Title: Leading Offshore Wind Developer Urges UK Government to Bolster Support for Sector
Introduction:
The Danish power group Ørsted is determined to move forward with its ambitious UK offshore wind project, known as the Hornsea 3 project, despite escalating costs. However, Ørsted’s chief executive, Mads Nipper, has cautioned that the UK government needs to provide more support to the renewable energy sector. This article discusses the challenges faced by Ørsted and other global wind developers due to rising costs and the inadequacy of government-offered electricity prices. It highlights the need for the UK government to address these issues to ensure the country’s rapid capacity growth in line with climate targets.
Section 1: Rising Costs Pose Challenges for Offshore Wind Developers
1.1 Financial Pressures Faced by Ørsted and Hornsea 3 Project
– Ørsted’s CEO emphasizes the need to make the Hornsea 3 project financially viable.
– Warns that inadequate electricity prices may hinder capacity growth.
– Urges the UK government to consider necessary changes.
1.2 Impact of Rising Interest Rates and Supply Chain Costs
– Sven Utermöhlen, RWE’s offshore wind business managing director, highlights the increased costs of developing offshore wind.
– Attributes the rise to factors including the Russian invasion of Ukraine.
– Anticipates sustained high costs in the near future.
Section 2: Ørsted’s Position and Initiatives
2.1 Ørsted’s Financial Success and Renewable Energy Targets
– The Danish power group’s profitable year and plans for substantial renewable energy development.
– Intention to triple its portfolio by 2030 and revised performance goals.
2.2 Fixed Price Contracts and Cost Challenges
– Ørsted and other developers face difficulties in passing on rising costs due to fixed price contracts.
– Potential risks of suspension or abandonment of projects indicated by Ørsted’s UK boss in March.
Section 3: Hornsea 3 Project and Government Contracts
3.1 Overview of Hornsea 3 Project and Capacity
– Details of the planned Hornsea 3 project off the Yorkshire coast, set to be the world’s largest offshore wind project.
– Expected capacity and the ability to supply nearly 3 million homes.
3.2 Potential Project Suspension and Abandonment
– Ørsted’s concerns regarding financial pressures jeopardizing the Hornsea 3 project.
– March statement by Duncan Clark, Ørsted’s UK boss, outlining the risks.
Section 4: Ørsted’s Commitment and Government Support
4.1 Ørsted’s Efforts to Facilitate Hornsea 3 Project
– Reduction and increase in revenues to make Hornsea 3 viable.
– Anticipated final investment decision.
4.2 UK Government Auctions and Low Maximum Price
– Current government auction and concerns about the maximum price being too low.
– Skepticism about securing the full capacity on offer.
Section 5: Costs and Regional Variations
5.1 Relative Ease of Passing on Costs Elsewhere
– Observations regarding costs becoming easier to pass on outside of the UK.
– Examples of rising prices for commercial customers and offshore wind contracts awarded by the Irish government.
5.2 UK Energy Secretary’s Perspective
– Graham Stuart’s assurance of appropriate support for offshore wind investment.
– Confidence in the UK maintaining its global leadership in the renewable energy sector.
Additional Piece:
Exploring the Future of Offshore Wind Energy: Overcoming Challenges and Unleashing its Potential
Introduction:
The global shift towards renewable energy sources has brought offshore wind power into the spotlight as an essential component of the clean energy revolution. While Ørsted’s Hornsea 3 project exemplifies the vast potential of offshore wind, the sector’s growth faces significant challenges. In this section, we delve deeper into the intricacies of offshore wind development, focusing on the hurdles it currently faces and providing insights on how to overcome them.
Section 1: The Rising Costs Conundrum
1.1 Factors Driving Cost Escalation
– Detailed analysis of the key factors contributing to the rising costs of offshore wind projects.
– Evaluation of challenges posed by supply chain costs, interest rates, and geopolitical factors.
1.2 Innovative Strategies for Cost Reduction
– Exploration of technological advancements and innovative solutions aimed at reducing offshore wind project costs.
– Examples of successful cost-saving measures implemented by leading developers.
Section 2: Government Support and Policy Framework
2.1 The Crucial Role of Government in Offshore Wind Development
– Examination of the significance of government support for the growth of the offshore wind sector.
– Case studies highlighting successful government policies and financial incentives.
2.2 Recommendations for Enhanced Government Support
– Detailed suggestions on how governments can further nurture and bolster the offshore wind industry.
