Going out on a limb
12th May 2025
Last week’s decision by the Danish company Orsted, to scrap its plans for the Hornsea 4 offshore windfarm project, sent shockwaves through the industry.
Though some tried to put a brave face on the decision, rising costs seem to have rendered the project financially unviable. I suspect it wasn’t a decision they took lightly, it probably meant they have written off many millions of pounds in arriving at this outcome. No one wins.
There are many analysts, with expertise in power generation, who suspected this might happen – but probably not just yet. In the race to achieve Clean Power by 2030, the risk was always that this political target date would come at a price. As any project manager will tell you, when you set a deadline like this, then a ‘build at all costs’ mentality kicks in. Costs soar as suppliers have the commissioner over a barrel, in this case a self-inflicted barrel. This lack of project management experience is now showing, to the cost of the taxpayer and consumer.
At the same time as costs are being driven up by artificial timetables and deadlines, risks for wind generation are also increasing. Recent political changes will weigh heavily on those making investment decisions. Discussions around zonal pricing, before the generation is in place, will add to the risks of any plans. Increased risk equals increased cost of capital – you and I know that, do DESNZ?
Against this backdrop, I’m going to go out on a limb here. Achieving Clean Power by 2030 has now become more difficult but DESNZ won’t accept defeat just yet. But Whitehall has a track record of gently amending the outcome, just look at the language used for the smart meter roll out.
The 2030 deadline will still stand, but I suspect the language around how much clean power is in place by then will change. Currently the target is around 95 per cent, prepare for language such as “overwhelming majority”, “vast majority”, “mostly” to be wheeled out. I’m not being critical of this, just suggesting what might be a face-saving (and cheaper) option.
Mike Foster
EUA's Chief Executive
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