Ørsted has paused its major Hornsea 4 offshore wind project due to rising costs, interest rates, and supply chain issues.
The decision adds to a series of recent setbacks in the UK’s renewable energy sector.
While government officials insist the 2030 goal remains achievable, experts say Hornsea 4 could still go ahead later.
There are growing doubts over the government’s ability to meet its net zero targets after the company behind one of Britain’s biggest-ever wind farms abruptly pulled the plug on the project, citing overwhelming cost pressures.
Denmark-based Ørsted, which won the contract to develop the 2.4GW Hornsea 4 offshore windfarm last year, said it took the decision due to “supply chain costs, higher interest rates, and an increase in the risk to construct and operate Hornsea 4 on the planned timeline.”
The move marks the latest blow in a bruising week for the UK’s energy industry following an announcement by power firm Drax that it would pause a major expansion of its Scottish hydro-power plant. Last week, FTSE 100 giant ABF said it would mothball a bioethanol plant in Yorkshire, accusing the government of “undermining” its viability, while on Wednesday oil and gas firm Harbour Energy said it would cut 250 jobs in Aberdeen, slamming “the government’s ongoing punitive fiscal position and a challenging regulatory environment.”
Ørsted’s decision to shelve Hornsea 4 piled further pressure on Energy Secretary Ed Miliband, who is spearheading a target of cleaning up UK power by 2030. But his net zero policies have faced increasing political backlash amid rising household bills and job loss fears.Related: OPEC+ Overproducer Kazakhstan Will Not Cut Oil Output in May
Shadow Energy Secretary Andrew Bowie said the project’s discontinuation “took the Ed Miliband – already mad – target of getting to clean power 2030, and left it in tatters.
“There is absolutely no way that without Hornsea they can make clean power 2030… Ed Miliband needs to revisit whether or not clean power 2030 is still realistic,” Bowie told City AM.
Bowie said Ørsted’s decision “raised questions” over whether the contracts for difference process, a scheme set up by the previous government to fund renewable energy infrastructure, was “fit for purpose.”
“If Ørsted are able to renege on commitments made in previous auction rounds, it seems to me like they’re trying to game the system,” said Bowie. “All of this will have an impact on bill-payers, because they are paying for these projects. So we need to examine whether or not any monies that have already been parted with need to be recouped.”
A Department for Energy Security and Net Zero (DESNZ) spokesperson said: “We recognise the effect that globally high inflation and supply chain constraints are having on industry across Europe, and we will work with Ørsted to get Hornsea 4 back on track.”
Supply chain hit
Sam Alvis, head of energy security and environment at the Institute for Public Policy Research, said, Ørsted’s issues speak to “massive supply-side constraints,” something which has “hit offshore wind like it has hit many other industries.”
Alvis warns some components necessary for wind turbine production won’t be available until the mid-2030s: “the order books are full, the supply chain components aren’t there.”
The hit to suppliers by the cancellation of Hornsea 4 could exacerbate the industry’s supply-side squeeze, he added.
However, Ørsted’s experience might not be indicative of how other companies perform, as its woes span back some time.
Alvis pointed to “a difficult couple of years” where “they’ve had challenges in the East Coast of America,” including nixing two of their projects there. Their share price dropped by 40 per cent, so “their risk tolerance is in a different place to a lot of other offshore wind developers, which is why you’ve seen them pull this project and not yet any other developers who still have that background level of capital and the risk appetite commensurate with what they bid for.”
Project could still return
DESNZ has insisted that its clean power 2030 mission is safe. The department said in a statement: “We have a strong pipeline of projects to deliver clean power by 2030 and our mission-led approach ensures we can steer our way through global pressures and individual commercial decisions to reach our targets.”
“It’s definitely a setback, but it is not an immeasurable or impossible to fix one,” said Alvis, pointing to the fact that “in the next allocation round, we are looking at procuring upwards of 20 gigawatts.”
Dr Simon Cran-McGreehin, Head of Analysis at the Energy & Climate Intelligence Unit (ECIU) is convinced that the Hornsea 4 project will be revived, not least because of the costs that have been sunk into it. “They haven’t said they’re scrapping. They’re putting on hold. So much work has gone into it, and so much invested in terms of money, but also will and potential, that it’s likely to go ahead … it’s a question of exactly when, and exactly how quickly.”
Cran-McGreehin said problems with the project didn’t yet spell a death knell for the clean power 2030 mission, as there’s enough on the cards to go off: “there is time, and the amount of renewables in the pipeline that are near the end of the process [and] almost ready for construction – once they get a contract in place, there’s substantial amount there.”
Ørsted has been approached for comment.
By Fonie Mitsopoulou and Guy Taylor via CityAM
Orsted Warns Offshore Wind Continues To Face Challenges
- Orsted’s core earnings, or EBITDA excluding new partnerships and cancellation fees, rose by 14% from a year earlier to $1.31 billion.
