Today, Orsted has announced that it is pulling out of its flagship 2.4 GW Hornsea Project Four offshore wind farm that was granted a contract only last year in AR6. It said:
After careful consideration, we’ve decided to discontinue the development of our Hornsea 4 project in its current form, well ahead of the planned FID later this year. The combination of increased supply chain costs, higher interest rates and increased execution risk have deteriorated the expected value creation of the project.
Orsted’s statement comes just a day after Ed Miliband announced the results of his consultation into Contracts for Difference (CfDs) for Allocation Round 7 (AR7) and committed to changes to deliver more offshore wind capacity. The DESNZ announcement said that 31 GW of offshore wind capacity has been constructed or contracted and at least 12 W of offshore wind capacity needs to be secured in AR7, AR8 and AR9 to meet its 43-50 GW target by 2030. Now 2.4 GW of that 31 GW has been removed from the pipeline.
Hornsea 4 made up the bulk of the 3.4 GW of the new offshore wind capacity awarded in AR6, so its removal is a big blow to Miliband’s Clean Power 2030 plan. In fact, the NESO target for offshore wind in 2030 is 50.7 GW, so until today almost 20GW was required from the new allocation rounds. Now 22.1GW is required. Moreover, as we discussed last month, Miliband is already falling short of his target.
Miliband has agreed to publish the budget for AR7 much later than normal and is giving himself powers to see anonymised bid information on prices and capacity before announcing the budget. It is interesting that he made no announcement about the proposal to increase the contract term from 15 to 20 years and there is still no news on the Administrative Strike Prices.
However, today’s news from Orsted means he cannot rely upon projects getting built even if he awards contracts. And of course, this news comes after Norfolk Boreas was cancelled last year after being awarded a contract in AR4 in 2022. Moreover, parts of other AR4 projects were rebid at higher prices in AR6, such as Moray West and Inch Cape. Orsted’s Hornsea Project Three has even been awarded contracts for more capacity than is being built.
If we cannot rely upon either the capacity being delivered nor the price being honoured then the whole Allocation Round process has become a farce. It is time for Miliband to declare that his Clean Power 2030 plan is dead. It is no more, it has ceased to be, it’s expired and gone to meet its maker.
David Turver writes the Eigen Values Substack, where this article first appeared.
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