Development of what would be the world’s largest wind farm off the coast of Britain is in doubt, with developer Ørsted saying it needs more support from the government such as tax breaks to proceed with the project after costs soared.
The 8 billion pound ($9.6 billion) Hornsea 3 project is expected to have a capacity of almost 3 gigawatts (GW) when built, enough to power around 3.2 million homes, and is seen as vital to Britain’s push to increase energy security and rapidly increase its renewable power output to meet climate targets.
The project, due to begin production in 2026, won a government contract at auction with a minimum price guarantee, called a contract-for-difference (CfD) worth 37.35 pounds per megawatt hour (MWh) in 2012 prices, around 45 pounds/MWh today.
Although the contract is index-linked to inflation it is now worth significantly less than current electricity prices of around 130 pound/MWh.
"Since the auction there has been an extraordinary combination of increased interest rates and supply chain prices," Duncan Clark, head of Ørsted U.K. and Ireland said in a statement.
“Industry is doing everything it can to manage costs on these projects but there is a real and growing risk of them being put on hold or even handing back their CfDs,” he said.
Clark is calling on the government to offer targeted support for the renewable sector, such as tax breaks on investments similar to those seen in the oil and gas sector, at the upcoming spring budget on March 15.
Britain has a target of 50 GW of offshore wind capacity by 2030, up from almost 14 GW currently and is aiming for net zero emissions by 2050.
E&P Highlights: March 20, 2023
2023-03-20 - Here’s a roundup of the latest E&P headlines, including a Black Sea discovery and new contract awards in the upstream oil and gas industry.
US Drillers Add the Most Gas Rigs in a Week Since December 2018: Baker Hughes
2023-03-17 - Oil rigs fell one to 589 this week, while gas rigs rose nine to 162.
Oxy CEO Vicki Hollub Talks Technology, Carbon Management
2023-03-17 - Technology partnerships key to bringing direct air capture facilities to reality.
Eni’s Yatzil Well Hits in Mexican GoM
2023-03-17 - Eni’s Yatzil well found 130 ft of pay, and the operator estimates 200 MMboe reserves in place.
Nabors Sees Digital Twin Tech Improving Safety on Rigs
2023-03-16 - Virtual modeling of real-world rig floors can help robots relieve humans of the most dangerous jobs.