- Orsted confirmed its full-year EBITDA and investment guidance for 2025, but warned that the near-term prospect for the offshore wind industry have become increasingly challenging.
- Ørsted reiterated its confidence in the offshore wind industry in the long term, but short-term prospects have deteriorated, due to higher costs and increased regulatory risks.
Despite posting consensus-beating core earnings for the first quarter, Orsted, the world’s biggest offshore wind project developer, on Wednesday warned of a continued challenging environment for the industry with mounting near-term headwinds.
“The offshore wind industry is challenged in the short term with headwinds relating to supply chain, regulatory, and macroeconomic developments,” Orsted said in its Q1 results release today.
“We are following the developments in the regulatory landscape closely and continuously assess any potential impacts hereof,” the company added.
Orsted’s core earnings, or EBITDA excluding new partnerships and cancellation fees, rose by 14% from a year earlier to $1.31 billion (8.6 billion Danish crowns), beating a company-provided consensus estimate of $1.21 billion (8 billion crowns).
Orsted confirmed its full-year EBITDA and investment guidance for 2025, but warned that the near-term prospect for the offshore wind industry have become increasingly challenging.
Due to higher costs and interest rates, the company announced today it had decided to discontinue the development of the Hornsea 4 offshore wind project in the UK in its current form, ahead of the planned final investment decision (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,” said Rasmus Errboe, Group President and CEO of Ørsted.
“The adverse macroeconomic developments, continued supply chain challenges, and increased execution, market and operational risks have eroded the value creation,” Errboe added.
Ørsted reiterated its confidence in the offshore wind industry in the long term, but short-term prospects have deteriorated, due to higher costs and increased regulatory risks.
Case in point—last month, the U.S. Department of the Interior ordered the suspension of construction works at Equinor’s Empire Wind offshore project in New York, saying the project may have been approved by the previous administration without an appropriate environmental assessment.
Equinor is considering its legal options after the Trump Administration ordered its major offshore wind project off New York halted, the Norwegian energy major’s chief executive, Anders Opedal, said last week.
“We have invested in Empire Wind after obtaining all necessary approvals, and the order to halt work now is unprecedented and in our view unlawful,” Opedal said in the company’s press release on the Q1 earnings.
By Tsvetana Paraskova for Oilprice.com
Is It Time to Unlock the Great Lakes' Wind Power Potential?
Ontario's moratorium on offshore wind, established in 2011, remains a major barrier despite Canada's favorable wind energy policies.
Public distrust and political opposition in both Canada and the United States are significant hurdles to offshore wind expansion.
The Great Lakes could generate over 150 GW of fixed and 415 GW of floating turbine power, potentially surpassing Ontario's entire electricity needs.
“Wind turbines in the Great Lakes have the potential to produce huge amounts of clean energy in one of the most populated regions in North America,” states a recent article by the Canadian Broadcasting Company. But it remains highly uncertain if that dream could become a reality anytime soon. Offshore wind energy development is facing major headwinds in the United States and Canada thanks to a mix of public and political opposition. Wind energy proponents argue that this has to change for the sake of energy security and climate concerns.
Canada has historically had a very favorable policy atmosphere for wind energy. As of 2022, the nation was a top-ten producer of wind energy on a global scale. For this reason, it came as a bit of a shock when Ontario, the nation’s most populous province, declared a moratorium on offshore wind in 2011 – a moratorium which still stands. At the time, Energy Minister Brad Duguid reasoned that "Fresh water wind turbines are something that's relatively new, and the Ministry of the Environment needs a level of comfort on the science before they can approve any further consideration of them."
But the Canadian Broadcasting Company contends that the primary reason for the moratorium was public distrust and anti-wind sentiment from local communities, a growing issue in renewables expansion across North America. “Anti-wind opposition has only grown in the last decade, and you can see that very clearly in the trend line of the paper,” Leah Stokes, associate professor of environmental politics at the University of California, Santa Barbara, told CNN in 2023. Stokes conducted a study that found that only about one in ten wind projects in Canada and the United States faced opposition in the early 2000s. “By the end of this period, before the Trump era, the average rate is more like one in five,” she said.
Opposition is also growing sharply in political spheres, with the United States’ President Trump leading an anti-wind movement, calling for "a policy where no windmills are being built” and making outlandish and false claims to slander the sector, including the noise from wind turbines causes cancer. The Trump administration is currently being sued by 17 states and Washington, D.C., for halting wind power projects. And, ironically, Trump’s energy policy might end up giving wind energy a boost – in Canada, that is.
Although Ontario’s moratorium on offshore wind is still in place, “the Ontario Clean Air Alliance thinks it's time to reconsider,” says the Canadian Broadcasting Company, “arguing offshore wind could end the province's reliance on natural gas imports from the U.S. for its gas-powered generators at a time when the U.S. threatens Canada with punishing tariffs and talk of annexation.”
