Britain's future as 'Saudi Arabian wind' questioned by rising costs

Net Zero secretary Grant Shapps has been accused by energy company executives of being a «remote» figure. Credit: STEFAN ROUSSEAU/AFP

A number of offshore wind projects designed to power the UK are under threat as the global race to zero costs rises soaring, casting doubt on the industry's future as a cheap energy source.

Rising supply chain costs have pushed up the price of wind turbines, while rising global interest rates have substantially increased refinancing costs.

This rendered several projects unviable just a year after they won government grant contracts, sparking concern from industry insiders. that the future of Britain is at stake as the «Saudi Arabia of the wind».

Inch Cape, a 50:50 joint venture between Ireland's ESB and China's Red Rock Power to develop a project located 15km off the east coast of Scotland, is under threat as the Irish side refuses to proceed with a so-called Final Investment Decision (FID) after abandoning economic aspects of the project.

One source said, “People won't invest if it doesn't give you a decent return on equity. And at present it is difficult to understand how this is possible.”

The schemes, developed by the Danish company Ørsted and the Swedish company Vattenfall, are among other projects believed to be at risk as the industry needs more government assistance to keep the projects viable.

Senior executives also talked about Net Zero secretary Grant Shapps. as a «remote» figure who does not want to interact with company executives.

The struggle faced by some of the biggest offshore wind developers is raising new questions about whether the government can meet its 50 GW offshore wind target by 2030, compared to the current level of around 14 GW.

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The so-called contracts for difference (CfD) are designed to guarantee companies that operate offshore wind projects fixed prices for the sale of electricity over a 15-year period. If the market price falls below the so-called strike price, the government will make up the difference.

However, if the opposite is true, companies must return the money to the government.

< p>Last year's CfD auction was the largest to date and provided enough power to provide clean energy to more than 10 million homes.

However, it is understood that the Inch Cape strike price of £37.35 is currently «below the waterline». for ESB, which means they are unhappy with the proposed rate of return.

“It should be closer to £50-55,” the source said.

Vattenfall's Norfolk Boreas offshore wind farm is also under threat from rising costs.

The spokesperson acknowledged market conditions were «extremely challenging», suggesting a final investment decision has yet to be made. He warned that the government should reflect market realities, suggesting that Vattenfall is unwilling to act without more government help.

Katrin Jung, head of the offshore wind power company, said: “Vattenfall has not yet adopted FID. at the Norfolk Boreas offshore wind farm.

“Market conditions are currently extremely challenging, with rising costs and a supply chain crisis, as well as an increasing cost of capital. We are looking at the best path forward for all three projects that make up the 4.2 GW offshore Norfolk area and how we can work with the supply chain, including business opportunities in the UK.”

2105 Power Generation for the Zero Path Grid

The North Sea vessel Ørsted Hornsea 3 is also believed to be at risk, though a company spokesman insisted the company was «increasingly confident that we can make a final investment decision during 2023».

The spokesperson added: “The offshore wind sector has shown tremendous growth in the UK over the last decade, but it has reached a tipping point.

“Stakeholders in government and across the industry will require continued attention to ensure that offshore wind fulfills its potential to become the backbone of the UK energy system and drive further investment, provide consumers with cheap electricity and help achieve our zero emission ambitions.”

However, it is clear that any decision to proceed must include a change in project.

A joint statement released by ESB and Red Rock Power said the companies remain «strategically aligned and committed.» the Inch Cape offshore wind farm project.”

An official from the Department of Energy Security and Net Zero insisted that Mr. Shapps “interacts regularly with the industry.” A spokesman said: «Offshore wind power is a vital part of our work to improve energy security and reduce emissions.

«Our plans to secure UK power, combined with our ongoing annual auction process, give the industry more confidence to invest .

“We have already raised £120bn of private investment in renewable energy since 2010 and expect to raise another £100bn, which will provide up to 480,000 jobs by 2030.”

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