Ørsted has greenlit the development of the Hornsea 3 offshore wind farm after supply chain squeezes had cast doubt on the project.
The Danish wind major said in a statement today that the site, set to be the largest single wind farm in the world, will have a capacity of 2.9 gigawatts (GW) when it is completed in 2027.
Ørsted said it already has “all major” contracts for the site in place, including an agreement with Siemens Gamesa, the beleaguered wind arm of German power firm Siemens.
Last month Siemens was bailed out by the German government to the tune of €7.5bn (£6.5bn) as part of a €15bn (£13bn) package to cover debts.
Ørsted, which has already halted two major US wind farm projects this year due to cost spikes, said most of Hornsea 3’s capital expenditure was contracted at “competitive prices” ahead of inflationary tightening.
The company was awarded a contract for difference (CfD) at the inflation-indexed price of £37.35 per MWh in 2012 prices, totalling around £50 in today’s money.
According to the firm, the project will meet Ørsted’s targeted lifecycle project return range of 150 to 300 basis points above its weighted average cost of capital.
Duncan Clark, head of Ørsted UK & Ireland, said: “Hornsea 3 will be a cornerstone in achieving the UK government’s climate and clean energy targets while increasing energy independence and creating local jobs.
“Our decision to build Hornsea 3 is a vote of confidence in the UK market for offshore wind, as we continue to invest significantly in UK clean energy infrastructure and in the UK supply chain.”
Jess Ralston, analyst at the Energy and Climate Intelligence Unit, added: “Every offshore wind farm we build decreases the amount of gas we need to buy in from abroad and produces cheaper electricity for British households, so this is a win-win for energy security and bills.
“It also signals our offshore wind market remains attractive for international investment despite competition from the likes of the EU and China, and that the industry has confidence that we’ve successfully moved past the small speedbump in the last renewables auction that saw no bids due to outdated Government rules.”
Shares in Ørsted, which have more than halved this year, rose 4.1 per cent yesterday.
Ørsted’s announcement is a shot in the arm for the UK’s offshore wind sector, which suffered a major setback in September when the government’s latest subsidy auction received no bidders for wind power as subsidy prices offered were too low.
It also comes hot on the heels of Rishi Sunak’s unveiling of the £11bn Dogger Bank deal that flew somewhat under the radar at COP28.