"Given that we're in a sovereignty crisis and affordability crisis and a climate crisis," said Jack Gibbons, the chair of the Ontario Clean Air Alliance, "this is a solution that can address all three of those crises and we should just be moving forward as quickly as possible."
A 2023 report by the United States’ National Renewable Energy Laboratory (NREL) found that the Great Lakes could house 150 GW of fixed and 415 GW of floating turbines. Furthermore, Gibbons says that wind power in the Great Lakes could provide more than 100% of Ontario’s total electricity needs, and at a cost lower than that of the four nuclear plants that the province is currently building. However, the cost of offshore wind production remains a challenge for the sector.
The cost of deploying wind energy has dropped dramatically on land as technologies have advanced, becoming “one of the lowest-priced energy sources available today” according to the United States Department of Energy. However, offshore wind is another story, especially in North America. Faced by enormous regulatory delays, supply chain issues, and high interest rates, offshore wind faces considerable financial hurdles – but building in the Great Lakes could actually be easier than building in the oceans, where waves, salt, and costly ocean leases create problems for permitting, construction, and maintenance.
By Charles Kennedy for Oilprice.com
Ontario's moratorium on offshore wind, established in 2011, remains a major barrier despite Canada's favorable wind energy policies.
Public distrust and political opposition in both Canada and the United States are significant hurdles to offshore wind expansion.
The Great Lakes could generate over 150 GW of fixed and 415 GW of floating turbine power, potentially surpassing Ontario's entire electricity needs.
“Wind turbines in the Great Lakes have the potential to produce huge amounts of clean energy in one of the most populated regions in North America,” states a recent article by the Canadian Broadcasting Company. But it remains highly uncertain if that dream could become a reality anytime soon. Offshore wind energy development is facing major headwinds in the United States and Canada thanks to a mix of public and political opposition. Wind energy proponents argue that this has to change for the sake of energy security and climate concerns.
Canada has historically had a very favorable policy atmosphere for wind energy. As of 2022, the nation was a top-ten producer of wind energy on a global scale. For this reason, it came as a bit of a shock when Ontario, the nation’s most populous province, declared a moratorium on offshore wind in 2011 – a moratorium which still stands. At the time, Energy Minister Brad Duguid reasoned that "Fresh water wind turbines are something that's relatively new, and the Ministry of the Environment needs a level of comfort on the science before they can approve any further consideration of them."
But the Canadian Broadcasting Company contends that the primary reason for the moratorium was public distrust and anti-wind sentiment from local communities, a growing issue in renewables expansion across North America. “Anti-wind opposition has only grown in the last decade, and you can see that very clearly in the trend line of the paper,” Leah Stokes, associate professor of environmental politics at the University of California, Santa Barbara, told CNN in 2023. Stokes conducted a study that found that only about one in ten wind projects in Canada and the United States faced opposition in the early 2000s. “By the end of this period, before the Trump era, the average rate is more like one in five,” she said.
Opposition is also growing sharply in political spheres, with the United States’ President Trump leading an anti-wind movement, calling for "a policy where no windmills are being built” and making outlandish and false claims to slander the sector, including the noise from wind turbines causes cancer. The Trump administration is currently being sued by 17 states and Washington, D.C., for halting wind power projects. And, ironically, Trump’s energy policy might end up giving wind energy a boost – in Canada, that is.
Although Ontario’s moratorium on offshore wind is still in place, “the Ontario Clean Air Alliance thinks it's time to reconsider,” says the Canadian Broadcasting Company, “arguing offshore wind could end the province's reliance on natural gas imports from the U.S. for its gas-powered generators at a time when the U.S. threatens Canada with punishing tariffs and talk of annexation.”
"Given that we're in a sovereignty crisis and affordability crisis and a climate crisis," said Jack Gibbons, the chair of the Ontario Clean Air Alliance, "this is a solution that can address all three of those crises and we should just be moving forward as quickly as possible."
A 2023 report by the United States’ National Renewable Energy Laboratory (NREL) found that the Great Lakes could house 150 GW of fixed and 415 GW of floating turbines. Furthermore, Gibbons says that wind power in the Great Lakes could provide more than 100% of Ontario’s total electricity needs, and at a cost lower than that of the four nuclear plants that the province is currently building. However, the cost of offshore wind production remains a challenge for the sector.
The cost of deploying wind energy has dropped dramatically on land as technologies have advanced, becoming “one of the lowest-priced energy sources available today” according to the United States Department of Energy. However, offshore wind is another story, especially in North America. Faced by enormous regulatory delays, supply chain issues, and high interest rates, offshore wind faces considerable financial hurdles – but building in the Great Lakes could actually be easier than building in the oceans, where waves, salt, and costly ocean leases create problems for permitting, construction, and maintenance.
By Charles Kennedy for Oilprice.com
No comments:
Post a Comment