Danish energy firm Orsted has pulled out of an offshore wind project in the North Sea, delivering a blow to the government’s transition plans.
Orsted is the world’s largest offshore wind developer and said it will discontinue the Hornsea 4 project “in its current form”, partly as a result of rising costs and “supply chain challenges”.
The 2.4 gigawatt Hornsea 4 project off the Yorkshire coast would have been capable of powering more than 1m homes.
Orsted made the announcement as it revealed a bigger than expected rise in first quarter profits despite increased headwinds facing its offshore wind interests.
The firm secured funding for both Hornsea 3 and Hornsea 4 under the government’s auction of renewable energy “contracts for difference” last year.
Rasmus Errboe, Orsted’s recently-appointed chief executive, said: “We remain fully committed to being an important partner to the UK government, to help them achieve their ambitious target for offshore wind build-out.
“However, our capital allocation is based on a strict and value-focused approach.
“The adverse macroeconomic developments, continued supply chain challenges and increased execution, market and operational risks have eroded the value creation.”
Orsted’s share price, which has fallen by around 80% since it peaked in 2021, was down 4% in mid-afternoon trade.
The Department for Energy Security and Net Zero said it would “work with Orsted to get Hornsea 4 back on track”.
Tania Kumar, net zero director at the CBI, said: “Today’s announcement reflects the growing challenges facing businesses delivering major infrastructure work across the UK.
“But it should not detract from the UK’s record leading one of the world’s most rapid rollouts of offshore winds, made possible by our market-based investment models.”
Andy Mayer, energy analyst at the Institute of Economic Affairs, said: “The cancellation of Orsted’s Hornsea offshore wind project is a reminder of the folly of legally binding climate targets.
“The Government’s plan to decarbonise the power grid by 2030 denies real trade-offs between lower emissions, energy security and affordability.
“Businesses understand these trade-offs and recognise how key they are to the Government hitting its legal target. They can therefore extract a higher price for their services, which helps ensure the UK continues to have the most expensive energy in the world.
“The Government needs to think again, moderate their ambitions, replace targets with aspirations, and restore competition and price discipline to energy markets.
“If they can restore affordable abundance as the goal for energy policy, the UK will decarbonise faster, investing in the most efficient projects first, not the most greedy.”
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