Ørsted to go ahead with world’s largest offshore wind farm in Britain

Image: Orsted. Pictured: Hornsea 2

The business confirmed the decision on Wednesday (20 December) and floated a late-2027 completion date for the 2.9GW offshore wind farm.

Hornsea 3, which will extend an existing array of wind farms off the Yorkshire coast, will cost around £10-11bn to deliver and will have the capacity to power more than three million British homes.

Ørsted said in a statement that it already has “all major contracts” in place for Hornsea 3, having taken learnings from a “well-established supply chain” from the Hornsea 1 and 2 projects.

The business noted that most of the capital expenditure for the project “was contracted ahead of recent inflationary pressures”.

Several developers in the UK, EU and US have paused or scrapped offshore wind projects this year due to rising supply chain costs, partly caused by soaring energy and commodity prices and continued disruption related to Covid-19.

Ørsted itself halted the development of two offshore wind farms in New Jersey last month due to rising costs.

And rival Vattenfall paused the Norfolk Boreas project in the UK this June for the same reason.

As such, uncertainty had surrounded the Hornsea 3 decision, and the news has been well-received across the UK’s green economy.

Energy and Climate Intelligence Unit (ECIU) analyst Jess Ralston said: “Every offshore wind farm we build decreases the amount of gas we need to buy in from abroad and produces cheaper electricity for British households, so this is a win-win for energy security and bills.

“It also signals our offshore wind market remains attractive for international investment despite competition from the likes of the EU and China, and that the industry has confidence that we’ve successfully moved past the small speedbump in the last renewables auction that saw no bids due to outdated Government rules.”

Policy support

The Contracts for Difference (CfD) auction round to which Ralston is referring took place in September. While a record number of clean energy projects secured funding, no offshore wind projects had bids accepted, significantly lowering the total capacity of the confirmed projects.

Under pressure to intervene, policymakers elected in November to boost the CfD’s maximum strike price for offshore wind. A 66% uplift was confirmed for traditional turbines and 52% increase was announced for floating projects.

Additionally, offshore wind developers will start being paid for not only their ability to deliver low-cost clean energy generation but also their provision of wider socio-economic benefits, described by the UK Government as “non-price factors”. This change will apply from 2025.

“Offshore wind is an extremely competitive global market, so we also welcome the attractive policy regime in the UK which has helped secure this investment,” said Ørsted’s chief executive and group president Mads Nipper.

“Our decision to build Hornsea 3 is a vote of confidence in the UK market for offshore wind, as we continue to invest significantly in UK clean energy infrastructure and in the UK supply chain,” added the company’s country lead for the UK and Ireland, Duncan Clark.

EY currently ranks the UK as the world’s seventh most attractive international investment destination for clean energy. The nation fell three places in the most recent rankings, which were published in November before the CfD changes were confirmed.