– Examples of countries that have implemented effective policies to promote offshore wind power.
Section 3: Collaboration and Partnerships for Success
3.1 The Importance of Stakeholder Collaboration
– Highlighting the need for coordinated efforts among various stakeholders, including governments, developers, and local communities.
– Analysis of successful collaborations and the positive outcomes they have generated.
3.2 Investing in Research and Development
– Exploring the significance of ongoing research and development to drive innovation in offshore wind technology.
– Case studies showcasing breakthroughs and their potential to revolutionize the industry.
Conclusion:
The offshore wind sector is at a critical juncture, with significant challenges to address and substantial potential waiting to be harnessed. By prioritizing cost reduction, fostering government support, and encouraging collaboration, the industry can overcome the present hurdles and unlock a future powered by clean and sustainable offshore wind energy.
Summary:
Danish power group Ørsted is determined to proceed with its major UK offshore wind project, the Hornsea 3 project, despite rising costs. Ørsted’s CEO highlights the need for increased support from the UK government as electricity prices offered to developers do not accommodate escalating costs. Global wind developers, including Ørsted, are facing challenges due to factors such as rising interest rates and supply chain costs. However, Ørsted remains committed to its ambitious renewable energy targets and plans to triple its portfolio by 2030. The Hornsea 3 project, which secures a government contract, is likely to move forward after considerable efforts to cut and raise revenues. Ørsted urges the UK government to address the issue of low maximum prices set in government auctions. Despite the challenges, Ørsted remains optimistic about the future of offshore wind, while emphasizing the need for continuous government support.
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Danish power group Ørsted is ready to push ahead with its major UK offshore wind project despite rising costs, but has warned the UK government needs to do more to support the sector.
Ørsted chief executive Mads Nipper said the company was working “very hard” to make the planned Hornsea 3 project off the Yorkshire coast, the world’s largest offshore wind project, viable, after warning from March it could be derailed by financial pressures.
But he added that the electricity prices the UK government offers to developers are not high enough to absorb the rising costs and ministers could find it difficult to ensure the rapid capacity growth they need to meet climate targets.
“If a project that is by far the largest in the world, with all these opportunities, can only become an investment after a year’s hard work on everything, hopefully it will also be a stark reminder to the UK government that something must change,” he said. he said she.
Global wind developers are facing major challenges due to rising interest rates and supply chain costs over the past year.
Sven Utermöhlen, managing director of RWE’s offshore wind business, said this week at the Global Offshore Wind 2023 conference in London that the costs of developing offshore wind have increased by 20-40% since the Russian invasion of Ukraine. He added that he didn’t expect costs to come down any time soon.
Ørsted, which is listed in Copenhagen and 50.1% owned by the Danish state, had its most profitable year last year. This month it confirmed plans to develop 50 GW of renewable energy by 2030, tripling its portfolio. It has also raised its performance goals.
However, the rising costs have caused problems for Ørsted and other developers in projects where the costs cannot be easily passed on because they have a fixed price contract to sell the electricity.
Ørsted’s Hornsea 3 project, which will have a capacity of nearly 3GW, or enough to supply nearly 3m homes, last year secured a government contract that pegged most of its electricity at £37.35 per megawatt hour at 2012 prices, indexed to inflation.
But with costs rising so sharply, Ørsted’s UK boss Duncan Clark said in March there was a “real and growing risk” that projects could be suspended or abandoned.
Speaking to the Financial Times during Ørsted’s Capital Markets Day earlier this month, Nipper said Hornsea 3 was now “likely” to go ahead, after the company worked to cut and raise revenues. He expects to make a final investment decision this year.
The government is currently auctioning off a new round of offshore wind project contracts, but Nipper said the maximum price set was too low and he “would be surprised” if he secured the full capacity on offer.
“It’s inconceivable that others aren’t having a hard time,” Nipper warned.
He added that costs were becoming easier to pass on elsewhere, however, noting that prices commercial customers are locking in have risen and the Irish government recently awarded contracts to offshore wind developers at €86 per megawatt hour.
UK Energy Secretary Graham Stuart told the wind conference that Britain had the right support to maintain the “investment attractiveness” of offshore wind.
“I am confident that we will continue to be not just a European, but a global leader,” he said.
https://www.ft.com/content/4621f549-85dc-4731-b3ad-6d76969c31d4
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