UK Edition
One of Britain’s biggest wind farm operators has axed a major US offshore project, raising fears about its plans to build more than 200 turbines off the coasts of Norfolk and Lincolnshire.
Danish energy company Ørsted said it was halting development of its Ocean 1 wind farm off New Jersey after incurring losses of £2.3bn. It is also cancelling Ocean 2, also off the New Jersey coast, where construction was planned to start in 2028.
Ørsted took DKr28.4bn (£3.3bn) of write-downs related to its wind farm business in total.
Chief Mads Nipper said: “There’s no doubt that the offshore wind industry is finding itself in a perfect storm, where adverse impacts like skyrocketing interest rates are leading to much higher capital costs and supply chain disruptions.”
Shares in the company fell close to 25pc in Copenhagen.
The announcement has raised fears that Ørsted may also cancel Hornsea 3, its flagship UK project, off the coasts of Norfolk and Lincolnshire.
Hornsea 3 won government approval last year and will comprise 231 offshore wind turbines over 100km off the Norfolk and Yorkshire coasts. Construction has not yet begun but once operational the field will generate enough power for 3 million homes.
Ørsted already operates Hornsea 1 and 2, which between them generate enough electricity to power almost 2.5 million British homes.
The axing of Ørsted’s US projects came as a senior BP executive described the sector as “fundamentally broken”.
Anja-Isabel Dotzenrath, BP’s head of gas and low carbon, told a London conference that problems including permitting, long timelines and a lack of inflationary adjustment mechanisms meant that building wind farms in the US was extremely difficult.
BP this week took a $540m (£444m) hit from its Empire and Beacon offshore wind projects in the US, which have a combined capacity of 3.3 gigawatts capable of powering two million homes.
BP and Ørsted are the latest in a series of energy companies to announce heavy losses on wind farm projects. Germany’s Siemens Energy and Sweden’s Vattenfall have both taken large write-downs after surging inflation has seen costs rising by well over 40pc.
Vattenfall decided to scrap its flagship UK project, the Boreas wind farm off Norfolk, in July.
Louis Knight, analyst at Third Bridge investment analysts, said: “The wind power sector has stalled, with virtually no companies in the industry now turning a profit.”
She added: “The future of many projects such as Hornsea 3 remain uncertain due to the increasing construction costs, combined with the fact that power prices for projects are fixed, ignoring inflation, through the UK’s contracts-for-difference price model.”
Renewable UK, the offshore wind industry’s trade body, called on Chancellor Jeremy Hunt to announce new support for the industry in his forthcoming Autumn Statement. It comes after the UK’s last auction for offshore wind farm construction failed to attract any bids.
The auction failure threatens plans to expand Britain’s offshore wind capacity from its current 14GW to around 50GW by 2030.
Ana Musat, RenewableUK’s executive director of policy, said the UK needed to attract £17bn in private investment every year between now and 2030 to meet its targets.
She said: “We’re urging the Chancellor to announce new measures in his Autumn Statement to make the UK the most attractive destination for investing in offshore wind, such as enhanced capital allowances.
“RenewableUK is working with the Government to formulate and fund an Industrial Growth Plan… The Chancellor could signal his support for this industrial development in his Autumn Statement.”