After spiraling costs cast doubt on its viability, the UK’s largest offshore wind developer has been in discussions with Net Zero Secretary Claire Coutinho regarding the fate of their flagship project off of the coast of Norfolk.
Orsted, the Danish renewables giant, is believed to be in discussions with the Department for Energy Security and Net Zero (led by Ms Coutinho) about more generous subsidies for its Hornsea 3 project.
The project would install 231 wind turbines off the coasts in Norfolk and Lincolnshire to generate enough power for 3 million homes.
Last year, subsidies for Hornsea 3 have been agreed with the Government through contracts for differences (CfDs), where operators are guaranteed a minimum per megawatt-hour (MWh) price known as the strike rate. Orsted received £37.35.
The wind industry has seen inflation rise by up to 40% since then. Orsted would be at risk of substantial losses if they built Hornsea 3. Executives warned earlier in the year that more government funding was needed to keep Hornsea alive.
Orsted’s spokesman said that “a dialogue is ongoing with the UK Government”.
This week, it was reported that Orsted would consider selling Hornsea 3 power to commercial companies in order to improve their finances.
Orsted has fired two of its senior managers following huge losses on US Wind Farm Projects.
The company lost $4bn in the first nine months 2023. It has halted the development of its Ocean 1 offshore New Jersey, and cancelled Ocean 2 nearby.
Richard Hunter, Orsted’s Chief Operating Officer, and Daniel Lerup the company’s Chief Finance Officer, both left the business.
Mads Nipper announced the changes and said that he and his board of directors had come to the conclusion that the company “needs new and different abilities to lead”.
He said: “Orsted and the rest of industry are experiencing a volatile business environment.
Siemens Energy in Germany and Vattenfall in Sweden have recently both taken large writedowns due to the rising inflation.
Siemens Energy was forced to strike a £15bn agreement with the German Government and a group of banks in order to help the manufacturer cope with massive losses at Gamesa, its wind turbine unit.
A Department for Energy Security and Net Zero spokesperson said: “We are committed to a successful next auction round that includes offshore wind.” We are committed towards a successful auction that includes offshore winds.
The UK government will soon publish the details of its upcoming “allocation round”, which includes offshore wind, for new renewable energy projects. This announcement should be made this week, and confirm that the strike price is now above £70.
The last round of bidding offered a strike-price of £44 and did not attract any bidders.