal-fired power station.
Friends of the Earth renewable energy spokesperson Pat Simons welcomed news of the approval.
"The Star of the South offshore wind farm will be a game changer for action on climate change and Australia's energy system," he said.