Hornsea Three offshore wind farm could be put on hold if help with soaring costs doesn't emerge

Additional government support sought for industry to allow Orsted's next project to emerge off the Humber

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David LaisterBusiness Editor (Humber)

13:58, 3 MAR 2023

Wind of Hope, Hornsea Two's service operation vessel, pictured in the offshore wind farm. (Image: Orsted)

A huge offshore wind farm set to be anchored on the Humber could be put on hold if further government support isn’t forthcoming.

Orsted’s Hornsea Three offshore wind farm set a new record to deliver cheaper green energy last year, but huge pressures on the supply chain are being felt by the present economic situation.

The 2.8GW project is double the size of the first two Hornsea projects operated and maintained from Grimsby, and was awarded a new low subsidy price of £37.35 last summer in the fourth auction round held by government. But those numbers were crunched before the Russian invasion of Ukraine sent inflation soaring. A final investment decision has yet to be taken by the Danish giant on the consented scheme, with Orsted having returned record earnings of £3.8 billion in 2022.

Duncan Clark, head of Orsted in the ��Ƶ, said: “Hornsea Three would become the world’s largest offshore wind farm and represents an £8 billion investment with thousands of jobs created in the ��Ƶ during construction and billions more spent in the ��Ƶ supply chain. It is a project that has been under development for more than a decade and part of an auction round - AR4 - that is worth an estimated £20+ billion inward investment for the ��Ƶ.

“The AR4 contracts are excellent value for society, providing electricity at a price that is less than a quarter to a half of average wholesale prices over the last two years. However, since the auction there has been an extraordinary combination of increased interest rates and supply chain prices. 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, with repercussions that could impact across the economy as reserved capacity with supply chain businesses goes unfulfilled.”

Duncan Clark, head of ��Ƶ region at Orsted. (Image: Orsted)

The company has already placed several orders for elements, including XXL monopiles from inward investor SeAH in Teesside, while only this week it launched its largest ever apprenticeship recruitment campaign - as it looks to have at least 800 people working from the town by the decade’s end.

Mr Clark is pinning hopes on Chancellor Jeremy Hunt to help deliver.

“The upcoming Spring Budget offers a unique opportunity for the ��Ƶ to take decisive action to maintain its leadership position in renewable energy and maximise the economic benefits for the ��Ƶ,” he said. “In the midst of intense global competition for investment, skills and supply chain resources, we are in a position where nationally significant projects like our proposed Hornsea Three offshore wind farm are at risk unless the government takes significant action to maintain the attractiveness of the investment environment.

“This is why the sector is asking the government for targeted support to ensure the ��Ƶ remains an attractive destination for investors. It would send a powerful message if the government would consider a more suitable capital allowances regime, as it has for the oil and gas sector, which acknowledges the significant upfront investment required for these projects and enables us to recycle capital more effectively.

“Medium term, it is the rapid build-out of renewable energy that will enable us to become independent of gas and other fossil fuels and to ensure security of supply for the ��Ƶ. The offshore wind sector has delivered huge growth in the ��Ƶ over the last decade. We are now at an inflection point and government intervention will be crucial to enabling projects that are key to the ��Ƶ’s energy security and that will bring billions of pounds of investment into the ��Ƶ, provide low-cost electricity for consumers and help deliver our net zero target.”