Energy Minister Chris Bowen said the potential Novocastrian Wind project, more than 20 km (12.4 miles) offshore Newcastle in the state of New South Wales, could generate over 2 gigawatts (GW) of electricity, enough to power 1.2 million homes.
If feasibility is proven, Oceanex, which has lined up Equinor as a partner, can apply for a commercial licence to build an offshore wind project, Bowen said.
Australia is shaping up to be the next big market for offshore wind farms - which are much bigger and far more productive than onshore wind farms - after a law setting out a framework for their development was passed in November 2021.
The feasibility licence allows developers to undertake environmental assessments and geotechnical surveys.
The decision comes a day after the opposition Coalition on Wednesday proposed building seven nuclear plants to replace coal-fired power by 2050, in a country where nuclear power is currently banned. Prime Minister Anthony Albanese called the policy "a recipe for an economic catastrophe" that would raise costs for taxpayers.
The Albanese-led centre-left Labor government has been looking to ramp up renewable energy projects to meet its net zero emission target by 2050 and replace coal-fired power.
It is targeting 82% of power supply to come from renewables by 2030, but remains well short of the target, at around 40% now, even after pledging to underwrite new wind, solar and battery projects with more than A$40 billion ($26.7 billion).
Last month, the government gave the go-ahead for six projects, including proposals by wind giants Orsted (ORSTED.CO), opens new tab and Iberdrola (IBE.MC), opens new tab, to study the feasibility of building wind farms off the state of Victoria.
