Orsted Halts Work on Giant UK Wind Farm Citing Rising Costs

‘Adverse macroeconomic developments, continued supply chain challenges, and increased execution, market and operational risks’ are an issue, Orsted’s CEO said.

Turbines at Orsted's offshore wind farm near Nysted, Denmark, on Sept. 4, 2023. Tom Little/Reuters

The world’s largest offshore wind developer is discontinuing work on a giant UK project in its current form because of rising costs and the risk of delays.

Orsted announced on May 7 that it is pulling out of its flagship 2.4-gigawatt (GW) Hornsea Project 4, which was granted a contract only last year.

The news is a blow to UK Secretary of State for Energy and Climate Change Ed Miliband, who is pursuing a goal to decarbonize the whole economy, which will need to increase offshore wind capacity from 14.7 GW to 43–50 GW in 2030.

While the UK’s Climate Change Act 2008 embeds legally binding carbon targets into law and creates favourable conditions for the wind industry, Orsted still faces challenges.

“The adverse macroeconomic developments, continued supply chain challenges, and increased execution, market and operational risks have eroded the value creation,” Orsted CEO Rasmus Errboe said in a statement.

He also said that the company would “seek to develop the project later in a way that is more value-creating for us and our shareholders.”

The site was being proposed in the North Sea, approximately 42 miles off the Yorkshire Coast.

In February, the Danish company stated that it was cutting its 2030 investment program by 25 percent.

Orsted develops, constructs, and operates offshore and onshore wind farms, solar farms, energy storage facilities, renewable hydrogen and green fuels facilities, and bioenergy plants.

It operates 12 offshore wind farms in the UK, including Hornsea 1, which held the title of the world’s largest wind farm until its sister project, Hornsea 2, came into operation with 165 turbines in August 2022.

The Department for Energy Security and Net Zero (DESNZ) announced on May 6 that it would need at least 12 GW to hit Miliband’s Clean Power 2030 Action Plan goals.

The department stated that it was exploring changing rules for the next big AR7 auction for subsidized wind power sites so that projects can get their contracts confirmed sooner.

AR7 is the acronym for Allocation Round 7, the UK’s Contracts for Difference (CfD) scheme, which is the government’s main mechanism for supporting low-carbon electricity generation.

Last year’s Allocation Round 6 (AR6) budget exceeded 1 billion pounds (about $1.3 billion) and included the Hornsea 4 contract.

A spokeswoman for the DESNZ told The Epoch Times via email: “We recognise the effect that globally high inflation and supply chain constraints are having on industry across Europe, and we will work with Orsted to get Hornsea 4 back on track.

“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.”

Responding to Orsted’s announcement, Dhara Vyas, CEO of Energy UK, the trade association for the energy industry, said in a May 7 statement, “Whilst Orsted has been clear this is not a result of Government policy, with offshore wind playing such a critical role in our future energy ambitions it’s vital that the Government doubles down to ensure AR7 is a success.”

A source familiar with the matter told The Epoch Times that the government is working to get Hornsea 4 back on track and for the project to happen by 2030.

Despite record public and private investment, strong government support, and locked-in climate laws, analysts previously told The Epoch Times that the UK’s wind industry is struggling with supply chain pressures and rising interest rates, undermined by previous years’ underpriced contracts.

‘Buyer’s Remorse’

Gordon Hughes, a former professor of economics at the University of Edinburgh and former senior adviser on energy and environmental policy at the World Bank, previously told The Epoch Times via email that “it is all a massive case of buyer’s remorse because of excessive optimism about future costs five years ago.”

In the past two years, industry giants such as Orsted, Siemens Energy, and Vestas have been forced to reassess their investment strategies as financial setbacks pile up.

Shifting investor sentiment and U.S. President Donald Trump’s renewed push for oil and gas have also added to the wind industry’s challenges. The president suspended offshore wind leases on his first day in office.

Trump’s action is a shift from the previous administration’s four-year effort to expand wind-power leasing, which aimed to build 30 GW of offshore wind power by 2030 and another 15 GW of floating offshore wind power by 2035.